What’s Ailing Catholic Hospitals?

“Marry for money, not for love,” a doctor once advised me. He had married for love, he told me, and that’s why he had had to become a doctor (instead of an archaeologist) to support his family. Such advice, I have learned, leads to unhappy marriages. This sad fact can be a lesson for individuals but also, analogously, for institutions. Catholic health care is a case in point. Over the past five years or so, reports have surfaced that many not-for-profit Catholic hospitals have become “unequally yoked” with secular “for-profit” health-care systems for financial reasons. Though these unions have been undertaken to preserve the goals of the institutions in question, they have not always resulted in happy marriages—at least not from a moral and spiritual point of view.

These unions of Catholic and non-Catholic health-care providers have taken a variety of forms. In some cases, Catholic health-care systems have acquired non-Catholic hospitals—as in the 1999 purchase by Catholic Healthcare West (CHW) of eight non-Catholic hospitals, formerly owned by Unihealth. In other cases, secular “for-profit” health-care systems have acquired Catholic hospitals, as happened in June of this year when Tenet Healthcare Corporation purchased the Daniel Freeman Hospitals in southern California from the Catholic Carondelet Health System of St. Louis. According to a report from the Catholic Health Association of the United States (CHA), other transactions between Catholic and non-Catholic health-care providers include “joint operating agreements, holding company models, partnerships, swaps, sponsorship transfers, joint sponsorship arrangements, joint ventures, leases, governance and management integration, and other forms of significant collaboration.”

In some cases, Catholic hospitals have become secular, for-profit institutions even when a Catholic alternative existed. For instance, in October 1997 Jesuit St. Louis University’s board of trustees agreed to sell St. Louis University Hospital to Tenet Healthcare for about $300 million, though another St. Louis-based Catholic system had offered to buy the hospital for $200 million. The Tenet deal, it seems, was too good to pass up. Besides the sale price, Tenet offered the university $50 million over a five-year period to maintain the hospital as a teaching institution, as well as a $1.5 million endowment for a chair in health-care ethics. Though St. Louis Archbishop Justin Rigali opposed the sale, the Vatican approved it.

Such mergers have occurred because Catholic hospitals have been losing money. In 1999, for instance, CHW (the seventh largest not-for-profit health-care system in the United States and the largest in the West, with $6 million in assets) reported a $310 million operating loss. This kind of loss is of course more serious for smaller systems and individual hospitals, which is why some have decided to merge with larger for-profit systems.

Mission vs. Market

Why are Catholic hospitals experiencing such financial difficulties? Rev. Michael D. Place, president of CHA, says several factors have had a negative financial impact not only on Catholic health care but on all not-for-profit health care in the United States. These factors, he says, include HMOs, increased labor costs, rises in costs for medicine and technology, and the balanced budget act.

Father Place doubts that the decrease in the number of religious who once staffed Catholic hospitals has had any effect on the current financial problems of Catholic health care. To prepare for the day when laymen would take over positions once held by religious, hospitals have been paying most religious the same salary they pay lay employees for the past 10 to 15 years. The salary is paid to the religious community “in honor of centuries of non-compensated services.” Some communities keep the money; others return it to the hospital. In either case, Father Place says, the salary is treated as an expense, while any money returned comes into the hospital as income.

Not-for-profit hospitals suffer financially, Father Place says, because they have less flexibility to preserve the bottom line than for-profit institutions. He says that while for-profit hospitals “have a commitment to communities, their ultimate responsibility is to stockholder returns. Not-for-profit hospitals’ first and only commitment is to the well-being of communities.” Because of their mission, not-for-profit hospitals do not have the freedom to cut “the high-end, high-tech, high-expense services that historically do not get reimbursed commensurate with the expenses”—services such as neonatal intensive care and burn units.

