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
IV. Case Study D
In 1996, the governing board of a public/district hospital in the Western region of the country voted in favor of a joint venture with a Catholic health care system. (The district hospital is accountable to district voters, who may fund it through tax revenues and elect its governing board members). The district hospital had been experiencing operating losses due, in part, to the growth of managed care. Key decision makers recognized that it could not continue to operate as an independent provider. Two corporate "suitors" proposed to affiliate with the hospital: a Catholic system and a for-profit health care system. After soliciting the input of community members, medical staff, and employees, the board voted to affiliate with the Catholic system. The facility continues to operate as a non-sectarian community hospital.
The 438-bed hospital was established in the 1950s after the voters of five neighboring towns elected to form a hospital district and passed bond issues to finance the project. The hospital was built in a mid-size town with a predominantly white, middle-class population. The Catholic system is a large hospital chain and operates Catholic and non-Catholic providers through a number of regional offices. The system sought to strengthen its provider network through an affiliation with the public facility.
Following the governing board's vote for a 50/50 joint venture with the Catholic system, a new not-for-profit corporation was formed to run the hospital. The new corporation's governing board includes representatives from the district board and the Catholic system. The hospital's assets were transferred to the new corporation, and the Catholic system gave the district several million dollars to fund community projects. The hospital continues to provide a range of reproductive services including obstetrics and fertility-control. Pregnancy terminations for purposes other than to save the life of the woman were discontinued following the joint venture.
The Affiliation Process
Earlier Attempt at Affiliation (1995)
Faced with major financial difficulties as a result of declining admissions, operating inefficiencies, and an inability to acquire managed care contracts, the district hospital had laid off many employees and closed its walk-in and cardiac rehabilitation units in the 1990s. The governing board saw three alternatives: closing the hospital, selling the facility, or affiliating with a strong partner. In 1995, the hospital signed a letter of intent to partner with the Catholic system. However, the hospital soon realized that district health care laws require it to go through a formal process of requesting and evaluating affiliation proposals from all interested parties before making affiliation decisions. The Catholic system withdrew its offer, and the hospital began a nationwide search for a partner.
Successful Attempt at Affiliation (1996)
With the help of an investment banking firm, approximately 125 requests for proposals were sent out in 1995 to health care systems across the country. Three responses were received: the first was for a management agreement and was rejected by the board; the second was from the Catholic system; and the third was from a large for-profit chain. Similar motivations were driving the two systems: both had substantial stakes in the state's health care market and wanted to strengthen their networks. The Catholic and the for-profit systems proposed alternative types of affiliations. The board elected to pursue a 50/50 new corporation joint venture with one of the two systems, an arrangement that would provide the hospital with the capital, management expertise, and managed care contracting power while maintaining some local control over decision-making.
The hospital began its due diligence process, which included making site visits to hospitals operated by the two systems and conducting public meetings. Teams representing the executive and professional staffs, the board, and the employees made site visits and concluded that both systems were financially stable organizations and good potential partners. Meanwhile, the board was being lobbied by reproductive rights advocates fearful that an affiliation with the Catholic system would limit access to reproductive services and by unions fearful of for-profit business practices.
Opposition to the affiliation with the Catholic system was expressed by local reproductive rights groups, the American Civil Liberties Union, Catholics For A Free Choice, a number of hospital physicians, and members of the community. At four public meetings, officials of the Catholic system explained that an affiliation with the system would not transform the facility into a religious hospital and that all fertility-control services, with the exception of abortions, would continue. Given the availability of abortion services at neighboring hospitals and clinics and the relatively few abortions performed at the district hospital in the past, the discontinuation of the service soon became a "non-issue." Concerns about the for-profit status of the other suitor appeared to be more serious than concerns related to reproductive services. The community was concerned that for-profit health care would negatively impact both access to care and quality. The unions were also concerned that an affiliation with the for-profit chain could lead to staff lay-offs, reduction in benefits, and the closing of unprofitable medical services.
The four public meetings provided an important forum for communication. Each meeting began with a consultant describing changes in the health care system and the need for affiliations. Community members could then raise concerns and have their questions answered by hospital and system officials. The Catholic system had a strong presence at these meetings, but the for-profit system had a weak presence, and the community's and unions' concerns about for-profit health care remained largely unaddressed.
