Catholic hospitals care for one of every six inpatients in the U.S., but mounting financial pressures are forcing many of them into deals that may feel like Faustian bargains that pit their Catholic identities against their ability to survive.
Private-equity firms and secular health systems have shown a keen interest in buying up Catholic hospitals to keep their doors open, but the trend has raised concerns that the Catholic social mission cannot square with secular owners' interest in profits.
Now a new for-profit joint venture between Catholic giant Ascension Health and private-equity firm Oak Hill Capital Partners intends to offer a new option: ownership by a for-profit Catholic healthcare system.
Ascension and Oak Hill are forming a jointly owned, independent health system called Ascension Health Care Network, which will specialize in acquiring Catholic hospitals that need capital but don't want to compromise their long-standing Catholic identities to get it. The hospitals will continue to comply with Catholic religious ethics, and the local bishops will retain all the control over the hospitals that they have today.
Although Catholic hospitals face the same financial and operational challenges as other not-for-profits in today's healthcare market, Ascension leaders and others believe Catholic hospitals stand to lose more when they run into the arms of a buyer: namely, their long-held identities.
“Our fear is, 10 years from now we may look back and say: What happened to all of the Catholic hospitals and systems?” said Anthony Tersigni, president and CEO of 76-hospital Ascension Health, based in St. Louis.
But could the creation of entities such as Ascension Health Care Network actually accelerate the decline of Catholic hospitals?
Kathleen Boozang, a law professor at Seton Hall University, said it's not clear that the surviving entities will be Catholic, or that they would stay that way for long.
“It goes to the heart of what Catholic healthcare is: Can a for-profit enterprise that is owned by a private-equity firm pursue and live the ministry of Jesus in providing healthcare?” said Boozang, who was not familiar with the Ascension joint venture because it was not yet public.
Simply following the ethical and religious directives promulgated by the U.S. Conference of Catholic Bishops does not sufficiently define what a Catholic hospital is, Boozang said. “Historically, the empirical evidence suggests that for-profit companies are very nimble at getting out of communities that are stressed, and they eliminate services that are unprofitable.”
However, Monsignor Peter Beaulieu said the notion of a for-profit Catholic hospital is not necessarily an oxymoron. He has worked as a Catholic priest and ethics adviser for 14 years at 321-bed St. Vincent Hospital, one of the nation's longest-running Catholic hospitals run by for-profit companies. The Worcester, Mass., hospital is owned by Vanguard Health Systems.
“I'm sure they don't make money on maternity services, or very little … but we wouldn't let them drop that service,” Beaulieu said. “The bishop has moral and spiritual authority in the operation of the hospital.”
Tersigni said Ascension Health Care Network will be a new entity, and he was confident it would pass muster with Catholic authorities.
“It's fair to say that this is the first Catholic equity-based system in the country. We're charting uncharted waters,” Tersigni said. “We believe this is a model that will not only preserve Catholic identity, but … the rights of the local bishop.”
The announcement comes on the heels of a raft of merger deals between secular and Catholic hospitals. The biggest was the $895 million transaction last November that resulted in six-hospital Caritas Christi Health Care—once owned by the Archdiocese of Boston—becoming New England's largest for-profit provider.
At least half a dozen other Catholic hospitals in the past year have been sold to secular interests, and more sales are in the works. For example, Catholic Health Partners announced last year that it is trying to find a buyer for its seven hospitals in the Knoxville, Tenn., region.
The wave of ownership changes has prompted the Catholic Health Association—of which Tersigni is the board chairman—to revisit its long-standing policy of prohibiting for-profit entities from becoming full voting members. A CHA subcommittee is examining the issue, and the full membership is expected to vote on a possible change during the trade group's annual meeting in Atlanta in June (Jan. 31, p. 12).
News of the creation of Ascension Health Care Network comes two years after the painful unwinding of the joint operating agreement that created Denver's “dual heritage” two-hospital Exempla Healthcare.
That 1997 agreement joined two secular hospitals with a Catholic hospital into a single system, but it had to be undone after the Catholic religious sponsor of the system, Sisters of Charity of Leavenworth, could not invest in facilities upgrades when part of the system was not following Catholic ethics.
After a protracted legal battle, plans for a $311 million buyout of the secular partner in the system were scrapped, and Exempla simply amended its bylaws to transform itself into an all-Catholic system, upsetting thousands of Denver-area residents who signed petitions opposing the change.