In 2007 there were eight Catholic acute care hospitals in New York City. By the end of 2008 there was only one. The reasons for this shift are many and complex, but it would be foolish to dismiss this as a freak event, unique to that city. Indeed, even if one has no special interest in the field of health care, this story speaks volumes about the current state of Catholic institutions in the United States. How did so much happen so fast? And what can be learned?
In the 1990s, fearing increased pressure to conform to secular medical morality and under intense financial stress from managed care, Cardinal John O’Connor of the Archdiocese of New York pushed the somewhat unwilling hospitals and nursing homes of the archdiocese into a loose confederation called the Catholic Health Care Network. Initial plans were for a full merger, but fear on the part of the hospitals that their charisms would be lost and worries about job security on the part of administrators scuttled the effort.
Unable to merge completely with the hospitals of the Catholic Health Care Network, and facing mounting financial difficulties, St. Vincent’s Hospital Manhattan explored a possible merger with St. Vincent’s Staten Island and the hospitals of the Diocese of Brooklyn, which had been united into one network as early as the 1960s. This too, proved difficult. Brooklyn feared that in a three-way merger they would face a two-against-one dynamic. While St. Vincent’s Manhattan was owned by the Archdiocese of New York, and St. Vincent’s Staten Island by the Sisters of Charity, the religious congregation itself was an order of the Archdiocese of New York. This could provide the archdiocese with an unfair advantage. To facilitate a bilateral structure, Cardinal O’Connor ceded full control of St. Vincent’s Manhattan back to the Sisters of Charity, and the merger proceeded. A number of members of the board of trustees of St. Vincent’s Manhattan warned that the undertaking was ill advised and expressed skepticism about the financial health of the Brooklyn hospitals. Nevertheless in 2000 the merger was completed and the Saint Vincent Catholic Medical Centers of New York was created.
The chief executive officers and boards of trustees of all the merging institutions were replaced with a new board—consisting of two members of the Sisters of Charity, an auxiliary bishop and a canon lawyer— and a new C.E.O. from the outside with experience running a big system and a history, albeit a highly checkered one, of overseeing mergers.
The Bottom Drops Out
From the moment of its creation, Saint Vincent Catholic Medical Centers of New York was a disaster. The problems of a $1.6 billion-a-year multi-hospital, multi-nursing-home behemoth were legion. As it turned out, the Brooklyn hospitals were in horrible financial shape. Two hundred million dollars in cash reserves (a meager amount by health care standards) went out from St. Vincent’s Manhattan into Brooklyn as soon as the merger took place. Staff in Brooklyn, who had no idea that their hospitals were in such bad shape, immediately blamed Manhattan for mismanagement. Manhattan physicians placed the blame for the financial instability of their hospital on Brooklyn, despite the fact that St. Vincent’s Manhattan was hemorrhaging cash independently. And financially solvent Brooklyn nursing homes resented having to carry the load for the hospitals.
Professional relationships did not function properly, either. The physicians refused to refer patients to one another or to function as one system. Attempts to create systemwide bylaws bogged down in endless squabbles.
After Sept. 11, 2001, a decline in the number of employees and residents of downtown Manhattan dramatically reduced the potential patient population around St. Vincent’s, and the hospital incurred huge losses. Despite the hospital’s national prominence in the wake of the terrorist attacks on Sept. 11, no one proved able to make effective use of it to raise funds. When post-9/11 federal dollars were doled out, New York hospitals that had played almost no role in responding to the disaster received more funding than did St. Vincent’s.
The financial picture continued to deteriorate. The economies of scale that the merger was supposed to achieve were poorly realized. Saint Vincent Catholic Medical Centers wound up with the worst managed-care contracts in the city. The system could not pay its creditors; it deferred maintenance and the floors went unwashed. On several occasions the institution came close to missing its payroll obligations. Layoffs included physicians, and essential items like X-ray film became scarce when suppliers imposed credit-holds.
