The hospital merger and acquisition world is one filled with deep and wide complications. One of those complications, rarely discussed, is the role of values and how one board's values may actually conflict or so radically differ from that of the prospective partner, a merger is not possible.
Take for instance the Roman Catholic Church. In a fairly large number of communities and some 100 years ago, Roman Catholic religious men and women developed ministries focused on ensuring that those without the means would have a place to be treated when they were affected by illness. That world has changed radically both with the development of approaches to addressing illness; the introduction of federal and state payments for health care services to those without resources; and medical practices and capacity. And all of these changes have made the health care field, in all ways, very complicated and solo hospitals in particular, facing great challenges to stay independent and financially successful.
But these independent faith-based hospitals, particularly the Roman Catholic religious order based organizations are rooted in a set of fundamental beliefs, values, that guide and inform their work. The for-profit systems that see opportunities in acquiring these institutions have their own sets of values but most often without the "strings" that faith beliefs attach. And hence becomes the challenge for creating a marriage.
Today's Wall Street Journal does a great job in highlighting these challenges of conflicting and/or competing values and even the need for some boards to appeal to a higher power, aka, the Pope. Some questions: what is compromise in values and when is it appropriate; does faith trump economics; and, what happens after?
Here's the Wall Street Journal article.
It isn’t just the Federal Trade Commission scrutinizing U.S. health-care mergers these days. The Vatican is watching, too.
Some of the biggest recent deals involve nonprofit hospitals affiliated with the Catholic Church, which make up about 8% of U.S. hospitals. Many began as small institutions founded by nuns more than a century ago. But as they have combined and grown into large corporations, they are posing new moral quandaries for church officials, who have a say in which mergers go ahead.
A proposed union between Catholic Health Initiatives and Dignity Health would create one of the largest U.S. hospital owners, with $28 billion in annual revenue—exceeding that of McDonald’s Corp., Kraft Heinz Co. or Qualcomm Inc.
The deal won clearance from several congregations of nuns and two archbishops. But daunted by the merger’s complexity, the archbishops in December also agreed to seek a review by a higher authority: the Vatican, which has the ultimate authority to reject or modify deals.
“They need to know what’s going on” in Rome as U.S. health care consolidates, said Denver Archbishop Samuel Aquila, who requested the Vatican review. No decision has been made yet.
The Catholic Church reviews mergers involving Catholic hospitals and can object when they run afoul of church teaching.
Officials at CHI and Dignity declined to comment. The Vatican body responsible for the review didn’t respond to a request for comment.
One big issue is the Catholic Church’s prohibition of medical care it considers immoral, such as abortion, sterilization and physician-assisted suicide. Catholic hospitals cannot perform such procedures. When merging with non-Catholic hospitals, they must be kept separate from those services.
“The Catholic Church’s moral position on issues that are considered to be the standard of care” in secular hospitals “require some really hard thinking and creative ways to forge” secular-sacred unions, said John Haas, president of the National Catholic Bioethics Center in Philadelphia, who advises bishops on health care.
There is also a risk that the institutions could lose ties to the communities they serve as they grow larger, eroding the humanity of medical care at the heart of Catholic teaching, Archbishop Aquila said. Of the handful of health-care deals he estimated he has reviewed over the years, CHI-Dignity is “by far the largest,” he said.
Pushback from the church can derail a deal or send people back to boardrooms to renegotiate the terms. The 2012 sale of a Catholic hospital by Mercy, based in St. Louis, to a non-Catholic, for-profit company, ended after parties involved said they anticipated “continued challenges” to approvals needed from the Vatican and Federal Trade Commission.
The Vatican in 2014 released new guidance for health-care deals “to ensure that Catholic healthcare institutions neither cooperate immorally” with non-Catholic partners “nor cause scandal as a result of their collaboration with such other entities.” The Vatican said it viewed the mergers as a response to advances in medical technology and related costs.
That guidance prompted the U.S. Conference of Catholic Bishops to begin revising its health-care directives, which detail how Catholic hospitals should do business with non-Catholic providers that perform prohibited procedures. The new directives are expected as early as this summer.
Catholic acquisitions of non-Catholic hospitals have also drawn criticism from some patient advocacy groups, who say the unions threaten access to reproductive and other medical services that the church bans. State attorneys general intervened in some instances to ensure that entities resulting from deals involving Catholic and non-Catholic facilities would offer reproductive services.
Catholic Health Initiatives, based in Englewood, Colo., is affiliated with the Catholic Church. Dignity Health, based in San Francisco, broke its formal church ties five years ago, but some of its hospitals kept their Catholic affiliation.
The nonprofits have combined assets of $39.3 billion.
CHI has expanded rapidly since the start of the decade with nearly two dozen acquisitions or joint ventures. Dignity Health operates hospitals in fewer states than its proposed partner, but has national businesses under joint ventures with publicly traded and private-equity partners, including Welsh, Carson, Anderson & Stowe; Select Medical Holdings Corp.; and UnitedHealth Group Inc.
Archbishop Aquila and San Francisco Archbishop Salvatore Cordileone said when they reviewed the deal, they consulted bishops affected by the proposed merger, as well as moral theologians hired by Dignity and CHI to help shape the union, and other theologians not involved in the deal.
The archbishops awarded the merger a “nihil obstat,” a Latin term meaning they have no moral objections to the transaction. Possible benefits of the deal include the potential for better borrowing terms for the new, larger organization, said Archbishop Cordileone.
But the archbishops also contacted the Vatican to seek a review by the Congregation for the Doctrine of the Faith, a body of cardinals, bishops and others who settle questions on Catholic doctrine. They did so to ensure their analysis had “no blind spots that [the Vatican] might find unacceptable,” Archbishop Cordileone said.
—Francis X. Rocca contributed to this article.
Write to Melanie Evans at Melanie.Evans@wsj.com