Caritas Christi: Going…Going…Gone!

 As expected, yesterday we heard that Attorney General, Martha Coakley, approved selling Caritas Christi to Cerberus, with a few additional restrictions that make the deal less bad but still not all that great. Some readers are asking us for shorter posts, so we will try this time around and see how it goes.

All would probably agree this marks the beginning of the end of Catholic healthcare in Massachusetts. Do you remember Coakley’s comment during her failed U.S. Senate campaign that devout Catholic healthcare workers who abide by Church teachings on abortion and birth control, “can have religious freedom but you probably shouldn’t work in the emergency room“? Well, it looks like the chicken will be coming home to roost on that comment in the not-too-distant future.

Anyway, the 39-page report by the Attorney General’s office makes for an interesting read, and we learned quite a few things from a quick 15-minute review of it, including the 9-page appendix that answers some of the most frequently asked questions. Below we simply will share the high level conclusions of the report, and what we learned, including some disturbing gaps in what initially seemed like a fairly comprehensive assessment.

High Level Conclusions from the Report

“In any transaction involving the transfer of a hospital’s charitable assets to a for-profit entity, the Attorney General’s Office has statutory authority to conduct a review of the proposed transfer. In its review of the Caritas transaction, the Attorney General’s Office found that:
(1) it is impracticable for Caritas to continue to survive in its current charitable form;
(2) due care was followed by the Caritas Board and senior management during the transaction;
(3) the Board and senior management appropriately disclosed and managed conflicts of interest;
(4) the transfer of assets affords Caritas fair value for its assets and operations; and
(5) the transfer is in the public interest.”

What We Learned, Gaps in the Report

1) Impracticable for Caritas to have survived in its current charitable form?

Coakley’s report gives a list of all of the negative aspects of Caritas’ financial position through February 2009, including doom-and-gloom consultant reports, and reduced numbers of patient discharges, patient days, and outpatient surgery volume. These reports indicated Caritas had limited options to stay afloat and also fund pensions and needed facility improvements. We hear in 2009 that consultant Navigant projected Caritas “would default on its existing debt covenants (i.e., less than 30 days cash-on-hand) in less than one year.” You read the report, and it seems like there were no other options and the Cerberus deal sounds like a “white knight.”

But, conspicuously absent from Coakley’s report is one word about how Moody’s and Standard and Poor upgraded their long-term bond ratings on Caritas in late 2009 and February of 2010. In February of 2010, Caritas and the Boston Business Journal reported that Moodys upgraded their long-term bond ratings.

The upgrade reflects the turnaround in financial performance in FY 2009 and our belief that this new level of performance is sustainable. Moody’s said the hospital group has better cash flow to cover its debt service and experienced an upswing in unrestricted cash and its investment position, $235.3 million compared with $172 million at the end of fiscal 2009. Moody’s said its analysis takes into consideration a potential $100 million bond issue during fiscal 2010.

Why is this information from late 2009 and early 2010–which undermines the doom-and-gloom scenarios from the consultants up to early 2009–not mentioned in Coakley’s report? We do not know. Nor do we hear about how Caritas has the cash resources be off acquiring other hospitals like Landmark, and “quietly courting area hospitals about potential mergers” while claiming to be unable to fund their own operations. It makes no sense that Coakley omitted this from her report.

 (2) Due care was followed by the Caritas Board and senior management during the transaction?

The report details the history of trying to merge Caritas with a Catholic hospital chain and/or sell it over several years. Most interesting is how the Caritas Board approved entering into a letter of intent with Vanguard Health Systems to sell most of Caritas assets, and how Caritas and Vanguard Health Systems signed that letter of intent on November 4, 2009. Next thing we hear in the report was they were unable to reach agreement on material terms, including the underfunded pension liability and no-sale period, so the letter of intent was terminated in December 2009 (no exact date provided). The report says Cain Brothers was then engaged to help Caritas explore other options, which meant reaching out to private equity firms. We are told that of five approached, three responded, including Cerberus, and two were pitched in January of 2010.

Apparently no one in the Attorney General’s office read the March 28, 2010 Boston Globe, where the general public was told the deal to sell Caritas to Cerberus was actually set in motion in November of 2009 at the Marriott Desert Springs Resort & Spa in California. [We peg that date as being November 11-15, when Nardelli was a keynote speaker at the Ernst and Young Strategic Growth Forum 2009 at the Marriott Desert Springs]. Maybe the Vanguard negotiation was already problematic a week after the letter of intent was signed, and de la Torre was hedging his bets in case it went south, or maybe the prospect of the deal with the three-headed lion that guards the gates of hell (Cerberus’ symbol) looked better than Vanguard. We just find it curious that Coakley’s report attempts to paint a detailed timeline, but then we find stuff like this omitted that was right out in the public domain.

 (3) The Board and senior management appropriately disclosed and managed conflicts of interest?

 The report does not say anything about Coakley’s own conflict of interest of accepting $34,000 that was donated to her by de la Torre and Caritas executives during her U.S. Senate campaign. Also, folks like friend-of-Martha and campaign-donor-to-Martha, Jack Connors on the archdiocesan finance council, who may want selected Caritas properties for Partners and who gives direction to Caritas board member Fr. Bryan Hehir, were not considered in the report.

