ARTICLES

Hospital Break-Up

Daughters of Charity Go It Alone

By Joe Marti

In February of last year Catholic Healthcare West, the largest not-for-profit health care provider in California and the largest Catholic hospital system in the western United States announced that it needed to restructure in order to more fully carry out its mission. Catholic Healthcare West was formed in 1986 by the Sisters of Mercy in Auburn and Burlingame in response to the rise of HMOs and to utilize their pooled resources to increase their buying power for common supplies and services. Over the past year, seven hospitals in the network have opted out of the organization. In their statement last February, Catholic Healthcare West said that the reorganization was being done to "reduce management layers and increase local decision making." The same reasons were cited by the Daughters of Charity when they pulled out of Catholic Healthcare West in December.

Tricia Griffin, executive coordinator of corporate communications for Catholic Healthcare West, was unable to comment on the progress being made since last year and explained that those who would be able to were traveling and unreachable. However, in a December 31 statement from Elizabeth Shih, chief administrative officer for Catholic Healthcare West, Catholic Healthcare West initiated a system-wide restructuring earlier this year, "designed to streamline reporting relationships, expedite decision-making, eliminate duplication between hospital and regional structures and place the CEO closer to day-to-day operations." Courtney Conlon, marketing and corporate communications coordinator for Seton Medical Center & Seton Medical Center Coastside, told the Faith last month, "[We] believe in having more local control of the healthcare for the community in order to be responsive and responsible to the community needs."

Lloyd Dean, president and CEO of Catholic Healthcare West said that the reorganization is taking place largely, "so that our hospitals can make decisions based on what is best for their communities." Since both groups cite the same reason for reorganizing, why did they choose to do so separately? In a May 2001 article that first appeared in the San Francisco Business Times, it was reported that in fiscal year 2000 Catholic Healthcare West lost $307 million on patient care, but limited its total loss to $47.6 million due to investment earnings. The article suggests that this is the main reason for the group's restructuring. According to state figures, the seven Daughters of Charity hospitals were among the best in the system 1999. All seven collectively broke even, while Catholic Healthcare West lost $103.4 million that year.

According to Wanda Jones, president of the New Century Healthcare Institute, the Daughters' profitable financial position, plus one other factor, might be the best explanation for the break-away. According to Jones, to say that the Daughters felt Catholic Healthcare West had fallen short is an oversimplification of the bigger picture. The current seismic safety law covers 80% of California (primarily west of the Sierra) and requires that buildings built before 1973 either be retrofitted or replaced. Jones said, "The cost for just the construction on all hospitals in that zone is $41 billion."

Given the financial picture of Catholic Healthcare West coupled with the prospect of replacing or retrofitting 32 hospitals understandably concerns the cash-rich Daughters' hospitals. In the system, all hospitals collaborate in borrowing or paying back money. Likewise, priorities are set as to who needs the money most. Although the Daughters may be financially sounder, that would mean that their money would go to pay for other, more cash-strapped hospitals before their own comparatively less needful hospitals. Sensing this, said Jones, the Daughters made a move to become more autonomous in order to take care of their own, and to do so according to their order's charism. [Daughters of Charity] wanted to make their own decisions. They had a lot of cash assets that they thought should be used for their hospitals. They never anticipated this retrofit," said Jones.

In light of this, the Daughters announced on December 31st that they were amicably leaving Catholic Healthcare West in order to convene under a new group, called Daughters of Charity Health Systems. Included in this group, in addition to Seton, are O'Connor Hospital in San Jose, Saint Louise regional hospital in San Francisco, Seton medical center coastside in Moss Beach, Robert F. Kennedy medical center in Hawthorne, St. Francis medical center in Lynwood, and St. Vincent medical center in Los Angeles. Conlon, who did not comment on the retrofit aspect of the move, explained that the move had more to do with a return of governance to the local level. "Most of the operating function will reside in each of the individual hospitals," Conlon said. In addition, the move will provide local management for each hospital apart from the umbrella organization."

On the front lines, the change is welcomed by those who are charged with the day-to-day work at the hospitals. Sister Paula, a volunteer at Seton who has been there for 13 years, expressed relief and happiness over the changes. "I think we're ecstatic about it," she said, "Our main goal is to take care of anybody who is in need regardless of whether they have money or insurance." She explained that in the Catholic Healthcare West system, their money was pooled. In her eyes, this raised some problems stemming from a belief that the money was not theirs to commit to other hospitals' needs. She said, "I think we all thought Catholic Healthcare West was something other than what it was. The money we have is the money of the poor; it isn't our money. So we couldn't turn it in to Catholic Healthcare West." She pointed out that the union was a benefit to both Catholic Healthcare West and the Daughters of Charity early in their partnership. Being able to buy supplies in bulk at great discounts was a help to all. "But there were other things that we weren't too thrilled about. The main part that we were worried about was that we could not give away the money of the poor that belongs to them."

The Daughters of Charity were founded in Paris in 1633 by Saint Vincent de Paul and St Louise de Marillac as a group of women dedicated to serving the "poorest of the poor," according to the order's literature. The Daughters currently maintain over 27,000 nuns and laywomen who serve all over the world.

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