The Health Care M&A Monthly: Catholic Hospital M&A --
Are Acquisitions Restricting Women's Health Care?
Political rhetoric heated up during February when the GOP claimed that the Obama administration was waging war on religious freedom by requiring certain institutions to pay for contraception for their employees. The countercharge from the Left retorted that the GOP was waging war on women’s control over their reproductive health. This brouhaha set the stage for Catholic hospitals to become ensnared in a larger debate they wanted no part of. The New York Times ran several stories and letters that were premised on the notion that access to women’s reproductive health, ranging from contraception, to tubal ligation and abortion, was gradually being curtailed because Catholic hospitals were buying non-Catholic hospitals and imposing Catholic health care protocols on their targets. To support this contention, two Times articles cited a vague, unattributed estimate that over the past three years, 20 such deals had taken place. This lone raw figure then gave way to a slew of anecdotes and touchy-feely commentary.
So we decided to run the numbers to see if there was anything to this. During the period 2009-2011, 211 deals were announced in the Hospital sector,covering 355 hospitals with 53,660 beds. The combined purchase price for this activity was approximately $15.5 billion. Within that group, Catholic hospitals acquired 25 hospitals with 6,880 beds for roughly $2.5 billion. However, Catholic hospitals often targeted other Catholic providers, as when Resurrection Health Care, a six-hospital Catholic system, merged with Provena Health, another six-hospital Catholic system, in 2011. We have included in this cohort Cerberus Capital’s $830.0 million acquisition and privatization of six-hospital Caritas Christi Health Care in Massachusetts. Even though the buyer is a nonsectarian private equity group, Caritas Christi’s successor, Steward Health Care System, has retained the Catholic health care protocols of its predecessor. However, the purchase agreement contains a little-noted provision that would allow Steward Health to dispense with those traditional protocols for an additional payment of $25.0 million. And as Steward seeks to expand its hospital network by drawing from a more diverse set of facilities, it may well implement that provision so as to avoid noisy conflicts and messy PR debacles. In a similar vein, we note that Catholic Health West, now known as Dignity Health, recently severed close ties with the Catholic Church, the better to manage its hospital network, which has 25 hospitals that follow Catholic protocols and 15 that don’t.
Against this activity, during the 2009-2011 period, non-Catholic hospitals acquired 21 Catholic hospitals with a combined total of 3,840 beds for approximately $1.2 billion. Some targets retained their traditional protocols, others didn’t. If, however, we moved the ambiguous Cerberus-Caritas Christi deal into this cohort, the number of Catholic hospital beds acquired by non-Catholic providers would rise to 5,390 beds while the number of beds acquired by Catholic providers would fall to just 5,330, essentially a wash. What these revised figures indicate is that Catholic hospitals have lost approximately 20 beds per year over the three-year period. So we believe that they can hardly support the claim that Catholic hospital M&A is part of a war on women’s reproductive health. We might also recommend—hope against hope—that the media and political parties curtail their use of the term war to characterize every difference of opinion lest they become unable to recognize a genuine war when it is staring them in the face....Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today