Ascension/Presence exemplifies how Catholic systems look after their own

This​ story​ was​ updated​ Aug.​ 25,​ 2017.

It should come as no surprise that Ascension is stepping up to acquire Presence Health or that Dignity Health is trying to partner with struggling Catholic Health Initiatives, said former Ascension hospital official Dr. Mike Schatzlein.

Catholic health systems look after each other to try to maintain the operating values and emphasis on the underprivileged that reflect their shared mission, said Schatzlein, who is now of counsel to consultancy Jarrard Phillips Cate & Hancock in Brentwood, Tenn.

"There's a general belief in preserving Catholic healthcare," said Schatzlein, who identified himself as Lutheran. "There's no rule. No sense of collusion. Not even an unwritten rule. It's a common culture and mission to the poor."

Ascension's proposed pickup of Presence Health in Chicago comes as a two-year turnaround effort at Presence has experienced fits and starts. The system narrowed operating losses to $40 million in 2016 from an operating loss of $186 million in the prior year. But that performance was still short of system targets, Presence CEO Mike Englehart recently said.

San Francisco-based Dignity is in affiliation talks with money-losing CHI of Englewood, Colo.

Dignity changed its charter and name from Catholic Healthcare West in 2012 so that the parent organization of 39 hospitals is no longer Catholic-sponsored.

But most of the Dignity hospitals still have Catholic sponsorship and the parent's mission statement commits to "furthering the healing ministry of Jesus."

If the Dignity-CHI talks, which began last year, lead to a merger, it would create a system even larger than Ascension with 142 hospitals combined and annual revenue of more than $26 billion.

CHI is struggling. It posted an operating loss of $483 million in fiscal 2016 and has been restructuring through cost-cutting, exiting its health plan and selling money-losing hospitals in Louisville, Ky.

In June, Dignity said that it was in the final stages of due diligence with CHI. Dignity spokeswoman Lauren Davis declined to provide a further update.

Schatzlein said the primary characteristic of "Catholic healthcare" is an overarching focus on taking care of the poor and most vulnerable in society. It also promotes the offering of prayers with patients among other religious values, he said.

In a January interview with Modern Healthcare in San Francisco, Ascension CEO Anthony Tersigni said that as dean of the largest Catholic healthcare system, he couldn't fathom having regrets one day about not doing enough to preserve Catholic healthcare.

"I don't want to look back 10 years from now and say, 'Tony, you didn't do enough to keep some Catholic health systems alive while you were in charge.' "

Tersigni was in attendance in September 2015 when Pope Francis addressed Congress and urged leaders to do more for the poor.

Tersigni later said that he and other Catholic health systems took the pope's words as a call to action. Early in 2016, Ascension waived the deductibles or unpaid bills for any patient earning below 250% of the federal poverty level at any of its hospitals and other facilities across 24 states.

A review by Modern Healthcare found that Ascension last year reported about 2.32% of its net patient revenue, or $495 million, was charity care. That was the highest percentage among the Catholic systems. Presence came in second with 1.79%, or $45 million.

Schatzlein, who worked as an executive for several investor-owned hospital companies, including Community Health Systems, said the large Catholic systems will always entertain affiliations with weaker Catholic systems, even if they aren't always successful. But for now, Ascension and Dignity have full plates.

Ascension will be tied up with Presence, and Dignity and CHI don't have a close date yet set, Schatzlein said. Any other deal might put one of the big Catholic systems out of compliance with bond covenents, he added.

But Catholic systems are always willing to listen."If I were a Catholic hospital or system, I'd look first to be associated with another Catholic system," Schatzlein said.

There also are benefits to being a faith-based hospital system. Earlier this summer, the U.S. Supreme Court unanimously decided to revive a decades-old practice of exempting faith-based hospitals from federal pension regulations.

That meant every religious entity from Ascension to independent hospitals will not have to pay premiums to the Pension Benefit Guaranty Corp. or fully fund their pensions to meet Employee Retirement Income Security Act requirements. According to law firm Mayer Brown, that saved Advocate and Dignity from facing a $4 billion shortfall in their pension funding.

An​ edited​ version​ of​ this​ story​ can​ also​ be​ found​ in​ Modern​ Healthcare's​ Aug.​ 28​ print​ edition.​

Click here for a related story: Ascension picks proven deal structure for Presence Health acquisition