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Can things get too big?

Of the top 17 not-for-profit U.S. health care systems, 12 are Catholic. Only Kaiser Permanente has greater revenues and is more profitable than the current largest Catholic system, the St. Louis-based Daughters of Charity National Health System. At right, the 12 Catholic health systems are ranked by net income (profits) showing revenues and fund balances (savings and investments) using 1991 Modern Healthcare figures, the last time figures were available for all 12, or numbers supplied to NCR by the systems themselves. Dates are 1991 unless noted; all figures are in millions unless noted.

Facts and figures

Relying on secondary sources for financial figures, such as some of those listed above, can be problematical. For example, Thomas R. Prince, professor of accounting and information systems at Northwestern University's J.L. Kellogg Graduate School of Management, said of the Modern Healthcare figures here that he was surprised at the dollar amounts and warned against relying on unaudited reports. "They are not what I typically see in the certified financial statements I've looked at," he said. Nonetheless, MHC figures were the only figures available.

Prince, in two articles in the Health Care Management Review, has taken his own recent look at Catholic hospitals' profitability. In one, he examined Catholic community hospitals' profitability using a "matched set of 303 Catholic community hospitals compared with nongovernment, not-for-profit community hospitals" and found "the average 1992 Catholic hospital is less profitable, with older equipment and treats more Medicare patients than the average matched community hospital."

The second study showed that of 235 Catholic hospitals, 78 with relatively high rates of return on net patient revenue "made significantly higher proportional investments in medical technology, equipment and facilities compared to a panel of low-return hospitals, and were larger in size in many different ways."

How should net income -- profit -- be understood in a Catholic health care system? Catholic Health Corp. Chief Executive Officer A. Diane Moeller was asked to comment on the 1991 net income figures for CHC, which equaled the aftertax profit figures for Tiffany's Inc., both around $35 million. "This money, the $35 million in 1991, is not in CHC's bank account," said Moeller. "It is in the individual bank accounts of all those facilities, where Tiffany's does have it in their bank account."

Another issue concerns the sizable amount of reserves, approaching $1 billion dollars in some systems. How much money is enough? When do prudent reserves turn into hoarding? Jerry P. Widman, senior vice-president of finance at the Daughters of Charity system, said of his system's near $1 billion, "We like to have enough to cover our debts. We like to have enough to cover the replacement costs of buildings and equipment. Without it we wouldn't have the AA (taxexempt bond) rating that we have. And if we didn't have the AA rating we'd be paying more in interest rates. So it's a never-ending circle."

A final question concerns the connections between the sponsoring congregations and the huge sums their health systems generate. Where's the financial connection? Why cannot the Mercy health care systems, for example, bail out the financially ailing or underfunded Mercy Sisters' communities around the country? Essentially, because what is generated by the health care systems remains with the systems. The only moneys the spnsoring congregations receive, in the main, comes from salaried positions held by the congregation's sisters.

Top 12 Catholic health systems

1. Daughters of Charity St Louis

Revenues

$3.9 billion (93)

Fund balance

$1.9 billion (93)

Net income

$176 million (91)

2. Sisters of Mercy St. Louis

Revenues

$872 million

Fund balance

$754 million

Net income

$74 million

3. Sisters of Charity Incarnate Word, Houston

Revenues

$1.02 billion

Fund balance

$775 million

Net income

$73.7 million

4. Sisters of Providence Seattle

Revenues

$1.2 billion

Fund balance

$709 million

Net income

$72 million

5. Sister of Holy Cross South Bend

Revenues

$1.03 billion

Fund balance

$559 million

Net income

$71 million

6. St. Joseph Orange, CA

Revenues

$65 million

Fund balance

$722 million

Net income

$562 million

7. Sisters of Charity Cincinnati

Revenues

$62 million

Fund balance

$1.2 billion

Net income

$730 million

8. Eastern Mercy Radnor, Pa

Revenues

$60 million

Fund balance

$1.1 billion

Net income

$510 million

9. Catholic Healthcare West

Revenues

$59 million

Fund balance

$1.2 billion

Net income

$643 million

10. Sisters of Charity Leavenworth

Revenues

$55 million

Fund balance

$736 million

Net income

$608 million

11. Sisters of Mercy Farmington, MI

Revenues

$44 million

Fund balance

$1.6 billion

Net income

$550 million

12. Mercy Health Cincinnati

Revenues

$859 million

Fund balance

$435 million

Net income

$39 million

(Source: Modern Healthcare, Jan. 11, 1992, and individual hospitals)
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Title Annotation:Special Catholic Healthcare Report; Catholic healthcare systems
Author:Jones, Arthur
Publication:National Catholic Reporter
Article Type:Cover Story
Date:Jun 16, 1995
Words:782
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