The Texas attorney general and the foundation arm of a Dallas hospital once owned by Ascension Health, St. Louis, sued the Roman Catholic system in state court last week, accusing it of plundering $60 million from the hospital.
The St. Paul Foundation filed the suit on behalf of 288-bed St. Paul Medical Center, now part of two-hospital University Hospitals Health System, Dallas. State Attorney General John Cornyn intervened to defend charitable trust assets on behalf of the public.
The foundation accuses Ascension predecessor the Daughters of Charity National Health System-West Central of illegally transferring $60 million from St. Paul to Tri Provincial Depository, St. Louis, which the Daughters controlled. The transfer allegedly occurred when Harris Methodist Health System agreed to take over the majority sponsorship and operating interest of the hospital in 1996. Harris Methodist merged with Presbyterian Hospital of Dallas in 2000 and sold St. Paul to University of Texas Southwestern Medical School.
The 17-page suit was filed in Dallas County District Court.
In a written statement, Ascension Health denied the allegations. "We are reviewing the information regarding this issue. We strongly disagree with the assertions made by the plaintiff and will be responding to the court at a later date," the statement said.
Ascension was formed in 1999 when the Sisters of St. Joseph Health System merged with the Daughters of Charity National Health System. Just last week, Ascension announced yet another merger, this time with Carondelet Health System (See cover story, p. 6).
St. Paul Foundation President Mary Love Henderson said the $60 million made up the hospital's funded depreciation account, which according to audited financial statements was designated for St. Paul's capital needs. The fund contained both donations and operating income. "It represented the savings account of this hospital for about 100 years," Henderson said.
"The question is, how did the board let this happen? I think it's pretty clear the board was misled and the impact on the future of this hospital wasn't fully felt until years after it happened," she said.
Earl Hale, who serves on the boards of both the foundation and the hospital, said the transfer of the $60 million was not disclosed publicly for some years. The decision to transfer the fund was made by a Daughters-controlled board, Hale said. "There were some objections, but they were told the money would still be available to St. Paul," he said.
Hale estimated that the hospital has lost $50 million in the six years since the transfer. "The impact has been devastating," he said. "Every year the hospital has lost the interest on that $60 million-between $4 million and $6 million annually-and lost access to that $60 million for its much- needed capital."