The Sisters of St. Francis Health Services, a Roman Catholic hospital system in Indiana, is on a buying binge.
The system, which operates nine hospital campuses in Illinois and Indiana, recently signed deals to add two more hospitals, and it has its sights set on a third.
All the activity is part of a grander plan by the Mishawaka, Ind.-based system. To date that plan has given the system control of the acute-care facilities in four northwest Indiana cities: Crown Point, Dyer, Hammond and Michigan City.
"Our vision is to be a catalyst in the creation of a Catholic healthcare network (in the Midwest)," said Kevin Leahy, the system's president and chief executive officer. "We are attempting to grow the facilities and expand the services we have in the markets we are serving."
The Sisters of St. Francis of Perpetual Adoration, Mishawaka, is the system's religious sponsor.
Already a dominant player in northwest Indiana, the system's recently announced acquisition plans will help increase its presence in the neighboring southeast suburban Chicago market.
Ingalls Health System, a secular system that operates 410-bed Ingalls Hospital in southeast suburban Harvey, Ill., announced in August it would merge into the Sisters of St. Francis (Aug. 16, p. 14).
The Ingalls deal is expected to be completed in the first quarter next year, Leahy said.
In that southeast suburban corridor, the Sisters of St. Francis owns another hospital, 332-bed St. James Hospital and Health Centers, Chicago Heights, Ill., which is about 10 miles away.
In a move that would further increase its presence in the area, the Sisters of St. Francis also has expressed interest in buying 174-bed Columbia Olympia Fields (Ill.) Osteopathic Hospital and Medical Center from Columbia/HCA Healthcare Corp. Olympia Fields is about five miles from Chicago Heights.
"We've been talking, as have others, to Columbia for the past year," Leahy said.
Jeff Prescott, Columbia spokesman, said he couldn't comment on the sale of the Olympia Fields facility.
"We don't announce unless we have something signed," he said.
Leahy said he, too, was uncertain about when a deal, if any, would be completed: "You need a crystal ball for that one," he said.
The Illinois-Indiana border markets aren't the only areas where the Sisters of St. Francis is focusing its attention.
In another deal announced in August, the system signed a definitive agreement to buy 98-bed Culver Union Hospital, the only hospital in Crawfordsville, Ind., from Tenet Healthcare Corp.
The Sisters of St. Francis, which declined to comment on the sales price, is said to have agreed to pay Tenet more than $70 million for the facility (Aug. 30, p. 4). Tenet, headquartered in Santa Barbara, Calif., has 20 hospitals for sale. Culver Union is the 12th one to have a buyer.
The Culver Union sale is expected to be complete as soon as the end of the month, Leahy said.
Crawfordsville is about 50 miles northwest of the Indianapolis area where the Sisters of St. Francis has two hospital campuses, and about 30 miles south of Lafayette, Ind., where the system has a 50% stake in that city's only two acute-care hospitals.
"They really do want to be a major anchor of Catholic healthcare providers in the Midwest," said Ken Stella, president of the Indiana Hospital and Health Association. "They're demonstrating that with their actions."
Leahy said the Sisters of St. Francis is using debt financing to fund its recent acquisitions.
Earlier this year, the Sisters of St. Francis earned an Aa3 rating from New York-based Moody's Investors Service on $150 million in bonds. The money was partly used to finance the acquisition of 248-bed St. Anthony Medical Center in Crown Point, Ind.
The Sisters of St. Francis earned an AA rating from Fitch IBCA, another New York-based bond rating agency, on the same issue.
The Sisters of St. Francis acquired St. Anthony by swapping three nursing homes and an assisted-living facility with the Highland, Ind.-based Franciscan Sisters of the Chicago Service Corp. for the hospital (Nov. 16, 1998, p. 21).
Moody's said it gave the Aa3 rating because the Sisters of St. Francis has a strong balance sheet, solid operating performance and "solid multiple market positions resulting from successful strategic initiatives."
According to the Fitch report, the Sisters of St. Francis is projected to have profits of $84 million on revenues of $741 million for the fiscal year ending Dec. 31.