The four trustees, however, did not see that the man they had hired to run the new system was incompetent. While he justified the network’s problems as endemic to health care generally and called for more consultants, the budget for the system’s corporate offices ballooned. Finally, in 2004 the C.E.O. was fired.
Survival came at a still higher price. Saint Vincent Catholic Medical Centers declared Chapter 11 bankruptcy in 2005; when it emerged from bankruptcy in 2007, large chunks of Manhattan real estate that had provided office space, housing for residents and students and a convent for the sisters had been sold, along with three of the hospitals. Worse still, the hospitals located in the poorest neighborhoods had to be closed; no one wanted to buy them.
In the meantime, under the leadership of a new prelate who had inherited a financially troubled system, the Archdiocese of New York was busy extricating itself entirely from the acute-care hospital business. Our Lady of Mercy Hospital was sold to Montefiore in 2008. Operation of the former St. Clare’s was ceded to St. Vincent’s Manhattan in 2003; it continued to operate until it was finally closed in 2007 by the state’s Berger Commission, which had been established to reorganize and streamline health care throughout the state. The commission also shut down Cabrini Medical Center, another financially ailing Catholic acute care hospital in Manhattan.
And then there was one: St. Vincent’s Hospital Manhattan.
What Went Wrong?
Mergers often fail because of inattention to differences in culture between the merging institutions. That was clearly true in this case. Beyond this generic issue, however, what observations can be made? Why did the Catholic hospital system in New York City collapse so rapidly? Several lessons emerge.
1. The marketplace is a harsh environment for faith-based institutions. New York is one of the world’s most high-cost, inefficient cities for health care delivery. The average New York City family spends 18 percent more cost-of-living-adjusted dollars on health care than does the average American. A New Yorker is also 45 percent more likely to be X-rayed than a patient in Seattle.
To reduce costs, managed care used the same major technique in New York that it had used nationally: it forced shorter hospital stays. As a result, New York City eventually had many unused hospital beds. Rather than close, however, all of the city’s hospitals (except the university hospitals) tried to stay afloat by shrinking. The competition for paying patients and for the physicians who admit paying patients became fierce. Such a cutthroat commercial environment sits uneasily with a mission-based approach to care.
Moreover, consistent with their missions, Catholic hospitals were often built in poor neighborhoods. Medicaid cutbacks and an increasing burden of care for undocumented immigrants meant even less income; the financial stress proved too much.
Yet it is possible to hold one’s own without selling one’s soul. In other places during this era of managed care, Catholic and non-Catholic hospital systems still serve the poor and flourish. Some Catholic institutions have joined relatively well-paying suburban hospitals to inner-city hospitals, and in so doing are able to balance their losses with gains. As Jesus said, we must be wise as serpents and as innocent as doves.
2. Catholic philanthropy is weak. Surviving intense market competition and financial stress often requires generous but wise philanthropic support. New York’s Catholic hospitals saw precious little support, even when philanthropy elsewhere was robust. New York’s Mount Sinai Hospital, for instance, was in deep financial trouble in 2001 with an operating loss of $26 million. But after asking for and receiving enormous philanthropic support, they made a complete turnaround.
Today many Catholics have risen to prominence and have amassed great wealth. Catholic philanthropy, however, while often generous to direct service projects, does much less to support educational, cultural and health care institutions. Catholic universities and hospitals are notoriously under-endowed compared with similar institutions. It is a great irony: Catholics complain that they do not influence culture, but when they have the resources to make a difference, they tend not to support the institutions that can achieve such influence.
3. Catholics operate under outdated institutional assumptions. In the 1950s loyalty and subservience could be valued over competence, and institutions would still survive. In today’s complex environment, however, this is no longer true. Perhaps New York’s Catholic hospitals failed, in part, because too many of the administrators hired were good Catholics rather than good managers.
In some parts of the country, religious orders, conscious of their declining numbers, started years ago to plan for leadership succession in their institutions, truly “forming” lay leaders in their charisms, creating a knowledgeable and dedicated leadership workforce. New York’s Catholic health care institutions, unfortunately, operated as if the sisters would always be there. As a result, the sisters were relegated to being spectators when disaster struck.
