Sisters of Charity, University Hospitals restructure 3-hospital venture

Updated: 4:40 p.m.

The Sisters of Charity and University Hospitals health systems plan to alter their nine-year joint operating agreement involving three Ohio hospitals, returning full control of a critical downtown Cleveland hospital to Sisters of Charity Health System.

Also as a result of the deal, University Hospitals will take over management duties at St. John West Shore Hospital in Westlake — giving it a stronger foothold in the increasingly competitive and lucrative western suburbs of Cleveland.

“There’s no question this is a big bet for UH on the West Side,” said J.B. Silvers, professor of health systems management at the Case Western Reserve University Weatherhead School of Management.

The two health systems today agreed to the changes, which includes fresh investment in two of the hospitals, through a non-binding letter of intent that must still go through legal due diligence.

University Hospitals and Sisters of Charity currently have 50/50 joint operating agreements at Cleveland’s St. Vincent Charity Hospital, St. John West Shore and Canton’s Mercy Medical Center. Under the new agreement, Sisters of Charity would take complete control of both St. Vincent and Mercy Medical.

However, the two health systems would together invest $30 million in St. Vincent to build a fund-raising foundation to support the hospital.

The joint venture remains intact for St. John West Shore, the two systems will invest $100 million in the hospital, and Sisters of Charity will cede management control to University Hospitals.

The changes were made, in part, to better manage the hospitals, according to a joint release from the health systems. Sister Judith Ann Karam, president and chief executive at Sisters of Charity, said in an interview that having one system manage each hospital simplifies the process.

“Basically the health-care environment is very complex and very, very much evolving and changing as we speak,” Karam said. “We cannot have a cumbersome decision-making process.”

The organizations said they would continue – and in some cases expand – their commitments to the respective hospitals. Sisters of Charity said it would move ahead with more than $100 million in projects planned at Mercy Medical Center and St. Vincent will complete its new emergency department in the coming months.

University Hospitals Chief Executive Thomas Zenty stated in the release that the $100 million investment would make St. John West Shore the “destination hospital” in Cleveland’s western suburbs.

Janice Guhl, UH’s director of media relations, said focusing on one hospital instead of three lets UH better establish a presence on the West Side. She added that UH will continue the relationship with Sisters of Charity and provide some services.

All three hospitals will “retain their Catholic mission,” the release stated, which means among other things that the hospitals would continue to provide care for the poor and pursue transparency in their health care practices.

But St. Vincent faces enormous challenges as unemployment and the number of uninsured patients grows. Unemployment in the region is at a 15-year high and continues to climb.

Karam emphasized St. Vincent is not simply a charity hospital, but has unique services that can attract patients from the region. It will continue to explore ways to maximize its well-regarded and Harvard-affiliated Joslin Diabetes Center; its work in bariatric surgery; and its state psychiatric emergency department, which is one of only two in Ohio.

The new structure will also allow Sisters of Charity to better integrate its wholly owned Ohio hospitals with its hospitals in South Carolina, she said.

But when asked about the possibility of program and jobs cuts, she said: “Everything is on the table.”

Silvers said even without a stake in St. Vincent Hospital, University Hospitals remains a force in the city’s charity care. Its main campus on the east side of Cleveland provides an ample amount of charity care for which it is not compensated or is compensated through the federal Medicaid program, Silvers said.

St. Vincent is “not a pure safety-net hospital,” Silvers said. “But it’s got a lot of poor people going there, and Medicaid is insufficient. They’ve got a big challenge.

“There’s no question UH gets the strong entity (St. John West Shore) and [its] good cash flow,” Silvers said.

Last week, St. John West Shore was one of only eight Ohio hospitals named to HealthGrades’ America’s 50 Best Hospitals for 2009 list. It also was the only University Hospitals affiliate to be named to the list.

Cleveland’s West Side includes MetroHealth Medical Center, the region’s main safety-net facility; the Cleveland Clinic’s Fairview, Lakewood and Lutheran hospitals; as well as independent facilities and a series of smaller outpatient facilities.