Catholic Action League of Massachusetts weighed in saying, 

“Although Martha Coakley deserves some credit for extending the period during which the hospitals cannot be closed, and in trying to ensure care for the indigent, her refusal to address the issue of the termination clause will likely result in the secularization of the six hospitals under the new owners. This means the abandonment of Catholic medical ethics, including the right to life from conception to natural death, the loss of conscience protections for pro-life doctors and nurses, a reduction in charitable care for the poor, and the replacement of Catholic social teaching in employee relations, such as the family wage, with the free market law of supply and demand. Catholics must now turn to the Holy See as the last court of appeal if one hundred and forty-seven years of Catholic health care in Boston is to be preserved.”

What do we think will happen ahead? The SJC and state Department of Public Health will approve the deal. If the Vatican does as well, look for Carney Hospital to eventually close (because the modified agreement says they can do that if it is unprofitable for 2 years), maybe St. Elizabeth’s will close as well, and Jack Connors’ Partners to likely pick-up whichever of the hospitals Cerberus closes or unloads at a great price.  That would leave only two more Archdiocesan assets available for Jack Connors to potentially try and grab—Regina Cleri for Partners and St. Johns Seminary for his alma mater, Boston College.

For now, just start practicing how to say adios, because that is the word we will use to describe what happens to the Catholic identity at Caritas and Catholic healthcare in Massachusetts.

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8 Responses to Caritas Christi: Going…Going…Gone!

  1. Jerry says:

    Our Catholic hospitals are gone without a fight from our Cardinal Archbishop!? Without even a whimper?

    Where’s the outcry from the “social justice” crowd?? Oops – I forgot. They’re at the Cardinal’s Marxist conference this weekend. “Social justice” shows itself to be the lie it was from the beginning.

  2. Anonymous says:

    When are people going to realize that anything managed by the Archdiocese is going to eventyually fail. The seeds of the Hospitals’ demise were sown when “Caritas Christi” was formed.

    The first lay chancellor, a fine upstanding man by the name of Paul Devlin, saw this quite a few years ago. The Archdiocese never would be in the sorry shape it is today under his leadership. The current Chancellor is the worst thing to happen to the Archdiocese in a lot of years. Granted, the abuse crisis destroyed the financial integrity of the Archdiocese but strong leadership and not cronyism and mismanagement are needed to bring it back.

    This has not happened under McDonough. Just look at his leadership team. What a joke!!!

  3. Michael says:

    Like I said before … Cardinal O’Malley handed over children to gay families by spinelessly avoiding the opportunity to stand up and defend our faith. Anyone with the courage of the Holy Spirit would have ignored the claims of the government and said that Catholic Charities is not leaving the adoption business, rather the Commonwealth of Massachusetts is leaving the “suppression of constitutionally protected exercise of religion” business. Obviously, Cardinal O’Malley doesn’t have the courage of the Holy Spirit.

    So Catholic Hospitals are next … like I warned him. And Catholic Schools are right after the hospitals. God help our children and grandchildren who will live under oppression thanks to spineless shepherds like O’Malley.

    If I am wrong, show me the evidence. When has O’Malley done anything against the grain? He hands money to tort lawyers willingly … how difficult is that? He takes a lot of pictures and travels a lot … how difficult is that? He goes to nice dinners and social gatherings sipping tea and tasting crumpets … how difficult is that? He caves in on every major issue affecting the Archdiocese of Boston … how difficult is that?

    He reminds me of John Kerry … He was both for and against courageous Fr. Rafferty in Hingham … Now, the poor innocent Catholic children and their poor innocent and uninformed Catholic parents are being led astray in a Weymouth Catholic school.

    We need a leader. Where is he? Is he handing tort lawyers from Ireland several million Euros right now?

  4. M says:

    I just looked-up Cerberus Capital Management and found an interesting article in Wikipedia:

    I didn’t realize that “…Cerberus is named for the mythological three-headed dog that guarded the gates of Hades.” Cerberus was the watchdog of the Greek underworld and faithful servant to Hades. He was charged with the job of devouring anyone trying to return to the land of the living and refused entrance to living humans. The saliva that fell from his mouth produced a deadly poison.

    But from the graphic at the URL in the above post, I guess you may have known this.

  5. Ignored Pastor says:

    The selling of Caritas Christi is an unmitigated defeat for the Catholic faith in Massachusetts. It is an abject and craven surrender to the culture of death. It will only accelerate the dissolution of Catholic life in our state. Pray, pray that the Holy See does not allow this.

  6. Chris says:

    I’d like to point your attention to an American Spectator story on Obama’s Favorite Nun — who is also Bryan Hehir’s friend. It tells about the sale of three Catholic hospitals in Scranton, brought about almost certainly by the passage of Obamacare. http://spectator.org/archives/2010/10/11/the-presidents-nun-obamacare-s/

  7. Peter Santos says:

    I think we’ve heard enough about Bryan Hehir. Let’s hear about other dissidents in Boston and what we can do to stop them.

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