Two Roman Catholic hospital systems based in Texas say they will merge to form one of the 10 largest Catholic healthcare systems in the U.S.
The Sisters of Charity Health Care System, based in Houston, operates 15 hospitals, plus other facilities in Arkansas, Louisiana, Texas, Utah and Ireland.
Incarnate Word Health System in San Antonio has 12 hospitals in Texas, plus a half-interest in two other Texas hospitals.
Both not-for-profit systems operate health clinics, outpatient centers and other services.
The two systems' hospitals don't overlap in any market, so regulatory and antitrust issues are considered largely irrelevant, according to both systems. The need to consolidate operations is not a motive, although headquarters staff could shrink.
"Bringing Catholic providers together strengthens the presence and ensures the continuity of Catholic healthcare ministry to the future," said Sister Christina Murphy, president and chief executive officer of Sisters of Charity. "There is an advantage to critical mass. We're the two largest Catholic systems in Texas. We have diverse markets."
The merger is mission-driven, said Linda McClung, spokeswoman for Incarnate Word Health System: "By coming together we can be a larger force for many things. Not least is advocating for greater access to healthcare for those in need."
The assets of the two systems will be consolidated. Incarnate Word has $1.23 billion and Sisters of Charity has $2.15 billion.
Both systems are prosperous, according to data they supplied. Incarnate Word posted net income of $74 million on total revenues of $670 million in the fiscal year ended Dec. 31, 1997. That's a profit margin of 11%. Sisters of Charity reported net income of $134 million on total revenues of $1.17 billion in the fiscal year ended June 30, an 11.5% margin.
Incarnate Word has 8,525 employees, and Sisters of Charity has 14,200.
"Both systems are strong right now," Murphy said. "I believe we need to get stronger. . . . Hopefully we'll be an attractive partner to other potential providers in our markets-other hospital companies, managed-care organizations and physicians. As a unified organization, we certainly have contracting leverage."
The location of the new corporate headquarters hasn't been decided yet. The systems are developing a process for picking a new CEO.
The two congregations that sponsor the respective hospital systems, the Sisters of Charity of the Incarnate Word in Houston and the Sisters of Charity of the Incarnate Word in San Antonio, share the same history, values and mission.
The congregations began as one. Three sisters arrived in Galveston from France in 1866 and opened the first Catholic hospital in Texas in 1867.
In 1869, part of the congregation traveled to San Antonio and founded Santa Rosa Hospital, which still exists. That group then split from the original order.
Murphy said the dwindling number of younger sisters to carry forward the Catholic healthcare ministry "wasn't the driving force" in the merger but is always a subconscious concern.
About three years ago Incarnate Word and Sisters of Charity formed a corporation, La Clinica de las Hermanas, to work on unmet healthcare needs. Together, they opened a clinic in the Rio Grande Valley.
McClung said the two congregations announced internally last September that they were moving toward a combination. Several working groups were formed to look at such issues as human resources, information services and finance. The deal is expected to close by Jan. 1, 1999.