The Kaiser Family Foundation: Report - Is There A Common Ground?

Appendix C: Case Study Reports

I. Case Study A
II. Case Study B
III. Case Study C
IV. Case Study D

I. Case Study A

In 1995, a not-for-profit hospital located in a North Central state acquired a neighboring Catholic community hospital. The non-Catholic hospital is a 368-bed tertiary care provider located in a large city in an area known for its ethnic diversity and blue-collar industries. It is non-sectarian, with a Lutheran background, and part of a large not-for-profit system. This and two other systems (one Catholic and one non-sectarian) are the major hospital players in the local health care market. The Catholic hospital was a 178-bed general provider located in an economically depressed town 15 miles away.

In 1994, the corporate sponsor and governing board of the financially struggling Catholic hospital realized the need for a strategic partner if the hospital was to continue to serve its community. At the time, the non-Catholic hospital was enjoying growth in patient volume and revenues and was seeking to extend its services into surrounding communities. A letter of intent to transfer the Catholic hospital's assets to the non-Catholic hospital was signed in early 1995, and the sale process (which involved Catholic property alienation) was completed within nine months. The Catholic facility now operates as a general, non-sectarian hospital. Its new name combines the name of its current owner with its geographic location.

The Affiliation Process

Earlier Attempt at Affiliation (Early 1990s)

The 1995 acquisition was a second attempt at affiliation between the two hospitals. In the early 1990s, the Catholic hospital was purchased by a Catholic health care system. The hospital had been experiencing reduced patient volume and revenues and had accumulated millions of dollars of debt. The Catholic system and the hospital governing board determined the need for an affiliation and made their decision known to area providers. An affiliation was expected to facilitate the hospital's access to capital, physician networks, and managed care contracts. It would also allow the hospital to reduce its expenses and consolidate some of its services.

The non-Catholic hospital was enjoying a number of successes at the time. The hospital had established ambulatory care sites in several of its neighboring communities, including the Catholic hospital's service area. These centers provided primary care services and referrals to the parent hospital. In the late 1980s, the hospital had joined a health system that provided different services to its members. In addition, the physical space of the hospital was expanded and progress in cardiac, cancer, rehabilitation, and women's health care was made. These factors, combined with extensive market research, had produced a 40% increase in patient volume in recent years. The hospital was therefore ready for further growth.

Given the geographic proximity of the two hospitals and the referral patterns between them, the hospitals' executives agreed that an affiliation would be advantageous to both. Discussions ensued about different forms of affiliation. It was determined, however, that the Directives would prohibit the Catholic hospital from affiliating with the non-Catholic hospital because the latter's sister hospital (sponsored by the same health system) performed abortions. The affiliation plans were halted.

Successful Affiliation (1995)

With the continued decline in the Catholic facility's performance, its sponsor hired a hospital management group in 1994 to position the hospital for sale. One of the consultants became the hospital's top executive after the CEO resigned and implemented both financial and operational improvement initiatives. The hospital's sponsor then negotiated with the local Catholic system to acquire the facility. These negotiations failed when the Catholic system refused to assume the long-term debt of the hospital.

Meanwhile, the executives of the non-Catholic facility proposed that their governing board offer to purchase the Catholic hospital, and the board quickly agreed. A letter of intent to transfer the Catholic hospital's assets and liabilities to the non-Catholic hospital was signed in early 1995. Although the Catholic hospital's sponsor and governing board struggled over the loss of Catholic identity, they felt a strong responsibility to the community and agreed that the survival of the hospital was more important than the Catholic presence. Abortion did not emerge as a critical issue because the Catholic hospital was being sold outright to the not-for-profit system (i.e. no joint ownership or shared governance arrangements were considered). The acquisition was completed after nine months of negotiations that involved the Archdiocese. The executive consultant of the Catholic hospital was retained as the Executive Director of this campus.

Operationalizing the Acquisition

As soon as the letter of intent was signed, two transition task forces were formed with representatives from both facilities: an Operations Task Force and an Employee/Community Task Force. The Operations Task Force focused on: developing new organizational charts that define the accountabilities and responsibilities of all levels of leadership; meeting regulatory requirements; reviewing all policies and procedures; and communicating any new standards/expectations to the employees. The Employee/Community Task Force focused on: defining and communicating the compensation and benefits package for new employees (those previously employed by the Catholic hospital); developing management training and new employee orientation programs; merging the mission and vision of the two organizations; managing the cultural transition from Catholic to non-Catholic; and communicating change internally and externally. One individual facilitated both task forces.

