NEWS

Condition critical: The Catholic-hospital question

In St. Louis, a battle rages over a for-profit’s buyout of a Catholic hospital, raising thorny issues of canon law

By Ann Carey

Now, in the current atmosphere of managed care, corporate conglomerates and keen competition, Catholic hospitals struggle to maintain the delicate balance between mission and margin.

That struggle is being played out in St. Louis, where Jesuit-run St. Louis University has announced the sale of its teaching hospital to a for-profit conglomerate.

Complicating the situation is the fact that the university’s board has agreed to the sale over the objections of St. Louis Archbishop Justin F. Rigali.

The university also claims that the sale is not subject to canon law, which requires Vatican approval for the sale of any Catholic property valued at over $3 million.

Tenet Healthcare Corporation has agreed to pay $300 million for St. Louis University Hospital, $100 million more than the combined bid of two Catholic groups: SSM Healthcare, which is sponsored by the Franciscan Sisters of Mary, and Unity Health System, sponsored by the Sisters of Mercy Health System of St. Louis.

Some industry experts have observed that the $300-million bid is on the high side, and speculation persists that the California-based Tenet wants the hospital to strengthen its position in the community and to broaden its geographic reach.

The university has indicated that proceeds from the sale will be used to strengthen university programs and research in the health professions.

Archbishop Rigali favors the sale of the hospital to the two Catholic groups, and has met with St. Louis University’s president, Jesuit Father Lawrence Biondi, to express his views.

Archbishop Rigali reportedly is concerned not only about St. Louis University Hospital continuing its Catholic mission and offering health care to the uninsured, but also that some of the other Catholic hospitals in his archdiocese may not survive without their relationship with the university’s teaching hospital.

Archbishop Rigali is among the big-city prelates who have encouraged Catholic hospitals in their archdioceses to partner with each other in order to compete effectively for managed-care contracts and to assure continuing care of the indigent by sharing that financial burden.

The late Cardinal Joseph L. Bernardin of Chicago, for example, enacted an archdiocesan policy in 1994 that directed Catholic health care institutions to enter into partnerships only with other Catholic health care providers.

In the 1980s, Cardinal John J. O’Connor encouraged collaboration among Catholic health care providers in New York when he created the Alliance for Catholic Health and Human Services of the Archdiocese of New York.

Cardinal O’Connor has come out publicly in support of Archbishop Rigali’s position on the St. Louis University Hospital sale, as have Cardinals Bernard F. Law of Boston and James A. Hickey of Washington.

If the sale to the secular, for-profit Tenet is consummated, St. Louis University Hospital would become one of the more than 50 Catholic hospitals that have lost their Catholic identity since 1990 because they were either sold to or merged with non-Catholic entities, according to Catholic Health Association statistics.

In 1990, the Official Catholic Directory listed 641 Catholic hospitals; the current directory lists 590.

Tenet representatives say the hospital will adhere to Catholic ethical and religious health care directives and will continue the hospital’s pastoral programs and indigent care — a condition the university set for the sale.

But William Cox, executive vice-president of the Catholic Health Association, believes that "once Tenet takes control of St. Louis University Hospital, the institution will, in effect, be owned by Tenet’s shareholders. These shareholders will properly and primarily be concerned about one thing: the hospital’s profitability."

Some canon-law experts say the Catholic identity of St. Louis University is threatened by the proposed sale, for a Catholic institution cannot exempt itself from canon law and still expect to be identified as Catholic.

However, university officials are contending that since the university’s lay board is responsible for the assets and operations of the university, the institution cannot be considered Church property.

Given this premise, Father Biondi asserts that the university does not need the approval of the archbishop or the Vatican for the sale.

In reaching this conclusion, the university apparently is relying on a controversial opinion set forth by the late Msgr. John J. McGrath in 1968, when he was a canon-law professor at The Catholic University of America.

In his 1968 book "Catholic Institutions in the United States: Canonical and Civil Law Status," Msgr. McGrath asserted that schools and hospitals that were separately incorporated from the religious institutes that owned them were not subject to canon law. The "McGrath thesis," as it came to be known, was used by Church entities to create separate corporations in order to obtain government funding.

Some religious orders invoked this thesis during the period of renewal after the Second Vatican Council (1962-65) to dispose of schools and hospitals without seeking Vatican approval.

Jesuit Father William Barnaby Faherty, a historian and director of the Jesuit archives for the Midwest, told Our Sunday Visitor that the McGrath thesis was responsible for about 90 colleges losing their Catholic identity.

Father Faherty also told the St. Louis Post-Dispatch: "It’s my historical conviction that McGrath’s thesis has led to the greatest alienation [transfer of ownership] of Catholic institutions since Henry VIII [took control of the Church in England in 1534]."

Even though the McGrath thesis is still floating around today, it was rejected as invalid by the Vatican in 1974, according to Nicholas Cafardi, a civil and canon lawyer who is dean of the Duquesne University School of Law in Pittsburgh.

Cafardi is co-author, with Cardinal Adam J. Maida (also a civil and canon lawyer), of the 1984 book, "Church Property, Church Finances and Church-related Corporations."

Cafardi told Our Sunday Visitor that Msgr. McGrath developed his thesis in order to allow Catholic institutions to qualify for federal-government aid.

This was done at a time when U.S. constitutional law on the topic was very ambiguous, Cafardi said. But since that time, several court cases have clearly set forth the principle that federal aid may go to nonreligious programs at certain religious institutions.

"[Msgr.] McGrath said that when institutions were incorporated, they lost their Catholic character and were alienated at that point in time, and the board was free of Church law," Cafardi explained. "But that’s complete nonsense. To say that a civil action has a canonical effect is illogical."

Cafardi added that even if the McGrath thesis were correct, Catholic health care is an apostolate of the Church, and the bishop has a supervisory role over any Catholic apostolate in his diocese. "So change this drastic should not be made over his opposition."

Cafardi also believes that if the St. Louis University Hospital sale to Tenet is finalized, this action would accelerate the sale of other Catholic hospitals to for-profit entities.

"That’s disturbing," Cafardi said, "because as long as these hospitals are Catholic — whether they’re lay Catholic or religiously Catholic — they’ve always been operated as a ministry. Once you turn the operation of these hospitals over to a for-profit concern, you go from health care being a ministry to health care being a commodity. A whole transformation occurs."

John Kerr, associate vice president for public relations at St. Louis University, told Our Sunday Visitor that dialogue with Archbishop Rigali has been ongoing.

Kerr said that at the time the sale was announced Oct. 4, it was estimated that the transaction would take 45 to 90 days to be consummated.

Carey is a senior correspondent for Our Sunday Visitor

Copyright Our Sunday Visitor, 1997; from the 11-9-97 edition

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