Yet some have criticized certain Catholic health-care systems for paying too much attention to the bottom line. A January 1998 Wall Street Journal article showcased the Daughters of Charity, known by some on Wall Street as the “Daughters of Currency” for their financial acumen. The Daughters National Health System had cut the number of hospitals they oversaw by 20 percent between 1993 and 1998 while their cash and investments grew to about $2 billion. Critics charged that key Daughters hospitals were located in affluent suburbs and that only 6 to 8 percent of their revenue came from Medicaid, as compared with an average 14 percent for hospitals nationwide. Still, the Journal noted, the Daughters spent 86 cents on charity for every dollar of profit they made from their hospital operations and investments. According to their own audited financial statements, between 1992 and 1998 CHW’s revenues grew from about $1.5 billion to $3.5 billion, while its charity spending dropped from 2 to 1 percent of net care.

Still, Father Place insists that “Catholic health care has a priority commitment to those who are poor, marginalized, or who do not have access to health care.” The impact of that commitment varies by community and state, since there are more uninsured people in some places than in others. Father Place says it is difficult to know whether Catholic hospitals devote more care to the needy, the uninsured, and the under-insured than non-Catholic or for-profit hospitals, because “that data is just not available.” Each state, he says, “has different reporting requirements, different auditing, so that we don’t have a universally agreed-upon definition or standard for gathering data.”

CHA disputes the claim made by Catholics for a Free Choice that the number of mergers and affiliations between Catholic and non-Catholic hospitals is rising sharply. An analysis done by Irving Levin Associates, Inc., as well as data from the seventh edition of the Health Care Acquisition Report, shows that while the number of such transactions rose from 14 in 1994 to 32 in 1998, it has since decreased. Twenty mergers and acquisitions were reported in 1999 and only 13 in 2000. The same reports show that such transactions are not a purely Catholic phenomenon. Between 1994 and 2000, out of 915 such acquisitions and mergers, 61 were between Catholic hospitals, 153 involved Catholic and non-Catholic hospitals, while 701 were between non-Catholic hospitals.

Father Place says one alternative to mergers and affiliations with non-Catholic systems is the formation of systems among Catholic hospitals to enhance management skills, to facilitate group purchasing, or to achieve favorable bond issue rates. Other approaches, he says, include the formulation of clearer financial goals that do not conflict with the charitable mission of Catholic hospitals; seeking federal and state reimbursement for costs associated with caring for Medicare and Medicaid patients; and coming up with ways of negotiating with HMOs so that they will adequately reimburse Catholic hospitals for the HMO services the hospitals provide. Father Place says that some Catholic hospital systems that follow these approaches are experiencing “a modest recovery,” but they are still far from achieving long-term financial stability.

Father Place thinks that President George W. Bush’s charitable choice initiative might help Catholic hospitals, though not in their daily operations. The Health and Human Services Department, he said, is doing a review to see whether existing regulations impede faith-based programs from accessing federal aid. “It could be that that audit will reveal some things we could apply for,” Father Place says.

Father Place’s overall prognosis for Catholic hospitals is not encouraging. “There are some,” he says, “who would say that the ingredients are present for an implosion, especially in a state like California. I think the [issues] facing Catholic health care, in terms of financial stability, are the same issues facing all health-care delivery in this country. And it’s a scary situation.”

Old Conflicts, New Compromises

Even scarier is what seems to be the loss of Catholic vision in Catholic health care. While Catholic hospitals have continued to ban abortions on their premises, they have been lenient in permitting elective, non-therapeutic sterilization and in administering morning-after pills to rape victims. The question of when and when not to remove hydration and nutrition from comatose patients has also plagued Catholic health care. Mergers with non-Catholic partners have only exacerbated these problems.

Some Catholic hospital systems have resorted to casuistry in order to allow sterilization to continue in the non-Catholic hospitals they have purchased. According to the June 16 edition of the National Catholic Reporter, after buying the Leila Hospital in Battle Creek, Michigan, the Catholic Battle Creek Health System created a separate “condominium hospital,” with its own operating room and governing board. The condominium hospital continued offering sterilizations. In 1998 Catholic Health Initiatives purchased the secular Doctors Hospital in Little Rock, Arkansas, renaming it St. Vincent’s. With the blessing of Bishop Andrew McDonald of Little Rock, St. Vincent’s leased out space near the labor and delivery ward to a clinic that performed tubal ligations. In October 1999, the Congregation for the Doctrine of the Faith in Rome told Bishop McDonald to withdraw his permission for the hospital’s arrangement with the clinic.