The community favored an affiliation with the Catholic system although it seemed that people were "more against the for-profit system than for the Catholic system." Within the hospital, the physicians and a number of board and staff members favored an affiliation with the for-profit system, which appeared more progressive and stronger financially than the Catholic system. The community's desire to keep the not-for-profit orientation of the hospital, however, was largely responsible for the board's unanimous vote in the spring of 1996 to affiliate with the Catholic system. This vote was facilitated by the fact that both systems offered comparable financial return for the transfer of the hospital's assets.
Operationalizing the Affiliation
Following the board's vote, a management service agreement was signed between the two parties, and the Catholic system began managing the hospital. An Integration Planning Committee was formed together with workgroups for the following areas: the business office, managed care, human resources, communications, information systems, programs/services, facilities, clinical support, and finance. Workgroups developed action plans for their respective areas and met regularly to evaluate their progress. The Catholic system brought in a new administrator to direct the facility. The services of external consultants were not used during the affiliation process.
Since the hospital is a public entity, state law required district residents to vote on significant transfers of assets from the district to a non-profit corporation. To prepare for the election, the hospital started a public relations campaign to inform voters and the press about the details of the affiliation. An election was held in the summer of 1996, and 95% of those who returned the mailed ballots voted in support of the affiliation ( the response rate was 36%).
The hospital officially joined the local division of the Catholic system in the fall of 1996, at which time its administrative and support departments were centralized at the regional level. A new nonprofit corporation with a 10-member governing board was formed to run the hospital. (The district retained its 5-member district board). The corporation's board is composed of five members appointed by the district board and five selected by the Catholic system. The Catholic division's CEO is empowered to break a deadlock. The hospital's assets were transferred to the new corporation; in return, the system assumed the hospital debt and gave the district several million dollars to fund community projects. The district board oversees use of these funds.
Given that the mission and values of the Catholic system and district hospital were very close, administrators felt that a minimal amount of time and effort would be needed to merge organizational cultures. Hospital employees were introduced to the system's mission during several meetings with system executives and also during their first meeting with the new administrator.
Status of Reproductive Services
The site visit took place four months after the joint venture was completed. Key informants believed that the affiliation will positively impact the range and quality of services that the hospital provides for women, with the exception of surgical abortion services, which were discontinued. The hospital is upgrading its birthing unit, funding community women's health projects, and planning to become a "center of excellence" in women's health care. Further, the local division of the Catholic system is developing a women's service product line for its member hospitals.
Although the facility is now sponsored by a Catholic system, it continues to operate as a non-sectarian community hospital. The Directives do not apply on the hospital's campus. A statement on community sponsorship that defines the values shared between the system and the hospital applies, however. The statement originated in an earlier affiliation between one of the Catholic system's divisions and a community hospital that provided sterilization and contraceptive services and wished to continue doing so. With help from two ethicists, a representative of the local Bishop's office, and its own legal counsel, the division developed a statement which subsequently became part of its affiliation contract with that community hospital. Since then, the system has used this statement in other collaborations, including its affiliation with the district hospital. The statement discusses the social and pastoral responsibility of health care providers and the professional-patient relationship, and it defines two procedures that are not permitted at the system's affiliated facilities: "direct abortion" and assisted suicide. (Direct abortion is defined as the termination of pregnancy for a purpose other than saving the life of the woman.) The Catholic system consulted with the local Bishop during the affiliation process. The Bishop expressed no objection to the affiliation going forward under the outline of common values for community sponsorship.
The district hospital agreed to the statement on community sponsorship and no longer provides surgical abortions in non life-threatening situations. Abortion was an important issue during the affiliation process, although the hospital performed only about 15 abortions per year, of which half were medically indicated and half were not. Reproductive rights groups and a number of hospital physicians expressed their concerns and argued that a community-supported facility should provide services needed by all community members. Similar concerns were raised at the public forums and were addressed by the Catholic system's ethicist. Board members were confident that discontinuing surgical abortions would not limit women's access to the procedure given its availability at neighboring hospitals and clinics.
To ensure that clients can obtain the service when needed, the hospital's policy on termination of pregnancy was revised, with funds allocated for counseling and transportation for women requesting abortions. The policy clarifies that women requesting an abortion will be referred to one of the hospital's social workers who will do an assessment and provide the patient with all information needed to make an independent decision, including a list of gynecologists and Planned Parenthood locations. Patients presenting with medical complications from an abortion will continue to be treated at the hospital. The hospital will also accept referrals from Planned Parenthood for services that it provides. (The local Planned Parenthood was informed about the new policy and agreed to it.) Hospital employees will not be required to participate in a pregnancy termination, and there will be no discrimination against hospital-affiliated providers who perform abortion in their practices off-site. This policy was distributed to hospital departments but not to community members.
