BOSTON-Two Catholic healthcare systems in New England are reassessing whether their plans to merge can survive a strict stance by a former state attorney general opposed to losing local control of charitable assets.
The systems, Caritas Christi in Boston and St. Joseph Health Services in Providence, R.I., say the merger structure they proposed in June has been undermined by a September ruling by Rhode Island's retiring attorney general. Jeffrey Pine blocked the merger of Boston-based CareGroup and Providence-based Care New England over concerns that control of charitable assets would move to Massachusetts (Sept. 14, p. 20).
Caritas Christi and St. Joseph are "re-evaluating the nature and the detail" of their pact, particularly the governance provisions, in the context of Pine's ruling. The ruling is "a clear blueprint on what we would need to address," said Otis Brown, a St. Joseph spokesman.
A significant factor is the stance of Rhode Island's new attorney general, Sheldon Whitehouse. Preliminary discussions with Whitehouse indicate he's not going to stray far from his predecessor's decisions on mergers of not-for-profits with out-of-state partners, Brown said.
However, a spokesman for Caritas Christi, Richard Doherty, said it's "too early to tell" whether the new attorney general will stand firm.
"We're continuing to talk with St. Joseph in light of the CareGroup decision and exploring what the menu of options might be," Doherty said.
When the new decisionmaking team is assembled in Whitehouse's office this month, "some of those discussions will heat up a little more," he said.
Pine's ruling on CareGroup was the first major application of a 1997 law giving the attorney general authority to review any hospital transaction in which 20% or more of charitable assets are transferred. He was concerned about sending substantial assets out of state and eroding local control of those assets.
The St. Joseph case involves only issues of local control, not the flow of dollars out of state, Brown said.
In trying to link with a larger organization, St. Joseph has found trouble at every turn.
A year ago, the two-facility system tried to merge with Lifespan, a Providence-based healthcare network that includes six hospitals. But the Roman Catholic bishop in Providence blocked the deal because of ethical concerns about a partner that allows abortions and other procedures banned by the church.
With no Catholic options in Rhode Island, St. Joseph reached out to Massachusetts for a partnership with Caritas Christi, a seven-hospital system sponsored by the Archdiocese of Boston. That chess play traded obstacles: a bishop for a consumer knight.
The merger game's delays don't make the St. Joseph system anxious, however. Having its finances in good shape, "puts us in a position of not having to scramble to find somebody to partner with," Brown said. The system earned $1.5 million in fiscal 1998 ended Sept. 30, and a profit is projected for 1999. The annual budget is about $120 million, he said.
Although hospitals nationwide are reporting losses and trimming payrolls in the face of cutbacks in federal programs, "we restructured the hospital during the last couple years to help soften the blow of Medicare and Medicaid cuts," Brown said. "We're not desperate like some other hospitals might be to find a partner."