San Francisco-based CHW envisioned a system with hospitals coast to coast, beyond its three-state region of Arizona, California and Nevada. To realize that vision, the system on Jan. 23 introduced the new name and the restructuring of its governance to separate from the church. Officials cited enhanced opportunities to expand, saying separating from the church would make the system more attractive to executives from secular or non-Catholic hospitals that are looking for an investor.“What this does is two things: it removes the words ‘Catholic’ and ‘West’ from its name; I think the intention is for broadening the pool of affiliations,” said Brad Spielman, a vice president and senior analyst for Moody’s Investors Service.

The former CHW counts itself as the fifth-largest Catholic system in the country based on revenue, and whether other systems follow suit in an effort to grow remains to be seen. Still, CHW’s conversion poses the latest example of a faith-based system taking drastic actions to position itself for impending healthcare reform and the business demands of the future.

Most observers aren’t surprised, but also wonder if the system’s mission and values have evolved to the point where they were forced to separate. “They view it as removing the ball and chain from themselves,” said Paul Danello, a Washington-based lawyer focused on Catholic canon law.As a growing number of laypeople continue to be involved in leadership, some question whether the Catholic way will remain a feasible way of doing business.

Lawrence Singer, director of the Beazley Institute for Health Law and Policy at Loyola University, a Jesuit school in Chicago, and his colleagues envision a time when compliance with ethical and religious directives could hamstring Catholic hospitals attempting to conduct business in the modern age. “Are we getting to a point where either government policy in the Affordable Care Act or community demand for certain services is such that Catholic healthcare providers won’t effectively be able to compete or serve their market any longer?” Singer said.

Dignity Health President and CEO Lloyd Dean declined to discuss any pending deals that may have served as motivation for the restructuring, but did say the system is looking to expand east. He also said there’s no “one-size-fits-all” remedy for all Catholic systems. But this one, he said, gives Dignity Health the flexibility to ally with a larger number of organizations.“What I can tell you is, this is the right model for us and it allows us to partner with others whose values who are in sync with our mission, vision and organization,” Dean said.

Dignity Health now has 23 Catholic and 15 non-Catholic hospitals.

Dignity Health officials planted the seeds for a name change in 2010, when CHW released its vision statement for the next decade. Besides making bold goals of expanding, the system listed “dignity” as the first of five core values and described aspirations of developing a “vibrant national healthcare system” by the end of 2020.

“We will grow our healing ministry by expanding access and market share within existing service areas, entering new service areas, and significantly expanding our community-based wellness, ambulatory and nonacute services,” the report, titled Horizon 2020, stated.

Dignity Health officials are quick to point out that they aren’t severing all ties to the church. Dean said the church’s values will remain important at the system’s Catholic and non-Catholic hospitals. The system will continue to prohibit most reproductive services at its existing facilities, regardless of the hospital’s affiliation, allowing only sterilizations at its non-Catholic facilities.“I would say our vision has not changed and neither has our mission as being a voice for the voiceless, serving those in need of quality healthcare,” Dean said.

That’s a statement supported by the Washington, D.C.-based Catholic Health Association. “We do not see it as separating from the church; they worked this corporate structure out in consultation with many bishops,” CHA President and CEO Sister Carol Keehan wrote in an e-mailed statement.

A changing climate is forcing Catholic healthcare organizations to make changes. Earlier this month, the largest Catholic care group in America, 76-hospital Ascension Health, St. Louis, split into two (Jan. 9). The Ascension Health Alliance will manage support services and subsidiaries, while Ascension Health concentrates on hospital operations and healthcare delivery. Last year, Ascension formed a for-profit partnership with private-equity firm Oak Hill Capital Partners that intends to buy struggling Catholic providers and keep them Catholic (See related story).

Blazing a trail?

Sister Judy Carle, Dignity Health’s board vice chair, said CHW leaders discussed splitting the system into non-Catholic and Catholic components, but concluded that would go against the system’s belief in inclusivity. CHW has been the rare group with both non-Catholic and Catholic hospitals. However, Danello predicted that other Catholic systems would follow Dignity Health’s lead, and that three out of the other top five Catholic healthcare organizations would do so in the next two to four years.

Dignity Health has not acquired a hospital since 2007, when it added St. Mary’s Regional Medical Center in Reno, Nev., and the system has been searching for a buyer for that 269-bed hospital.

A published report quoted Dean saying officials from non-Catholic hospitals interested in affiliating with CHW seemed reluctant about joining a Catholic system, worried that they’d have to become Catholic. [Read more...]