An outmoded, 1950s-style Catholic parochialism continues to plague Catholic institutions. Catholics were afraid to engage with non-Catholic institutions, religious orders were wary of other religious orders, and each diocese was wary of the other. The collapse that followed illustrates quite clearly: If we cannot work together, we will all die alone.
4. Catholics are opting for secular values. Exceedingly few people, including Catholics, seem to have noticed that there has been an 89 percent reduction in the number of Catholic hospitals in New York City in a very short period of time. I suspect one reason is that Catholics no longer prize Catholic institutions. This is partly good. Many Catholic institutions were founded because Catholics could not break through barriers of prejudice. As Catholics have become part of the mainstream, they no longer need such institutions for access to services.
But something has also been lost—a culture, a spirit and a community of faith. In a consumer society, people seek the best brand. Parents who once sent their children to Fordham now send them to Harvard. Even Cardinal O’Connor, when diagnosed with a brain tumor in 1999, sought care at Memorial Sloan Kettering rather than at St. Vincent’s Comprehensive Cancer Center. Medically, Memorial offered nothing that St. Vincent’s could not have offered for his cancer, but St. Vincent’s could have offered also a spiritual atmosphere and approach to palliative care that Memorial cannot match. Excellence and compassion are not antithetical. Catholic institutions can offer both in a truly distinctive way.
5. Ecclesiastical culture can be enervating. The hospital crisis could have been a time for a robust display of ecclesiastical leadership. Unfortunately, none was forthcoming. It seems that in the current ecclesiastical climate, one succeeds not by one’s accomplishments but by not making mistakes. Hospitals are costly and can drain enormous amounts of time. They can also spell trouble if someone in a Catholic hospital does something that some group thinks is a violation of church teaching. In such an environment, there is little incentive for church leaders concerned about their own future to take a decisive role.
6. Catholic institutions often have poor political connections. When hospitals looked for relief after 9/11, when market pressures pushed all hospitals to the brink of disaster, when the Berger Commission decided which hospitals to close, Catholic hospitals in New York consistently fared poorly. A major reason was the loss of Catholic political power in the city and state. Because of the influence of unions and local neighborhood political power, it was politically impossible to close any of New York’s 11 city-owned hospitals. And no one would dare close the big university hospitals. What remained were the small to mid-sized private hospitals. Those without political clout (for the most part, that meant the Catholic hospitals) were the most vulnerable.
Some might wonder why one should bother to save Catholic institutions. Perhaps the time has come to abandon bricks-and-mortar Catholicism and instead to live the faith by blending like yeast into the secular society. Personally, despite all the obstacles, I continue to be convinced that Catholic institutions (and, in particular, Catholic hospitals) are worth fighting to save. Catholic institutions help to nourish the faith of those who work in them and are served by them. Our Catholic hospitals also provide a vehicle for proving that our moral convictions are compatible with 21st-century technology, and they embody the ideal that service institutions ought to have service missions. In health care, patients and practitioners alike are becoming alienated from the health care delivery system. Hospitals that treat patients with true respect, recognize their dignity, attend to their spiritual needs, value people over technology and value service over the bottom line are precisely the remedy that people need. Given their mission, Catholic institutions should be leading the way.
Institutional presence also brings with it a place at the political table and greater potential to lobby for the good. A bishop who can say that Catholics operate one-third of the hospital beds in his state is much more likely to be heard on health care justice for the poor, than if he is speaking from the sidelines.
Recently St. Vincent’s tended survivors from the US Airways jet that went down in the Hudson River, just as it had tended survivors from the Titanic in 1912, survivors from the Lusitania in 1915 and survivors from the World Trade Center attacks of 1993 and 2001. Located in the heart of our communities and serving us often in the circumstances when we are most in need, Catholic institutions are worth saving. But the story of what happened to health care in New York suggests we had better learn well, and quickly, if we wish to succeed.
Listen to a conversation with Daniel P. Sulmasy, O.F.M.