Catholic Health Initiatives, a 64-hospital Roman Catholic system based in Denver, has retained investment bank UBS PaineWebber to help it explore strategic options for its hospitals in Albuquerque, including a possible sale of the hospitals or a joint venture with another owner.
Modern Healthcare first disclosed the move in its Sept. 18 Daily Dose electronic newsletter.
The hospitals-two full-service acute-care facilities, a rehabilitation hospital and an outpatient hospital-operate as St. Joseph Healthcare, which is beginning to emerge from a financially difficult period, its interim President and Chief Executive Officer Arthur Dunn said.
CHI hired UBS, with which it has had an ongoing consulting relationship, to examine the Albuquerque market earlier this summer, said Dunn, a senior vice president at the Hunter Group, a St. Petersburg, Fla.-based turnaround firm.
"It's a preliminary joint venture we've asked (UBS) to help us take a look at," said Mary Elise Biegert, director of communications services at CHI, who said the larger system is reviewing a range of options, including a joint venture, a merger or a sale of the facilities.
Although Biegert wouldn't disclose specifics, she said several potential partners had approached the system, none of which appeared to operate other hospitals in the market. CHI is the only Catholic provider in Albuquerque.
One of its rivals in the city is Presbyterian Healthcare Services, a seven-hospital system with two hospitals in Albuquerque. James Hinton, Presbyterian's CEO, said his system is not in any negotiations with St. Joseph. Nor is Lovelace Health System, which operates a 135-bed hospital in Albuquerque, said Martin Hickey, M.D., that hospital's chief executive officer. Stephen McKernan, chief executive officer of University Hospitals, another Albuquerque provider system operated by the University of New Mexico, also said his system is not in talks with St. Joseph.
Meanwhile, Triad Hospitals, a Dallas-based investor-owned chain, is trying to beef up its presence in New Mexico. Triad already has two hospitals in the state, one in Hobbs and one in Carlsbad, and it is building a new facility in Las Cruces.
Patricia Ball, spokeswoman for Triad, would not comment on whether Triad is in discussions with CHI about St. Joseph.
In addition, St. Joseph as of last week owned a 35% stake in Heart Hospital of New Mexico, Albuquerque. A 24% partner in the venture, MedCath, Charlotte, N.C., was negotiating last week to increase its stake in the hospital, which is also part-owned by local physicians, said Martha England, the hospital's vice president of business development.
St. Joseph reported a smaller-than-anticipated net loss of $1.3 million on net revenue of $160 million for the fiscal year ended June 30, Dunn said. For the first two months of its current fiscal year, St. Joseph has lost about $41,000 on net revenue of $32 million. Dunn said he anticipates the system will move into the black this month.
Like most acute-care providers in Albuquerque, the St. Joseph system is highly integrated, which could complicate a potential deal.
Dunn's predecessor, Steven Smith, resigned in April 2000 after involving the system in several projects that strained it financially, including a partnership with a for-profit HMO called Cimarron Health Plan, a Medicare provider-sponsored organization called St. Joseph MedicarePlus, and the expansion of a primary-care physician group.
Those initiatives, however, are turning around financially after faltering last year, Dunn said. St. Joseph had said in July 2000 that it would abandon the PSO, but the system changed its mind after Congress passed federal legislation at year-end increasing minimum payment rates in New Mexico and other states. The PSO, which has about 6,000 members, has since become profitable, he said. Meanwhile, the physician practice, which has 33 primary-care doctors, is gaining patients, he said.
