Financing crisis imperiling Catholic hospitals in Massachusetts

Editor's note: This is the first in a series of articles on Catholic health care in Massachusetts co-reported by the state's four diocesan newspapers:  The Pilot, The Catholic Observer, The Catholic Free Press and The Anchor.

BOSTON - A few months ago, a finance official in the Archdiocese of Boston proudly told his fellow priests that health insurance premiums for the archdiocese's clergy would stay the same for yet another year.  A short time later, the same official found himself in a meeting to discuss the financial problems of Caritas Christi, the health care network of the archdiocese.

"I reminded him that he's part of our problem," said Dr. Michael Collins, president of the state's largest Catholic hospital group.  Collins tells the story, not to criticize his church colleague, but simply to point out how the survival of Catholic health care in Massachusetts is dependent on several factors that are sometimes under-appreciated, even within the church.  Catholic hospital administrators who recently spoke to the diocesan newspapers of Massachusetts are sympathetic to religious and secular employers who have tried a variety of methods in the last decade to hold down what was once a soaring increase in health care costs in the Commonwealth.

But now, managed care, deregulation and institutional restructuring are reaching their limits of efficiency. What providers in the state now need is a higher income before parts of the state's health-care network start to collapse, they say.

"There's a perception among the public and politicians that health-care people are always whining about something," said Vincent McCorkle, president of the Springfield-based Sisters of Providence Health System.  But this time, McCorkle and others agree, Catholic and non-Catholic providers are not crying wolf.

"There are twelve hospitals in this state that have less than seven days free cash on hand," said Thom Clark, president of Saints Memorial Medical Center in Lowell.

Clark is a board member of the Massachusetts Coalition of Community Hospitals, which has recently documented the deteriorating financial condition of its members.  Unless at least some of their wide-ranging financial problems are addressed soon, some hospitals may fail this year, Clark predicted.

While the statewide crisis is not specifically hurting Catholic hospitals as a group more than non-Catholic institutions, a worst-case scenario could leave large regions of the state without Catholic health care.

This is particularly true in Springfield and Brockton, where financially fragile Catholic hospitals are now engaged in acrimonious struggles with their competitors.

At Springfield's Mercy Hospital, the only Catholic acute-care hospital west of Worcester, 54 percent of revenue comes from Medicare, the traditional federal insurance program for seniors. Another 24 percent comes from seniors enrolled in Medicare Risk program, which combine private-sector health maintenance benefits with government-paid Medicare benefits.

Another eight percent of Mercy's revenue comes from Medicaid, the government health program for the poor and disabled.  Only 3.4 percent of its income is from private insurance, which makes the federal 1997 Balanced Budget Act and the state budget so important.

The federal law limited Medicare reimbursement rates, while the state has also kept its Medicaid rates too low for the hospital to recoups its costs, explained McCorkle.   Mercy and its affiliate, Providence Hospital, a former acute care hospital in Holyoke which now specializes in behavioral and mental health care, are trying to recover some of the private-sector market by gaining access to Health New England (HNE),. western Massachusetts' largest HMO.

But 47.5 percent of the for-profit plan is owned by Baystate Health Systems, a three-hospital group which dominates health care in Hampden, Hampshire and Franklin counties. Another five percent is owned by 200 area doctors who founded the plan in 1985.

Providence System charges that HNE is being influenced by the Baystate group to not bargain in good faith with the Catholic hospitals. 

Unlike in eastern Massachusetts, where Caritas Christi facilities are directly sponsored by the Boston archdiocese, the facilities in western Massachusetts are not directly controlled by the diocesan church.

But late last year, Springfield Bishop Thomas Dupre decided that his diocese needed to become more directly involved in lobbying for the Providence System's interests. Working with a local political consultant and the Massachusetts Catholic Conference, key area clergy have called area legislators and mayors to bring Michael Daly, co-chair of HNE and president of Baystate Systems to the bargaining table.

To date, the Catholic hospitals and the HMO have not signed a comprehensive contract, although HNE clients may receive specialized care in areas which McCorkle contends are not "profitable" for Providence System.

Even if Mercy and Providence gain full access to HMO customers, some fear that it will hardly solve their larger dilemma. Statewide, community hospitals have been billing managed care plans at rates 28 percent below Medicare rates.

That discount is unlikely to lessen until the managed care system is re-organized so that it can charge higher premiums.

But that may not quickly happen in the case of HNE, which is itself losing money.   Another complication is that the other 47.5 percent of the HMO is owned by Harvard Pilgrim Health Care, the financially troubled plan just emerging from state receivership.

The community hospitals predict that if something does not change soon, further hospital consolidations and closures will create a series of regional monopolies across the state.  While these new monopolies will have the bargaining strength to force higher rates from HMOs, they will be unable to offer patient choice.

In Brockton, Caritas Good Samaritan Medical Center has faced rapidly mounting deficits since the area's largest physicians group decided Sept. 24, 1999, to refer all its patients to rival Brockton Hospital.  Bridgewater Goddard Park Medical Associates maintains that it was forced to pull all its business from "Good Sam" when the hospital said it wanted out of the money-losing Medicare Plus.

Richard Doherty, a spokesman for Caritas Christi, says that negotiations broke down when the head of the doctors group resigned from the board of the then Good Samaritan Medical Center when it voted to affiliate with Caritas Christi.

He also suspects that the parent company of the doctors group, CareGroup, might be now working to close Good Samaritan so that patients  who could not be served at the independent Brockton Hospital would be referred to Boston facilities owned by CareGroup.

Brockton's Catholic hospital, which was known as Cardinal Cushing Hospital before it merged with Goddard Memorial Hospital in Stoughton in 1993, has a $20 million endowment it can tap into in an emergency, and can theoretically use part of Caritas Christi's $800 million in resources.

But "Good Sam" has been losing up to $1 million a month since November as the dispute continues, and it also is carrying $4 million in unpaid bills from Harvard Pilgrim.  Collins stressed that Caritas Christi is committed to Brockton, and will not easily abandon Good Sam to its own resources.  But he cautions that losses in one hospital can eventually threaten the finances of the archdiocesan group.

The Providence System hospitals can also tap into the financial resources of Catholic Health East (CHE), an east coast Catholic health care group formed by the Springfield sisters and other religious orders in 1997.  But alliances like CHE were formed to strengthen the Catholic identities of institutions now relying on declining numbers of religious women for administration, and to obtain efficiencies like joint purchasing and planning.

They cannot indefinitely bail out individuals hospitals in areas where all the market forces are unfavorable, according to Father Michael Place.

"Look what just happened in Seattle," said Father Place, president of the Catholic Health Association of the United States.  Faced with a $19 million operating loss, Providence Health System Washington recently announced that it was transferring control of its flagship hospital, 334-bed Providence Seattle Medical Center and nine King County clinics to neighboring Swedish Medical Center.  Pending Vatican approval, the move will enable the Seattle hospital to keep some form of Catholic identity while keeping other hospitals across Washington State under the control of the Providence System.

But soon Seattle will join a growing number of U.S. cities where the church no longer controls any hospital.