For-profit hospital chains continue to find fertile ground where Roman Catholic systems have encountered a barren landscape.
The ongoing fallout from last year's breakup of Unity Health, a Catholic system in St. Louis, has provided acquisition opportunities for two for-profit hospital companies, Tenet Healthcare Corp. and Community Health Systems, both of which are on the hunt for more hospitals.
Santa Barbara, Calif.-based Tenet announced last week that it had agreed to buy St. Alexius Hospital, a 203-bed Catholic hospital in south St. Louis, in a deal expected to be completed by November. The hospital is owned by 685-bed St. Anthony's Medical Center, also in St. Louis.
Both St. Alexius and St. Anthony's were part of Unity, which had six hospitals until July 2000, when St. Alexius and St. Anthony's split from the system. Unity dissolved last year as its members decided their integration strategy had not led to anticipated benefits, only to an unacceptable loss of autonomy (Nov. 27, 2000, p. 2).
St. Luke's Hospital, Chesterfield, Mo., pulled out of the system in November, and the system's remaining three hospitals renamed themselves St. John's Mercy Health Care and stayed a part of 17-hospital Sisters of Mercy Health System, also based in St. Louis.
Now one of those three hospitals, 75-bed St. Clement Health Services, in Red Bud, Ill., has been purchased by CHS, based in Brentwood, Tenn. CHS, which announced completion of the purchase last week, intends to rename the hospital Red Bud Regional Hospital.
"The reason Unity came together was to create an integrated delivery system so we could work together to achieve economies of scale and so forth," said Barbara Meyer, spokeswoman for the Sisters of Mercy Health System. "Unfortunately, we were just not able to make that happen given the governance structure and differences in the way people wanted to make decisions."
Financial terms of the deals were not disclosed. St. Alexius lost $3.8 million on net patient revenue of $42.1 million for the year ended June 30, said David Seifert, president and chief executive officer of St. Anthony's Medical Center.
Meyer said St. Clement was "basically holding its own." She could not provide more specific financials.
In both cases, the for-profit hospital chains will beef up their market share. Tenet, which already has four hospitals in St. Louis, approached St. Anthony's about acquiring St. Alexius because it is less than a mile from Tenet's 249-bed SouthPointe Hospital.
"It makes more sense to have St. Alexius managed by a company that has served the same community," said Tenet spokesman Harry Anderson. "We saw opportunities in terms of access, care and services."
Seifert said the cultures and neighborhoods served by St. Alexius and St. Anthony's are very different, whereas St. Alexius' market had much in common with those of Tenet's hospitals.
"It became apparent to both us and Tenet that the two institutions should be working together, not competing with each other, to serve this neighborhood," he said.
Tenet, which operates 114 hospitals in 17 states, plans to continue to operate the hospital, Anderson said. It has also agreed to offer employment to St. Alexius staffers, to maintain the hospital's current level of charity care and to continue to run the facility as a Catholic hospital, a strategy it has used in the past to purchase other Catholic hospitals.
CHS similarly has agreed that it won't offer services at its newly acquired hospital in Red Bud that are prohibited by the Catholic Church. The 54-hospital chain owns three hospitals in Illinois, including the one in Red Bud, and is in talks to acquire a fourth.
"I think you're finding that some of the larger systems are rethinking some of their strategies with some of those smaller facilities," said Wayne Smith, president, chairman and CEO of CHS. "For us, it's a great opportunity."