The hospital has recently discussed non-surgical abortions with the Catholic system, primarily with regard to educating providers about RU486 within its continuing medical education program. The system clarified that it supports educating providers about all medications, particularly those that have multiple uses such as RU486. The system acknowledges that RU486 could be used for pregnancy termination in physicians' offices, but the system cannot invade the privacy of the patient-physician relationship to enforce its position on abortion.
The hospital continues to provide a range of reproductive services, including birthing and fertility-control services. Both low- and high-risk prenatal and obstetrical care are provided to about 1,200 women each year. Prenatal genetic screening is referred to a local specialty group. With financial support from the sponsoring system, the hospital is remodeling the obstetrics/perinatal unit and is expected to turn the birthing unit into another profit center. In addition, the hospital continues to provide sterilization (including tubal ligations and vasectomies), contraception (including emergency contraception), community education about reproductive issues, and infertility care. (The hospital continues not to operate a family planning clinic.) Infertility work-ups and basic treatments are provided on-site, and patients are referred to specialized providers for advanced techniques.
In this community, care of rape victims is centralized at the County Hospital which has a designated rape unit. If a rape victim presents to the district hospital's emergency room (ER), she will, with her consent, be escorted to the County Hospital. If the patient prefers to get care at the district hospital, she will receive the full range of care, including the "morning-after" pill. If a woman who has not been raped presents to the ER seeking emergency contraception in order to avoid pregnancy, providers are to assist her in finding a primary care physician. If she prefers to be seen in the ER, providers are permitted to prescribe contraception.
Other women's services have not been a focus at the hospital to date. Breast care is offered by a number of hospital departments (e.g. radiology, surgery) but not in a coordinated fashion. Education and midlife services are also lacking. Except for a survey of perinatal needs that was conducted prior to initiating the remodeling of the obstetrics unit, no assessments of women's needs have been made.
Recently, the district board announced that it will fund community projects in women's health care and cardiovascular medicine. In addition, a women's service product line is being developed by the Catholic system's local division. This project is still in its infancy, but a task force has been formed to assess women's needs and to plan a comprehensive service line.
Impact on the Community
District voters supported this affiliation. Without the affiliation, the hospital's almost certain closure would have meant the loss of more than 1,000 jobs and would have left a portion of the county without inpatient facilities and an emergency room. The hospital is now in a stronger position to continue to serve its community given its access to capital, management expertise, and managed care contracts.
The affiliation is also likely to improve access to health care in a number of ways. First, the system provided the district with several million dollars that, together with the tax revenue generated, will be used to fund community health projects. Second, the governing board of the new corporation has approved a plan for capital improvements that includes renovating the birthing unit, cardiovascular services, and other services. Third, the hospital is planning to expand its primary care services and increase the number of primary care providers. While this is being done largely to enhance the profitability of the hospital's service mix, it should also improve access to prevention and primary care in the community.
Summary
This case is illustrative of an affiliation between a public hospital and a Catholic health care system that helped position the hospital for survival with minimal negative impact on the range of reproductive services provided. The facts that the affiliation was a 50/50 joint venture and that the hospital did not become a Catholic facility were critical in terms of the outcome with regard to reproductive services. The hospital does not operate according to the Directives but according to a statement on community sponsorship that proscribes two procedures: termination of pregnancy not intended to save the life of the woman and assisted suicide.
Critical success factors of this affiliation were communicating the hospital's plans to the community and involving the district in the decision-making process. Of course, community involvement was a requirement given the public status of the facility, but it was the education that took place about the outcomes of the affiliation, particularly with regard to reproductive services, that alleviated people's fears and garnered their support. Other success factors included identification of common values in the statement for community sponsorship, the support of the Bishop, and the commitment of the district board to selecting the best strategies for the hospital and the community.
Currently, the hospital is contending with two related challenges: downsizing and improving its financial performance. The hospital's support departments have been centralized at the regional level, which means that some employees will move to the regional offices and some will be laid off. Lay-offs will also include the clinical staff. The hospital's deficit is shrinking, but the breakeven point has not yet been reached. The hospital is making progress, but there is still a great deal of work to be done in order to restore its financial health.