Other attempts to maintain sterilization services have been more brazen. After its 1999 purchase of eight non-Catholic hospitals, CHW made it very clear that the hospitals would continue to offer sterilization services. In a 1999 interview for the Los Angeles Mission, Carol Bayley, director of Ethics and Justice Education for CHW, told me that since “sterilization is the most widely used form of birth control in the United States,” when dealing with hospitals that have been founded for other-than-Catholic purposes, Catholic systems must consider “the needs of their communities.” “Sterilization is a need of their community, and it’s a pretty big need. Not only does Catholic teaching say, well, this is…evil, but it’s a little more negotiable. It’s also a lot less negotiable from the other side. It’s something they really need to do for their communities.”

According to the November 20, 2000, edition of Modern Health Care, even a specifically Catholic hospital in the CHW system chose to allow sterilizations on its premises. Though originally a secular hospital, St. Louise Regional Hospital in Gilroy, California, has taken on a Catholic orientation and mission since CHW bought it. Still, according to Modern Health Care, the San Jose diocese allowed St. Louise to offer sterilizations to avoid a “serious negative impact on the viability of the facility.”

The needs of the community and financial viability are two reasons Catholic health-care systems have compromised on the matter of sterilization. But there are others. Political pressure from feminist and “reproductive rights” groups may also be moving Catholic health care to change its policy. Last year a meeting of the American Medical Association in Chicago considered Resolution 218, which called for legislation to require all hospitals to provide a full range of “reproductive services” or lose their eligibility for government programs. Because of the testimony of Francis Cardinal George of Chicago, the resolution did not pass—yet the possibility of such a law still haunts Catholic health care.

Disrupted Directives

Part of the problem has been the Ethical and Religious Directives for Catholic Health Care Services, a publication issued by the National Conference of Catholic Bishops (NCCB) in 1994. The appendix to the Directives contained a section addressing cooperation in immoral acts. Some ethicists criticized the section on cooperation, saying it was far too unclear. The National Catholic Bioethics Center (NCBC) in Boston faulted the bishops for not clearly distinguishing between material cooperation, which is sometimes permissible, and implicit formal cooperation, which is never permissible. The NCBC also claimed that the bishops did not directly address institutional cooperation but only individual cooperation.

The Directives’ section on cooperation allowed for much misinterpretation. For instance, spokespersons for St. Vincent’s in Little Rock claimed the Church’s principle of cooperation permitted participation in an act of wrongdoing in times of “duress,” when it was done in order to preserve a greater good. In the case of St. Vincent’s, managed-care companies were said to be applying duress, and the greater good was the hospital’s “financial health.” Bayley told me that the Catholic bishops told CHW, “If you need to cooperate with providers who provide sterilization, if you need to do that to make your hospital system secure—to be sure that your mission goes forward into the future—about that you can negotiate, about that you can cooperate.”

Last year the U.S. bishops began revising their Directives at the request of the Congregation for the Doctrine of the Faith, which was particularly concerned about the section on cooperation. The resulting revision, which the NCCB issued on June 15, 2001, remains basically unchanged from the 1994 edition. The bishops added directives on partnerships in Catholic health care and omitted the entire section on cooperation in the appendix. The bishops now said that “reliable theological experts should be consulted in interpreting and applying the principles governing cooperation, with the proviso that, as a rule, Catholic partners should avoid entering into partnerships that would involve them in cooperation with the wrongdoing of other providers?’

Rev. Germain Kopaczynski, director of education at NCBC, says that in deleting the section on cooperation, the bishops were responding to criticism that the appendix “was spawning more questions than answers.” Was it an adequate response? The Church rarely makes “draconian revisions,” Father Kopaczynski says. “I think [the bishops] tried to address the legitimate concerns—that proper doctrine is safeguarded—without changing the document so drastically that people would find themselves lost in it. In a sense, it was a minimalist way of trying to handle the abuses that were taking place?’

