Ascension’s for-profit model called workable for Catholic hospitals
Ascension Health may have raised eyebrows in the Catholic healthcare world last week by forming a new for-profit health system, but industry experts say they hardly expect that to be the last such marriage between religious healthcare and profit-minded financiers.
Ascension, by far the nation’s largest notfor-profit nonfederal healthcare system by revenue, announced last week that it is partnering with private equity firm Oak Hill Capital Partners, of Menlo Park, Calif., to form a new entity called Ascension Health Care Network (Feb. 21, p. 6).
The new for-profit system will leverage Oak Hill’s private equity, along with an undisclosed investment by Ascension, to buy up ailing Catholic hospitals. The system will use Ascension’s operational and mission expertise to ensure the facilities remain authentically Roman Catholic—even while they produce dividends for Oak Hill’s investors.
It’s an idea that would have been antithetical the late Chicago Cardinal Joseph Bernardin, a nationally influential critic of profit-seeking Catholic healthcare who used his seat as a trustee on the Catholic Health Association to speak out vociferously during the wave of Catholic healthcare consolidations in the mid-1990s.
Bernardin died in 1996. “He was a brilliant man, but times have changed. It has gotten very tough to become a successful operator of an acute-care institution in this day and age,” said Lawrence Singer, director of the Beazley Institute for Health Law and Policy at the Jesuit Catholic Loyola University Chicago.
John Haas, the longtime president of the National Catholic Bioethics Center in Philadelphia, said the formation of Ascension Health Care Network is likely to prompt some concern.
“I think the news will be received with uneasiness by many,” Haas said by e-mail while traveling in Rome. “There is a deeply ingrained sentiment, if not studied conviction, that healthcare must be provided for the benefit of the patient and not for the enrichment of investors or shareholders.”
However, both Haas and Singer said they believe the Ascension Health Care Network model can be workable, given strong enough contractual protections and vigilant oversight by Catholic officials.
Whether other large Catholic systems plan to follow suit remains to be seen. Spokespeople for each of the other nine systems in the top 10 largest Catholic health systems in the country either declined to comment or did not return calls for comment. Officials with the Catholic Health Association also declined to comment.
Leo Brideau, president and CEO of Ascension Health Care Network, said in a written statement this week that reaction to the news has been positive: “Many colleagues and health system CEOs have told me this type of initiative is long overdue.”
Given the severe need for capital at many Catholic hospitals, the venture is bound to be watched closely, not just by hospitals but competitors as well.
Jeff Atwood, a spokesman for the privateequity backed hospital-acquisition firm RegionalCare Hospital Partners, called the formation of Ascension Health Care Network “a sign of the times.”
“We all know access to capital is becoming so important as it relates to healthcare, and these new types of arrangements and structures are part of the fabric of what we’ll see,” he said, adding that it wasn’t yet clear whether RegionalCare and Ascension Health Care Network would compete to acquire the same hospitals.
For-profit Vanguard Health Systems, which owns one Catholic hospital in Worcester, Mass., and last year announced plans to buy three more in Chicago, declined to comment on Ascension’s new venture.
The Rev. William Grogan, who serves as Chicago Cardinal Francis George’s delegate to hospitals and chairs the Chicago Archdiocese’s Bioethics Committee, noted that a sudden infusion of capital into a Catholic hospital could negatively affect competing not-for-profit hospitals within the same market. In theory, that could hurt the other Catholic hospitals’ ability to provide needed community services, he said.
Grogan said that conceptually, for-profit religious healthcare could be a workable model, but a major question will be whether the profits made by such systems end up eating into the funds that would otherwise go to providing community benefits.
He urged investors in Catholic systems to consider the fact that local bishops are likely to remove the Catholic identities of hospitals if they’re seen as straying from Catholic social teaching.