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BGCT Executive Board Recommends Hospital Sale.

News & Religion Editors

DALLAS--(BUSINESS WIRE)--Sept. 26, 2002

The Baptist General Convention of Texas Executive Board has recommended that the state convention consent to the sale of San Antonio's Baptist Health System to Vanguard Health Systems, a for-profit, investor-owned company.

With only one dissenting vote, the more than 200-member board voted at its Sept. 24 meeting in Dallas to affirm the deal. Messengers to the annual BGCT meeting, Nov. 11-12 in Waco, must approve the sale before it is final.

The executive board decision came after the convention's Human Welfare Coordinating Board "with reluctance and disappointment" recommended the sale of the financially beleaguered Baptist Hospital System to Vanguard, a Nashville, Tenn., based corporation.

Baptist Health System operates five hospitals with about 1,500 beds in the San Antonio area, making it the largest non-profit health care system in the region. The system, which has struggled financially for at least four years, is affiliated with the BGCT, and the convention elects its trustees.

Those trustees signed a letter of intent to sell Baptist Health System to Vanguard. The for-profit corporation promised to pay off $174 million in long-term debt and fund $28 million in debt that is due next year. Vanguard pledged to spend $200 million on capital improvements to the hospital by 2008.

Vanguard also proposed providing $100 million to fund a foundation that would benefit Baptist-related health care and human needs ministries in the San Antonio area.

The BGCT Executive Board voted to appoint a special committee to review the definitive agreement for the sale of the hospital system assets. The committee -- consisting of the chairman of the executive board and the chairman, chairman-elect and executive committee of the Human Welfare Coordinating Board -- would make sure that the deal was in substantial compliance with the provisions of the sale as presented to the Human Welfare Coordinating Board.

The committee also was charged with negotiating and clarifying the inclusion of four definitive provisions in any agreement: (1) preserving and protecting Baptist ministry, heritage and health care policies; (2) requiring that the Baptist name be dropped if the BGCT ever demanded it; (3) designating the Baptist entity or entities to receive and administer the purchase price to support health care-related ministries in the area; and (4) dealing with any other matters considered important by the committee to "preserve and effect the spirit" of the statement approved by the executive board.

Bill Skaar, chairman of the Human Welfare Coordinating Board and pastor of First Baptist Church in Grand Prairie, told the executive board that the recommended sale came out of a desire "to do what is best for the San Antonio area."

Earlier, the Human Welfare Coordinating Board had appealed to the Baptist Health System board to enter into any alliance with an investor-owned corporation only as a "last resort," after all not-for-profit possibilities had been carefully explored.

"The continued preference of the Human Welfare Coordinating Board is for Baptist Health System to continue as an independent entity, in partnership with another faith-based system, or in partnership with another not-for-profit entity," the board stated in resolution in April.

Leaders of the Human Welfare Coordinating Board and the BGCT particularly urged the Baptist Health System trustees to consider an offer by Valley Baptist Health System, a BGCT-related hospital system in Harlingen. Previously, the BGCT had given tentative agreement to an alliance with the non-profit Christus Santa Rosa Health Care system, but the parties involved never came to a mutually satisfactory agreement.

The Baptist Health System trustees three times rejected offers from Valley Baptist Health System, choosing instead to accept the Vanguard deal.

Earl Cutler of San Antonio, chairman of the Baptist Health System board of trustees, told the BGCT Executive Board that the health care system needed the rapid "capital infusion" that Vanguard offered.

He explained that as recently as 1999, Baptist Health System showed a profit. But in 2000, after further financial investigation, the hospital system revealed that it actually had experienced a substantial loss that year. The board dismissed the system's chief executive officer and brought in a "turnaround" team, but the losses continued.

The system currently has no access to capital funding, is in default of bond covenants, has lost doctors and is having difficulty keeping other employees, experienced a drop in patient volume, and is in jeopardy of losing its accreditation in some areas, he added.

"We came to conclusion that without substantial additional capital, Baptist Health System will continue in a downward spiral," Cutler said.

The Baptist Health System board secured several contractual guarantees from Vanguard. They included continued funding for chaplaincy programs, the hiring of a vice president for Baptist ministry, a commitment to keep all five hospitals open for at least seven years, and pledges to maintain the level of charity care historically provided by Baptist Health System.

A member of the executive board asked Charles Wade, BGCT executive director, to speak to the issue.

"This has been a rather difficult decision for all of us," Wade responded.

He explained that the Human Welfare Coordinating Board only had the authority to accept or reject the proposal brought to them by the trustees. The coordinating board could not choose one offer over another.

Wade added that he and other BGCT leaders tried to facilitate a deal between Valley Baptist Health System, which he considered "a good offer. But the 15 members of the Baptist Health System board disagreed. They felt it was not adequate."

Wade underscored the BGCT commitment to its hospital systems and their mission of providing not-for-profit health care. But he added that the deal with Vanguard was the "option most possible" for Baptist Health System, and he encouraged the executive board to support the proposal.
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Publication:Business Wire
Date:Sep 26, 2002
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