Partnerships between Roman Catholic-sponsored and secular hospitals can be dicey, but two not-for-profit New York hospitals want to try it with a new twist-creating a for-profit limited-liability corporation to mutually solve their polar-opposite problems.
In a foster care-type of arrangement, the filled-to-capacity 996-bed Westchester Medical Center, Valhalla, has proposed a three-year, for-profit joint venture with 184-bed St. Agnes Hospital, White Plains, which is losing millions of dollars while its beds lie empty. The management contract would allow less seriously ill Westchester patients to be sent to St. Agnes, four miles away, easing up a backlog of patients in Westchester's emergency department and freeing up the much-in-demand intensive-care unit beds, officials said. Westchester doctors and surgeons would in many instances still care for the patients sent to St. Agnes.
The partners would not disclose financial terms of the deal, which is awaiting state approval, they hope by year-end, said Brian Mulligan, a spokesman for St. Agnes' parent, five-hospital Catholic Health Care System, New York.
If the recent past is any indication, getting joint ventures off the ground can be tricky when the partners have religious differences. In March, the 6-year-old partnership between Catholic Sisters of Charity of St. Augustine Health System, Cleveland, and for-profit giant HCA, Nashville, dissolved-along with a novel strategy to bridge the not-for-profit and for-profit sectors (Mar. 5, p. 20). The New York deal is a little different because both hospitals are not-for-profit hospitals. But like HCA at least, they clearly are interested in turning a profit on this joint venture. However, because both partners are not-for-profit organizations, gross revenue from the operation is not taxable for either, said Carin Grossman, a spokeswoman for Westchester.
To work out potential kinks in the relationship, the contract, which comes with an option to renew, creates a for-profit joint venture called St. Agnes Management. Governed jointly by not-for-profit subsidiaries of Westchester and Catholic Health Care, St. Agnes Management has been structured to respect U.S. Catholic bishops' ethical and religious directives and the public benefit corporation bylaws of Westchester, officials said. St. Agnes Management will provide the executive management team to lead St. Agnes Hospital, while the hospital board will continue to hold the purse strings and will approve the appointment of the chief executive officer.
The agreement enables Westchester to reserve its most-advanced-level beds for the sickest patients "while streamlining operating efficiencies and also boosting the patient census at St. Agnes," Edward Stolzenberg, president and CEO of Westchester, said in a written statement.
Financial and utilization data make clear why the hospitals want to give it a try. The daily occupancy rate at Westchester runs upward of 95%, officials said. In 2000, Westchester earned a $4.04 million profit on $444.1 million in operating revenue. In contrast, occupancy rates at St. Agnes were barely 40% through Oct. 31, according to data supplied by the hospital. During the same period, the hospital lost $9.9 million on $43.2 million in patient revenue.
"The management contract really addresses the needs of both institutions and helps improve patient care in central Westchester County," Mulligan said.