Transition teams addressed three problematic areas: emotional issues, operational issues, and hospital-physician relationships. Emotional issues related to concerns raised by the former Catholic hospital's community about the future of the facility and the expressed preferences of some community members that the hospital be sold to the Catholic system. Workforce reduction and changes in the nursing model (from a paternalistic to a shared governance model) caused resentment among several of the former Catholic hospital's employees, a number of whom resigned. Hospital-physician relationships became an issue following two decisions: (1) requiring the medical staff of the former Catholic hospital to be re-credentialed by the non-Catholic hospital; and (2) terminating the contracts of anesthesiologists and emergency physicians with the Catholic hospital, since they were not considered as competent as their colleagues practicing at the non-Catholic facility.

Several factors contributed to the success of the affiliation. First, extensive market research was conducted in the Catholic hospital's community, and strategic plans for the facility were developed accordingly. The market research tools used included: a survey of community demographics and needs; market segmentation and attitudinal research; focus groups with residents; and one-to-one meetings with community physicians. Attitudinal research monitored different market segments and provided information on the community's attitudes toward the hospital to the public relations department.

A second success factor was the emphasis on internal and external communication during and after the transition process. Internally, the letter of intent was announced during a meeting attended by executives and employees of the two hospitals, and the announcement was followed by a survey of the perceptions/concerns of board members, providers, and employees of the Catholic facility. Ten editions of a Transition Newsletter were published, and several administrator forums were held by the CEO of the purchased campus to update campus employees about new plans. Externally, a program was developed in which teams of two employees (one from each hospital) participated in community events, discussed the acquisition, and provided feedback to the hospitals about community concerns. Furthermore, the new name of the former Catholic campus was selected with community input. Focus groups were used to generate potential names, and a telephone survey assessed people's opinions of the names.

A third success factor was addressing cultural issues early on. The transition team realized the importance of grieving over the loss of Catholic identity and held a "good-bye" party, a ceremony to remove the religious symbols, and an event to highlight the history and culture of the facility. A book summarizing the history of the Catholic facility was produced. In addition, the Team devoted time to addressing the concerns of those who had attended mass at the hospital's chapel and senior citizens who were saddened by the departure of their priest. (The Archdiocese no longer recognized the hospital chapel as Catholic, withdrew the chaplain, and insisted on a name change and the removal of religious symbols.)

Status of Reproductive Services

The site visit took place 15 months after the acquisition process ended and approximately two years after the letter of intent was signed and formal negotiations between the two hospitals began. Although there have been no major changes in the range of women's health services to date, the acquisition is beginning to increase the availability of services, including reproductive services, in the former Catholic hospital's service area.

Prior to the acquisition, the Catholic hospital provided a limited range of reproductive services with a focus on screening and treatment of gynecological conditions. The obstetrical service had been closed in 1994 following a sharp decline in patient volume. This was not a popular decision among community members, but the hospital argued that the low volume made it difficult for the unit to survive both from financial and quality-of-care standpoints. No contraception, sterilization, infertility, or abortion care was provided on the Catholic campus. Physicians renting office space in a medical plaza that was owned by the hospital provided fertility-control services in their offices, however.

A wide range of reproductive services is provided by the non-Catholic hospital including obstetrics and gynecology (each has a separate inpatient suite), prenatal services, prenatal genetic screening, contraception, sterilization (for men and women), and advanced infertility treatments. The hospital also provides community education about reproductive issues. There is no family planning clinic on-site. There are also no plans for starting a freestanding birthing center because market research indicates that community women prefer an inpatient setting for childbirth. Rape counseling, including emergency contraception, is provided by one of the system hospitals located 10 miles away; rape victims presenting to the emergency rooms of the other system hospitals are stabilized and transferred to this facility.

