$100m deal to lift Caritas Christi
Ascension Health OK's bond buy
Ascension Health, the Catholic healthcare giant that came close to taking over the struggling Caritas Christi Health Care system a year ago, will provide Caritas Christi with $100 million in funding, raising the possibility that Ascension could eventually take over the six-hospital chain owned by the Archdiocese of Boston.
In an agreement set to be made public today, Ascension, based in St. Louis, agreed to buy $100 million in low-interest bonds from Caritas Christi - essentially a five-year loan - to help shore up Caritas Christi's finances and improve its network of hospitals, which include St. Elizabeth's Medical Center in Brighton and Carney Hospital in Dorchester. Caritas Christi is New England's second-largest hospital system behind Partners HealthCare.
Marc Bard, the chief executive of the Bard Group, a healthcare consulting firm in Needham, said the deal represents a vote of confidence in Caritas Christi's turnaround strategy, indicating that Ascension is optimistic the debt will be paid back. Bard said it also "positions Ascension on the inside track" to potentially acquire Caritas Christi in the future. As part of the deal, an Ascension representative will be allowed to sit in on Caritas board meetings.
Ellen Lutch Bender, the president of Bender Strategies, a Boston healthcare consulting firm, also believes the financing deal could lead to a takeover. "I don't think Ascension is looking to invest $100 million in any system in the absence of believing there could be some long-term synergy," Bender said.
Caritas Christi's chief executive, Ralph de la Torre, said he was optimistic Ascension could help the chain continue to improve its operations, but said he hasn't discussed a possible merger.
"Does it help the two systems get closer? Absolutely," de la Torre said. "Are they interested in us for the future? That I can't answer. All I can tell you is that there has been nothing in writing or even a handshake, wink, nod, or discussion about that."
Ascension, the nation's largest Catholic healthcare system, came close to acquiring Caritas Christi from the archdiocese last year. The tentative deal collapsed in June 2007, after Ascension found Caritas Christi was in worse financial condition than expected because of underfunded pension liabilities and a dwindling number of patients. Since then, however, Caritas Christi has taken steps to improve its profitability, including streamlining management and consolidating some offices.
De la Torre, who became chief executive in May, said the system's 2008 earnings will be marred by some one-time restructuring charges, but that the chain's underlying operating profitability has already improved. For example, he said Carney Hospital, which has struggled with losses in the past, is now profitable.
In addition, de la Torre, a former cardiac surgeon, said the chain has recruited more than three dozen doctors this year, something it traditionally had difficulty doing. New recruits include three respected urologists: Michael G. Callum, a former chief of urology at North Shore Medical Center; David R. Staskin, former director of female urology at New York Presbyterian Hospital; and Ingolf "Harry" Tuerk, former vice chairman of urology at Lahey Clinic.
Caritas Christi also recruited North Shore Medical Center's former chief of radiology, Mark Girard.
De la Torre said the $100 million in funding will enable the chain to go "full-speed ahead" with plans to upgrade some facilities, including operating rooms at St. Anne's Hospital in Fall River and Good Samaritan Medical Center's emergency room in Brockton. In addition, he said it will allow the system to invest in doctor recruitment and upgrade its computer systems. Caritas Christi recently teamed with Microsoft Corp. to develop and deploy new software to handle electronic medical records.
"This infusion of capital will help Caritas fulfill some of its announced objectives," said Bender, the healthcare consultant.
Caritas Christi declined to reveal the interest rate it is paying on the bonds, but said it was below market rate. Ascension did not offer a reason for buying the bonds at below-market rates other than to say in a written statement: "Ascension Health has a commitment to strengthening Catholic healthcare." But de la Torre said Ascension would only make the deal if it considered it a sound business decision.
"This is still an investment," he said. "If they make bad investments, then their own healthcare system suffers."
Todd Wallack can be reached at twallack@globe.com. 