As for referring the question of cooperation to “reliable theological experts,” Father Kopaczynski notes that in the general introduction to the Directives, the bishops say that “in the absence of a determination of the magisterium, but never contrary to Church teaching, the guidance of approved authors can offer appropriate guidance for ethical decision-making.” Father Kopaczynski thinks that the “approved authors” perhaps refers to the “classical authors, those who have already gone home to the Father; whereas the ‘reliable theological experts’ might be those who are still among the living. That is open to some interpretation,” Father Kopaczynski says. “Depending on who the experts are whom you consult, you might get a latitudinarian or a narrow interpretation of the document. You might want to say, ‘This theological expert is reliable to me’—but would he be reliable to somebody else?”

Father Kopaczynski thinks that the new Directive 70 should be the litmus test in judging the reliability of a theological expert. That directive states: “Catholic health organizations are not permitted to engage in immediate material cooperation in actions that are intrinsically immoral, such as abortion, euthanasia, assisted suicide, and direct sterilization.” The footnote to this directive cites the 1975 “Reply of the Sacred Congregation for the Doctrine of the Faith on Sterilzation in Catholic Hospitals”: “Any cooperation institutionally approved or tolerated in actions which are in themselves, that is, by their nature and condition, directed to a contraceptive end…is absolutely forbidden. For the official approbation of direct sterilization and, a fortiori, its management and execution in accord with hospital regulations, is a matter which, in the objective order, is by its very nature [or intrinsically] evil.”

In their “Statement on Cooperation, An Examination of the Fundamental Principles,” the ethicists at the NCBC define immediate material cooperation as “any willful, intentional contribution to the circumstances essential to the principal agent’s immoral action, though that action may not be intended by the cooperator?’ If one applies this definition to Catholic health-care systems, even secular hospitals that remain secular after their purchase by a Catholic party may not offer abortion, euthanasia, assisted suicide, or direct sterilization.

An Uncertain Prognosis

Last year, when it became clear that the new directives would be more stringent on cooperation with sterilization, the CHA presented the bishops with a list of concerns expressed by Catholic health-care professionals. (Catholics for a Free Choice, on whose Web site this list appeared, claimed that CHA itself expressed these concerns. But Fred Caesar, CHA:s senior director for public affairs, said the list, though presented by CHA, did not express that organization’s concerns; rather, CHA “was reporting what had been expressed by Catholic health-care leaders in a meeting with the drafting committee of the National Conference of Catholic Bishops.”)

Among the concerns were the following: “The revision could result in another Humanae Vitae-type division within the church…. [It] will likely affect Catholic health care’s ability to approach potential partners [who] do not share our views on sterilization as an intrinsic evil…. There is a likelihood of the loss of OB/GYN services in many of our hospitals…. Some will see the proposed change as an attempt to impose our religious beliefs upon the community…. Women and children, especially the poor, will be most affected by these revisions…. The proposed revisions could jeopardize Catholic health care’s ability to carry on our mission by eliminating our presence in some areas, weakening our influence on moral issues, especially life issues…. Sponsors will be forced to consider whether or not to continue their health care ministry as Catholics, [and] the revisions may also create serious conflict within religious congregations.”

Insofar as this list of concerns reflects the attitude of Catholic health-care providers, there would seem to be little likelihood that they will obediently embrace the more stringent directives. One is left to ask how a Humanae Vitae-type division would be possible in a system where everyone followed Church teaching. Is the loss of OB/GYN services more serious than the sacrifice of Catholic principles? How will women be affected, except positively, by Catholic hospitals treating them according to their true human dignity? And how Catholic are the sponsors who will abandon their Catholicity because they are called to follow Church doctrine? The list of concerns presented by CHA may reflect an “unequal yoking”—not only of Catholic with non-Catholic institutions but of Catholics with anti-Catholic positions.


  • Christopher Zehnder

    At the time this article was published, Christopher Zehnder was the editor of the Los Angeles Mission.

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