The non-Catholic hospital's policy is that no surgical abortions are provided on its campus except when the life of the woman is threatened and she cannot receive care elsewhere. Only one abortion had been performed in the last decade that met these two conditions (a woman with a case of advanced cancer). The hospital refers for abortion, however, either to the local Planned Parenthood or to a system hospital 10 miles away (which is the only hospital in the state that performs abortions). The hospital has no policy restricting its physicians from performing abortions in their offices; physicians are not likely to provide this service, however, given the activity of anti-abortion groups. Complications of abortion are considered gynecological care and treated on campus. Provision of non-surgical abortions has not been discussed at the executive or board levels, but it is expected that this procedure will be provided in physicians' offices based on personal discretion. The hospital has a policy that employees who feel uncomfortable, for ethical or moral reasons, about participating in certain procedures can notify their managers and be re-assigned.

In addition to reproductive care, women's services at the non-Catholic facility include comprehensive breast care (mammography, case management, support groups), a cardiac awareness center, midlife services, and various support groups. The hospital is planning a psychosocial program for cancer patients and their families, as well as a women's resource center at one of its ambulatory care sites. The center will provide education, information, and referral services that are in high demand in the community (e.g. nutritional information, midlife program). Future plans call for a number of resource centers at the hospital's ambulatory care sites and a main center on the hospital campus.

The acquisition is beginning to result in expanded women's services at the former Catholic campus. Community contraception education has begun, and the first tubal ligation has been performed on campus. Gynecological care and mammography services have been strengthened, and there are plans to start a women's resource center on the campus. No obstetrics or infertility services will be provided at this site, however, because of financial considerations (revenues are not expected to cover costs). Women needing these services are referred to the non-Catholic campus. As part of the acquisition agreement, the non-Catholic hospital agreed that no "life-terminating procedures" - including abortions, euthanasia, or assisted suicides - would be performed on the former Catholic campus.

Although abortion was not an obstacle during the acquisition process, the issue is likely to arise in the future in the context of another possible affiliation. The not-for-profit system hospitals are initiating plans for merging their operations, and conflict among their governing boards regarding the provision of abortion is likely given that one of the system hospitals is committed to providing abortions and is currently the only hospital in the state to do so. (Currently, the operations of the system hospitals are not integrated.) If the hospital that performs abortions changes its policy to facilitate its merger with the other system hospitals, women's access to hospital-based abortion throughout the state will be undermined.

Impact on the Community

Overall, the acquisition was reported to have positively impacted the community. A survey showed that the community was supportive of the sale. The acquisition "saved" the only inpatient facility in a mid-size town and produced service improvements and cost reductions. It also expanded community education programs to a larger audience. The purchased campus was renovated, old accounting and communication systems were replaced, and patient transportation services to the main (non-Catholic) campus were initiated. Decisions about what clinical services are offered on the former Catholic campus are now made based on financial and quality challenges, with the understanding that a small community hospital does not need to duplicate advanced services offered at a nearby tertiary care center. For example, the radiation therapy and rehabilitation units were closed, and patients are now transported to the main campus.

Since the population served by the former Catholic hospital is largely indigent, the acquisition has maintained, and probably improved, the access of this traditionally underserved segment of the population to health care. The non-Catholic hospital is committed to caring for underserved groups. Currently, its department of family practice operates three clinics in low-income communities that are staffed by mid-level providers (primarily nurse practitioners), with rotating family physicians.

The non-Catholic hospital continues to involve the community in its decision-making processes. Neighborhood meetings, clergy meetings, and community forums on specific topics are consistently held to assess needs and concerns. The hospital is planning to monitor services provided by other organizations, with the intention of using these assessments when making decisions about service mix.

Summary

This case illustrates an affiliation between a Catholic and non-Catholic hospital that preserved an essential community provider and created an opportunity for expanding access to services, including reproductive services. While abortions continue not to be provided by either facility (except under the two conditions noted above), other fertility-control services (sterilization, contraception counseling) are becoming more available. There are also plans for enhancing women's access to education and support services.

Several lessons for organizations planning similar transitions emerge from this case. First, early communication about changes and plans, both to the staff and to the community, was important. Communication helped raise staff morale, curb the rumor mill, and establish commitment to the community. Second, human resources issues received special attention. This included early selection of managers and involving them in the planning process; defining roles and accountabilities for managers having responsibilities at more than one site; providing education about change management; distributing new policies/procedures early on; and defining and communicating the policy for workforce reduction. Third, considerable time was allowed for dealing with loss and change. Keeping the transition team and newsletter in operation for a year or longer facilitated the change process. Fourth, the early integration of the departments of the two hospitals and having a third party evaluate the process was a plus.