Decision-making process raised complex identity questions for Saint Joseph's
By JULIE MINDA
In Atlanta, the lone Catholic health care provider, Saint Joseph's Hospital Atlanta, recently capped off a two-year search for a partner or buyer to strengthen its position in the city's crowded health care market. The 410-bed community hospital announced plans earlier this spring to form a joint operating company with the not-for-profit system Emory Healthcare, in a deal that will enable Saint Joseph's to preserve its Catholic identity.
It was not a foregone conclusion during the search process that the facility would be able to remain a Catholic hospital. Bill Garrett, chief mission officer of Saint Joseph's, explained, "We had decisions to make along the way: Do we divest or continue to maintain our Catholic identity? There were strong arguments for both positions.
"We had to wrestle with the questions, what does it mean to be a Catholic provider and what's our core mission," he said. These were complex discussions, he noted.
Saint Joseph's is part of Newtown Square, Pa.-based Catholic Health East. While the facility was able to take advantage of many of the benefits of being part of a larger system — for instance, information technology support, supply chain savings, access to preferred investment and insurance rates — the hospital was challenged by the difficult competitive and reimbursement environment in the Atlanta market, according to Scott Share, CHE vice president of system communications. With no other large CHE hospitals nearby, when the facility negotiated with managed care companies in the local market it did so as a single hospital.
The Atlanta market has five or six large systems and more than a dozen additional one- and two-hospital systems serving a metropolitan area of about 5 million. Needless to say, Atlanta is a competitive market, and one Garrett said is ripe for consolidation.
Beyond the local pressures, Garrett said, "It was clear that É the dynamics of health care reform would exacerbate our negative position in the market. The changing dynamics of health care were aligned against us.
"You want to be in a position of strength when you start to see that the trend lines will be unfavorable. If you're a stand-alone or if your reimbursements are going down, you need to act quickly and move forward."
Although the hospital's financial performance has declined for a few years, Saint Joseph's has a strong balance sheet and has ample cash reserves, according to Garrett. But it does not have enough patients to maintain strong operations, he said. Also, it has invested heavily in developing a premier heart program, but that service line is not bringing in as much revenue as in the past, since new heart medication and technology is reducing patient demand for hospital-based heart services, Garrett said. Saint Joseph's recognized several years ago that it needed to diversify, increase its revenues, increase patient volumes and cut expenses. But, it needed more capital to do this.
Merge or sell
In its pursuit of a strategy to find an investor, Saint Joseph's vetted offers to be purchased by for-profits and not-for-profits and, finally, to form a joint operating company, the offer it chose.
Along the way, Saint Joseph's board and an 11-member divestiture committee asked themselves what it means to preserve a Catholic mission, recounted Garrett. If the facility were to divest, the sale could generate a healthy endowment that could fund extensive ministries locally for the poor and vulnerable, a top priority for Saint Joseph's sponsors, the Sisters of Mercy.
The committee questioned whether it was essential to maintain a Catholic acute care hospital in Atlanta. Research conducted by Saint Joseph's has shown that while people value the high quality of service at Saint Joseph's, they do not use religious affiliation as a primary factor in determining where they receive health care. Rather, Atlantans most frequently choose a hospital based on where their insurance provider incents them to go or where their doctor refers them.
Thomas Andrews is president of Saint Joseph's Mercy Care Services, an affiliated charitable arm that delivers health care services to the underserved. Andrews noted that Atlanta does not have a large Catholic population, a fact that could explain in part some people's ambivalence about the facility's roots.
Garrett noted that during the discussions, the Sisters of Mercy on the committee said that if Saint Joseph's had to sell, and if the purchaser was a for-profit, they did not want the facility to remain Catholic.
For the Sisters of Mercy, the top concern was to make a mission-oriented decision that upheld the sisters' Catholic values, said Sr. Angela Marie Ebberwein, RSM, vice president of Saint Joseph's Mercy Care Services. She and two other Sisters of Mercy were on the divestiture committee.
