The Roman Catholic parent of 403-bed St. Mary's Hospital, one of three hospitals that make up Genesis Hospital System, Huntington, W.Va., wants to dissolve the union without paying the price.
Pallottine Health Services cited religious and regulatory issues when it informed Genesis Chief Executive Officer J. Thomas Jones last week of its desire to disband the nearly 4-year-old system.
Pallottine President Sister Celeste Lynch declined an interview request but said in a written statement that Pallottine's board was requesting a "cooperative dissolution" of the system. Not mentioned in the statement was the fact that if the other two members of the system don't agree to disband voluntarily, St. Mary's will have to pay a $10 million breakup fee under the system's original affiliation terms.
Citing recent revisions to moral guidelines adopted by the United States Conference of Catholic Bishops and discussions with the local bishop, the Pallottine Missionary Sisters, the Roman Catholic order that sponsors St. Mary's, said it has become increasingly important to have control over the Catholic mission of St. Mary's.
In June, Catholic bishops voted to revise church rules in such a way to make it more difficult to provide elective sterilization services when Catholic hospitals affiliate with non-Catholic hospitals (June 18, p. 6).
Genesis' other hospitals, both secular not-for-profits, are 293-bed Cabell Huntington Hospital in Huntington and 201-bed Pleasant Valley Hospital in Point Pleasant. Both provide elective sterilization services but not elective abortions, said Kathy Cosco, a Genesis spokeswoman.
"The members of Genesis and the Genesis board of directors have just been advised of (Pallottine's) request and have not yet met to review the request . . . and the reasons for it," Jones said in a written statement. "The members will need to discuss the request before deciding the best course of action."
Each of Genesis' member hospitals has its own board of directors, and four representatives from each board sit on the system board. Cosco could not say when the board would meet to discuss the Pallottine request.
If St. Mary's leaves Genesis, it would be the latest in a wave of hospital system breakups that began last year (Oct. 1, p. 36) and the second in West Virginia alone (See story, p. 12).
The Genesis system was founded in November 1997 and originally had two CEOs, Don Smith II, who at the time was CEO of Cabell Huntington, and Jones, who was executive director of St. Mary's. After Smith's retirement in June 2000, Jones became the system's single CEO.
"What Pallottine Health Services is requesting is that the corporation members mutually agree to dissolve the corporation," Cosco said. "They will review that request; however, any member of Genesis has the right to leave, subject to a payment of $10 million."
It was unclear what effect Pallottine's proposed move would have on Genesis' plans to absorb 132-bed Logan (W.Va.) General Hospital. Logan General filed for bankruptcy protection in 1998 and has been banking on joining Genesis, which said it would guarantee an $18 million loan to Logan as part of its voluntary reorganization plan. The U.S. Bankruptcy Court in Charleston, W.Va., has not yet approved the plan and recently gave the hospital until Oct. 26 to submit an amended disclosure statement, which must be approved before the plan can be considered.
Meanwhile, at least two for-profit hospital chains, Province Healthcare Co., Brentwood, Tenn., and Health Management Associates, Naples, Fla., have expressed an interest in buying Logan General.
Cosco said she could not predict whether the Logan deal would still go through. "Right now, we're still trying to determine what this means, what actions need to be taken at the board level to consider this request," Cosco said. "There's a lot of things we're not sure of and we don't want to speak prematurely. It's a very sensitive issue."
The bankruptcy court recently rejected a request by unsecured creditors to consider Province's proposal to buy Logan General, arguing their interest in receiving a larger payment should not override the community's decision to keep the hospital not-for-profit.
"We have a number of viable alternative strategies to pursue to complete the reorganization proceedings and emerge from bankruptcy in the event that the current plan, which contemplates an affiliation with Genesis, is no longer feasible," Logan General Executive Director Thomas Sphatt said in a written statement issued last week. He declined an interview request.