Plans to operate hospitals as Catholic
By BETSY TAYLOR
Catholic Health Initiatives, one of the nation's largest faith-based health systems, signed a definitive agreement in April to acquire St. Luke's Episcopal Health System, a six-hospital system in the Houston region. The transaction, which is subject to regulatory approvals, is expected to be completed early this summer. The system will be renamed St. Luke's Health System.
CHI will contribute $1 billion toward a new Episcopal Health Foundation and $1 billion for investment in the health system; additional financial details have not yet been disclosed.
CHI's President and Chief Executive Kevin Lofton said CHI intends to run the facilities as nonprofit Catholic hospitals, and they will follow the Ethical and Religious Directives for Catholic Health Care Services. Lofton said he and Sr. Peggy Martin, OP, CHI's senior vice president of sponsorship and governance, met with Cardinal Daniel DiNardo, archbishop of Galveston-Houston, in April before they knew if CHI would be the system chosen to acquire
St. Luke's. In that meeting they apprised him of CHI's intent with respect to establishing a Catholic identity for St. Luke's if CHI prevailed in its bid. Cardinal DiNardo is the local ordinary with the authority to recognize St. Luke's as a ministry of the Catholic Church; he issued a brief statement last month saying he looks forward to meeting with CHI representatives again to continue the dialogue.
CHI has agreed to retain an Episcopal chaplain "for a period of not less than five years" and CHI will provide additional pastoral care resources in the St. Luke's system as part of its Catholic health care ministry. "We have mission integration vice presidents that would work with the leadership at St. Luke's to make sure that the Catholic teachings are understood, first by the leadership and then (by having) mission and HR work to incorporate CHI core values into the day-to-day operations at St. Luke's," Lofton said.
CHI is acquiring the health system in its entirety. This includes St. Luke's Episcopal Hospital in the Texas Medical Center in Houston and the suburban hospitals St. Luke's The Woodlands Hospital, St. Luke's Sugar Land Hospital, St. Luke's Lakeside Hospital, St. Luke's Patients Medical Center and St. Luke's Hospital at The Vintage. It also includes outpatient care facilities, community emergency centers and medical office buildings. The work of the existing St. Luke's Episcopal Health Charities will continue on through the new foundation.
CHI has committed to retaining all current St. Luke's employees, including President and Chief Executive David Fine. Existing affiliations with Baylor College of Medicine, Texas Heart Institute, Kelsey-Seybold Clinic, Texas Children's Hospital and MD Anderson Cancer Center will continue, St. Luke's and CHI leadership said in a statement and at an April 19 joint news conference.
The acquisition marks the first move into Texas for Englewood, Colo.-based CHI. The system has 78 hospitals and 40 continuum-of-care residential facilities in 17 states with annual revenues of $10.7 billion, while St. Luke's reports about $1.3 billion in annual patient service revenue. Lofton said the St. Luke's deal fits with CHI's strategy. He said CHI has been looking for growth opportunities in urban markets as it develops a number of large statewide systems.
He said that the acquisition of St. Luke's would bring the number of Catholic hospitals in the Houston-Galveston Archdiocese from two up to eight, providing an ability to expand Catholic health care in a city that is about 23 percent Catholic. The two existing Catholic hospitals are CHRISTUS St. John Hospital in Nassau Bay and CHRISTUS St. Catherine in Katy.
St. Luke's Episcopal Hospital is part of the Texas Medical Center, where several health care providers treat patients, educate students and conduct research. St. Luke's Episcopal Hospital also is affiliated with three medical schools and several nursing schools.
CHI has a few academic medical institutions in its system. In 2012, it became the sole sponsor of Alegent Creighton Health's Creighton University Medical Center in Omaha, Neb. It also operates the University Medical Center in Louisville through KentuckyOne Health. CHI has relationships with the University of Cincinnati through Cincinnati's Good Samaritan Hospital and with Pennsylvania State University through the St. Joseph Regional Health Network based in Reading, Pa.
Episcopal Health Foundation
The terms of the St. Luke's acquisition call for CHI to contribute more than $1 billion to a new Episcopal Health Foundation, whose mission is to meet the unmet health needs of the Houston region's underserved populations. Bishop C. Andrew Doyle of the Episcopal Diocese of Texas said at the news conference that the new foundation will allow the diocese to work to close a widening gap in health care in a 57-county area. "There is a care vacuum that must be addressed, including access to health care, prevention, community and environmental health, poverty, education and health disparities," he said.
CHI has committed an additional $1 billion for investment in St. Luke's Health System over seven years, a St. Luke's spokesperson said.
CHI's trump cards
At the news conference, Bishop Suffragen Dena A. Harrison, chairperson of the St. Luke's Episcopal Health System Board, said about 11 months ago the board set out "to reimagine the future of the health system based on the current health landscape and the changes that are coming in health care." She said that process involved assessing what was needed "to continue into the future with the same success we have enjoyed historically."
Leadership considered a variety of options, including partnerships and joint ventures. About 30 potential partners were notified that the system was seeking to make a change, and three finalists were selected in March. The other two were identified at the news conference by media outlets as the Texas-based Methodist Hospital System and Memorial Hermann Health System.
At the news conference, Rt. Rev. Harrison said: "CHI was selected because of its deep alignment with our mission and values and its incredible capacity to take the system to the next level in terms of meeting the different demands of physician models, accountable care organizations, efficiencies, value-based purchasing — all those words that you're hearing that are coming down the pike very rapidly."
Physicians seek to temporarily block sale
On the day the definitive agreement was announced, lawyer Hiren Patel of Houston sought a temporary injunction in the First District Court of Appeals in Texas to prevent the sale of St. Luke's Sugar Land Hospital, due to an on-going court case brought by four physicians over proportionate ownership and control of St. Luke's Sugar Land Partnership. The partnership was formed in 2006 to own and operate the St. Luke's Sugar Land Hospital, and physicians were able to buy into the partnership. St. Luke's counsel Ken Broughton said in a statement that the motion for an injunction is premised on a "flawed assumption" that St. Luke's Sugar Land Hospital is being sold or transferred. Broughton maintains that CHI will be substituted into the position currently held by the Episcopal Diocese of Texas, in an arrangement akin to when a company gets a new shareholder. He says it won't impact the assets or liabilities involved in the plaintiffs' case. The underlying case is Shatish Patel, et al. vs. St. Luke's Sugar Land Partnership, LLP, et al. and currently is scheduled for a September trial.