Roman Catholic giant Ascension Health is reaping the benefits of its 2002 merger with Carondelet Health System, as net income nearly doubled at the 67-hospital system in its fiscal 2003.
St. Louis-based Ascension, the nation's largest Catholic hospital system, is crediting improved operating performance and the merging of eight Carondelet acute-care hospitals into its system in December 2002.
Net income increased 94% to $215 million on $9.1 billion of total operating revenue for the fiscal year ended June 30, according to Ascension's audited financial statements, shared with Modern Healthcare last week.
Ascension's performance was its best since 1997, said Craig Kornett, a senior director of the healthcare group at Fitch Ratings, New York. "From a performance perspective, they had a good year," Kornett said. "This is one of the best-run management teams."
The key to Ascension's successful year was the merger with Carondelet, St. Louis, because Ascension added eight efficient hospitals, Kornett said. At the midway point of the fiscal year, just weeks after the merger, Ascension reported $49.5 million in operating income for the six-month period, he said. The second half of the fiscal year was even better, as Ascension further integrated the Carondelet hospitals, he said.
"The big story was the operating income," Kornett said. "They are able to manage the assets and inject a common culture into all of their geographically disparate entities, which is difficult. They are all over the place."
Ascension acquired eight hospitals from Carondelet in the fast-growing markets of Lewiston, Idaho; Kansas City, Mo.; and Tucson, Ariz. The system did not pay any cash in the deal but agreed to take on about $250 million of Carondelet's debt.
Management had announced their intentions to merge the two systems in June 2002. At the time, Carondelet had spent two years searching for the best structure to fulfill its Catholic mission after struggling financially. Carondelet had posted losses for three years in a row before emerging from the red in the fiscal year ended June 2002.
"They talked in great detail of all the due diligence and how they were going to integrate," Kornett said. "It was very well thought out. It was attention to detail."
Anthony Speranzo, Ascension's chief financial officer and senior vice president, was unavailable for comment at deadline.