In Caritas deal, fears for two city hospitals

News that the largest nonprofit hospital chain in the United States plans to absorb six hospitals operated by the Archdiocese of Boston triggered a debate yesterday about the future of Catholic healthcare in the region.

Proponents of the deal said the move will strengthen the Caritas Christi Health Care chain and bring a badly needed infusion of money and management expertise to a system that is falling behind its competitors. But others worried that services could be cut at some of the hospitals, particularly the most vulnerable one, Caritas Carney Hospital in Dorchester.

Ascension Health , a Catholic chain headquartered in St. Louis, has more than 70 hospitals in 20 states and annual revenue that tops $11 billion. It has a reputation among bond rating agencies for excellent management and a clear focus on containing costs. It also enjoys a strong reputation for improving quality and reducing the number of medical errors and infections in its hospitals.

"They have a great financial profile, a great balance sheet, great cash flow. They have strong management practices, and they have done a great job of standardizing things throughout the health system," said John Wells , senior director of public finance at Fitch Ratings , a bond rating agency in New York.

"Everybody's on the same page in Ascension," said Maureen Bisognano , executive vice president and chief operating officer at the nonprofit Institute for Healthcare Improvement, a Cambridge research and education organization. "If you go to an Ascension meeting, you see people talking about how [they] can reduce bed sores, or ventilator-associated pneumonia."

But while Ascension and archdiocese officials said yesterday that the deal to transfer ownership of the Caritas Christi hospitals will help make them better, Mayor Thomas M. Menino cautioned Ascension Health and Cardinal Sean P. O'Malley against an aggressive focus on cutting costs.

Menino expressed trepidation about the fate of two Boston hospitals in the chain, Caritas St. Elizabeth's Medical Center in Brighton and Caritas Carney.

"I am concerned that while the archdiocese begins these delicate negotiations about the future of its Boston hospitals, too much focus will be on the bottom line," Menino said. "I encourage the archdiocese to negotiate with Ascension so that there is no reduction of services at either the Carney or St. Elizabeth's hospitals."

Carney has relied on millions of dollars in annual aid from the state Legislature. With out-of-state ownership, the hospital chain's political position could be diminished, making it more difficult to secure funding from the Legislature.

Bill Walczak , chief executive of the Codman Square Health Center in Dorchester, said he hoped Ascension and its Catholic sponsors, a national order of nuns called the Daughters of Charity , will find ways to make Caritas Carney an integral part of the system. The Daughters of Charity owned the hospital before selling it to the archdiocese in 1996.

"It's fine to be bottom-line oriented, but I would hope that they don't make any rash decisions about this," Walczak said.

Ascension Health officials and the archdiocese said there are no guarantees about the future of Carney or any of the hospital chain's operations. But they said the deal came about out of a desire to improve the Caritas Christi system, not diminish it.

"We come in with an explicit commitment to strengthen Catholic healthcare in the United States, and to strengthen Catholic healthcare in Eastern Massachusetts, and build for the long-term future," Robert Henkel , Ascension's chief operating officer, said yesterday.

James P. McDonough , the Boston archdiocese chancellor who has led discussions about the deal on O'Malley's behalf, said the move will improve the hospitals' position in the Boston market.

"This isn't going to hurt us, it's going to help us," he said.

The Globe reported yesterday that the archdiocese has signed a "letter of intent" with Ascension to transfer ownership of the six hospitals, with a July 1 target for the deal's completion. Whether it will be a sale, merger, or some other form of transaction remains unclear because conditions of the transfer of ownership have not been negotiated. Yesterday, a press release from Ascension and the archdiocese called it a "change in sponsorship." Officials from both parties, including O'Malley, briefed trustees from individual hospitals last night at a closed meeting in Waltham.

Ascension enjoys a sterling reputation on Wall Street, with bond agency ratings that allow it to borrow money more cheaply than smaller systems, including Caritas Christi. By absorbing about $278 million in Caritas debt, Ascension will save millions of dollars a year in interest payments.

But individual hospitals tend to lose control of their destiny in these mergers, according to an expert in Catholic healthcare at Georgetown University , Gary Filerman , professor and chairman of the college's department of health systems administration.

Filerman said he did not have specific knowledge of Ascension's plans, but speaking generally, he said the leadership of the nation's growing Catholic healthcare chains are removed from local concerns.

"As the system gets larger, the individual community hospital, where the rubber hits the road, is further and further away from the center of decision making, which may ultimately affect its vitality if not its survival," Filerman said.

"Money gets moved around in these systems. It gets moved around often for good reasons, but it means that the individual hospital can be a winner or a loser in a situation where it has not a lot of say over the disposition of its resources," he said.

Christopher Rowland can be reached at crowland@globe.com.