Ancilla Systems wants you. The Roman Catholic system headquartered in Hobart, Ind., is in the market for regional partners for its five hospitals-two in Illinois and three in Indiana.
"We are in discussions in every one of those markets with at least one and in some cases multiple parties to see which one fits best (with) what we want to do," said Bain Farris, Ancilla's interim chief executive officer.
Farris, an Indianapolis-based healthcare consultant, took the reins at Ancilla in May after a shake-up in its top management left the system without a CEO, a chief financial officer and a human resources senior vice president (July 5, p. 28).
The system is searching for permanent CEO and CFO replacements, Farris said. He said he is happy to provide transitional management as CEO of the system but does not want the job full time.
Ancilla's new concentration on regional partners is a significant change from its previous strategy of seeking out a partner to do a system-to-system deal.
Farris said part of the reason for the strategy shift is that Donaldson, Ind.-based Poor Handmaids of Jesus Christ, which sponsors Ancilla, wants to stay in the healthcare business.
Farris, who is in various stages of talks with potential partners, said the deals that are ultimately brokered could take a variety of forms, including other hospitals' joining Ancilla or Ancilla hospitals' joining other systems.
"The goal is not to get out of the business or to abandon healthcare," Farris said.
Ancilla operates 188-bed St. Catherine Hospital, East Chicago, Ind.; 224-bed St. Elizabeth's Hospital, Chicago; 100-bed St. Joseph Community Hospital, Mishawaka, Ind.; 102-bed St. Mary Medical Center, Hobart, Ind.; and 119-bed St. Mary's Hospital, East St. Louis, Ill.
Ancilla has taken its lumps.
Earlier this month, Moody's Investors Service downgraded $202 million of Ancilla debt to Baa2 from Baa1 because of "the unexpected downturn in financial performance in 1998, which has continued through the first half of 1999."
According to Moody's, Ancilla suffered a $26.9 million operating loss in 1998 after the system posted $5.1 million in operating income in 1997.
Despite the downgrade, Moody's gave the rating a stable outlook.
"The stable outlook reflects recent actions taken by the well-seasoned, albeit interim, management team to help stabilize performance and provide a cohesive direction for the system," the report said.
Some of these recent actions, according to Moody's, were the termination of unprofitable capitated contracts and the downsizing and restructuring of the employed physician division, which reduced its losses to $9.5 million in 1998 from $13.1 million in 1997.
Farris said Ancilla hopes to have deals worked out in each of its five markets by the end of 2000.
"I don't think there are any limitations on who we'd look at to work with," he said.