She believes those values will be upheld with the strategy Saint Joseph's has chosen.
Under the joint operating agreement with Emory, Saint Joseph's will be owned 51 percent by Emory with an organization called Saint Joseph's Health System owning the other 49 percent. Saint Joseph's Health System will continue to be affiliated with CHE.
When the deal is finalized, Saint Joseph's will remain under the sisters' sponsorship. Saint Joseph's will be represented on a yet-to-be-created joint operating company board. The joint operating company's assets will include Saint Joseph's Hospital and related facilities and an Emory facility called Johns Creek in Johns Creek, Ga. Saint Joseph's will have one less seat on the joint board than Emory, however, Saint Joseph's will retain super-majority voting rights on that board when it comes to issues related to its Catholic identity. The board will not vote on issues related specifically to the Ethical and Religious Directives for Catholic Health Care Services; Saint Joseph's will have the authority on those concerns. Like Saint Joseph's, Johns Creek will follow the Ethical and Religious Directives for Catholic Health Care Services.
Sr. Ebberwein said Emory's leaders have said they will give Saint Joseph's much latitude when it comes to how they maintain the facility's Catholic identity. Saint Joseph's preexisting mission effectiveness committee already is documenting how this identity is maintained and planning how that will continue or be improved upon after the Emory-Saint Joseph's deal is finalized, probably by September. The joint operating company will have a mission leader with oversight of that company, Saint Joseph's and Johns Creek.
Andrews said the sisters' influence was instrumental in ensuring that Saint Joseph's could continue its ministry under the new owner. "The sisters constantly reflected on their mission (throughout the discussions) and on how to protect that mission. They take a lot of pride in the ministry that their congregation has developed here."
Garrett said the general agreement about Saint Joseph's goal emerging from the search process was: "We need a partner that understands the importance of continuing the tradition of the Sisters of Mercy and continuing to operate in the Catholic tradition. We need a partner who values our team."
He said the hospital's team members are enthusiastic that they've found that partner.
Emory and Saint Joseph's
- A regional not-for-profit system based in Atlanta
- Includes five hospitals, a health center, clinic and spine hospital. One of these hospitals will be part of the joint operating company with Saint Joseph's Health System
- Part of the Robert Woodruff Health Sciences Center of Emory University
Saint Joseph's Health System:
- Includes Saint Joseph's Hospital Atlanta, a physician group, an indigent services arm and research facilities
- The owner of Saint Joseph's East Georgia of Greensboro, Ga., a facility that is in negotiations to transfer ownership to Catholic Health East's St. Mary's Health Care System of Athens, Ga.
Preserved services for the homeless
Under the Emory Healthcare-Saint Joseph's Hospital partnership, Saint Joseph's outreach facilities for the underserved will be preserved. Saint Joseph's sponsors and clinicians founded the Saint Joseph's Mercy Care Services in 1985 to meet the needs of people in downtown Atlanta, after Saint Joseph's Hospital moved from the inner city to the outskirts of the city, in order to have room to grow.
Mercy Care has grown from a single small site to a network of clinics, satellite offices and mobile units that last year saw 10,000 patients. Organized as a federally qualified health center, Mercy Care gets the bulk of its funding from federal grants, but it also uses state grants, philanthropic donations and cash from Saint Joseph's.
Mercy Care provides primary care, preventive services, screenings, dental services and social service help to people who otherwise would have trouble accessing such services. About 64 percent of Mercy Care's clients are homeless; 96 percent are uninsured and 85 percent are at or below the federal poverty level.
Sr. Angela Marie Ebberwein, RSM, vice president of Saint. Joseph's Mercy Care Services, said it was a priority of the sisters to maintain these services. Mercy Care will continue to be run by Saint Joseph's, under the joint operating company it is forming with Emory Healthcare.
"It's important to understand that Mercy Care truly holds a special place in the hearts of our health system and board," she said. "Mercy Care will be preserved."
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