Thursday, April 29, 2010

A Hospital Conversion Does Not Necessarily Imply a Religious Conversion

Conversions of nonprofit hospitals into for-profit firms raise a host of legal issues familiar to exempt organization lawyers.   The Boston Globe reports that such conversions of legal form do not always lead to the abandonment of the historically religious mission of the “converted” hospital, however.  Currently, Cerberus Capital Management, a private equity firm, is in the process of acquiring Boston's Catholic hospital network, Caritas Christi Health Care.  The parties are seeking to ensure that any resulting for-profit hospital will continue to operate in accordance with the traditional Catholic values of Caritas.  How will this be accomplished?  Caritas and Cerberus are drafting a “stewardship agreement” with the Roman Catholic Archdiocese of Boston.  The Globe states the following with respect to this agreement:

At its heart, the stewardship agreement will commit Caritas to strictly adhere to the Ethical and Religious Directives for Catholic Health Care Services agreed to by the US Conference of Catholic Bishops. The directives lay out the principles of Catholic health care - respect for human life from conception until natural death; care for the poor; contribution to the common good - and explain how health care institutions should put them into practice. The directives prohibit medical procedures that the church considers morally wrong, including abortions, sterilizations, certain fertility treatments, and euthanasia.

In addition to complying with the church's ethical guidelines, Caritas will promise to maintain its current level of spending on charitable services ….  In 2009 the six Caritas hospitals spent $66 million: $37 million on charitable care for the uninsured and underinsured, $26 million on community benefits such as support groups and skin cancer screenings, and $3 million on ``mission'' spending such as pastoral care.

Opinions differ as to whether such a stewardship agreement can, in practice, live up to its terms when the hospital is owned and managed by those motivated by profits.  For more on the acquisition, see Charity’s Call Ingrained at Catholic Hospitals, Hope, Hesitation over Caritas Deal, and Equity Firm Set to Buy Caritas.


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