Incorporated: 1996
NAIC: 622110 General Medical and Surgical Hospitals; 621610 Home Healthcare Services; 624190 Other Individual and Family Services; 623311 Continuing Care Retirement Communities
SIC: 8062 General Medical & Surgical Hospitals; 8082 Home Health Care Services; 8322 Individual & Family Services
Catholic Health Initiatives (CHI) is one of the largest Catholic healthcare systems in the United States. With facilities in 19 states, CHI owns and operates 73 hospitals/medical centers, two community-based health organizations, and 42 senior living centers, including long-term care, assisted-living, and independent living facilities. A nonprofit organization, CHI's Board of Stewardship Trustees is comprised of Catholic laity and religious personnel. CHI's ministry includes the Mission and Ministry Fund, which provides grants to improve the health and well-being of the communities served by CHI. The Direct Community Investment Program provides low-interest or no-interest loans to local, nonprofit organizations.
Unifying Healthcare Ministry and Systems
The formation of Catholic Health Initiatives began in early 1995, when Catholic Health Corporation of Omaha, Nebraska; Franciscan Health System of Aston, Pennsylvania; and the Sisters of Charity Health Care Systems of Cincinnati, Ohio, met to discuss the possibility of consolidating their three healthcare systems. All three of the healthcare systems evolved from the small clinics and hospitals opened by Catholic nuns in newly formed communities of the American frontier, some originating in the early 1800s. After decades of advancement, the late 20th century presented new challenges to maintain the healthcare and community ministry of these organizations. The development of managed care, and the resulting financial pressure of restructured methods of reimbursement for medical services, forced the organizations to evaluate their future course. Their representatives decided to merge the three healthcare systems in order to pursue cost-savings through economies of scale in operations, such as volume purchasing of supplies. Furthermore, the safeguard of a large organization diverted the potential for acquisition by large, for-profit corporations that might comprise the charitable mission of the religious communities represented by the three systems.
Determining the organizational structure of CHI raised another concern: how to handle the decline in available religious personnel, particularly nuns, to support the ministry and the operations of CHI's healthcare facilities. This CHI addressed by creating an executive umbrella, unprecedented in Catholic healthcare, in which laity would have equal ownership with religious personnel. Thus, CHI's Board of Stewardship Trustees was comprised of seven religious women and seven lay members, plus the chief executive officer, together acting as a single religious entity. Patricia A. Cahill, Esq., former director of health and hospitals at the Archdiocese of New York, was appointed president and chief executive officer of CHI.
In becoming one of the largest healthcare systems in the United States, the new national organization consisted of 61 hospitals, more than 50 long-term care units, several senior housing facilities, and other healthcare services. CHI created a structure of five market-based organizations focused on the particularities of each region's healthcare needs, along with a national office located in Denver. CHI held a 70 percent asset interest in Denver-based Centura Health, a joint venture with PorterCare Adventist Health System, which included seven hospitals and several physician practices. Sisters of Charity brought to CHI a joint venture with Karrington, a for-profit builder and operator of assisted-living centers in Ohio.
Operations Beginning July 1, 1996
When operations at CHI officially began July 1, 1996, Cahill's first priority was to achieve immediate cost savings through consolidated administrative services. In collaboration with four other Catholic healthcare systems, CHI formed Catholic Materials Management Alliance (CMMA) to handle volume purchases of food and supplies. After CMMA merged with Sisters of the Sorrowful Mother-Diversified Health Services in late 1998, aggregate purchasing volume rose to $2 billion. Daughters of Charity and CHI formed the Catholic Healthcare Audit Network to provide internal auditing and compliance services to network facilities. With Catholic Healthcare East and Daughters of Charity, CHI formed an offshore excess insurance captive company.
CHI started in a strong financial position. For its first fiscal year, ending June 30, 1997, CHI reported $4.7 billion in revenues, $254 million in net income, and $5.8 billion in assets. CHI's network organizations also consolidated their investments, creating a $2.5 billion asset base comprised of equities and fixed-income instruments. The investments were organized into operations, insurance, and retirement funds. Its financial strength garnered CHI the top credit rating for a nonprofit organization. Because a nonprofit cannot sell stock to raise capital, the rating provides access to financial instruments that support growth and development. In late 1997 CHI consolidated and restructured the debt of the founding organizations through issuance of $834 million in bonds. It was the largest such financial transaction ever completed by a nonprofit healthcare company.
CHI expanded during the late 1990s through mergers with other Catholic healthcare organizations as well as joint ventures and acquisitions. In September 1997 the Sisters of Charity of Nazareth Health Systems (SCN) merged with CHI. No financial exchange accompanied the merger; as a nonprofit organization, SCN transferred sponsorship to CHI. SCN operated Caritas Health Services, itself comprised of nine acute care facilities in Kentucky, Tennessee, and Arkansas. In 1998 CHI subsidiary Alegent Health, a seven-hospital system in Omaha, formed a joint venture with Creighton St. Joseph Hospital Regional Healthcare System in Omaha, owned by Tenet Healthcare Corporation, a for-profit corporation. The March 1998 merger with Sisters of St. Francis of the Immaculate Heart of Mary in Harkinson, North Dakota, added a hospital and eight clinics in the upper Midwest to CHI's system. CHI purchased the 83-bed Memorial Hospital in Chattanooga and a Columbia hospital in Little Rock. The acquisition of Jewish Hospital Lexington, a 174-bed facility, supplemented CHI's other facilities in Kentucky with an obstetrics unit. Integration into the local network was expected to alleviate financial losses experienced at Jewish Hospital.
In keeping with CHI's charitable missions, the Board of Stewardship Trustees implemented a Social Responsibility Investment Policy in the fall of 1998. CHI established the Direct Community Investment Program with the intention of serving disadvantaged populations by providing low-interest or no-interest loans to local organizations. Other activities involved applying social values to its investment choices and participating in shareholder activism as a means of creating social justice.
Shifting from Expansion to Improving Existing Operations
While CHI maintained its financial strength during the first three years of operation, the integration and expansion phase culminated in losses in 1999. Financial difficulties at facilities in southern Colorado, Cincinnati, Joplin, Albuquerque, Des Moines, and Little Rock hurt overall operating margins. Changes in reimbursement from HMOs, Medicare, and other federal health plans affected CHI as well. Overall, only seven of 45 market-based organizations achieved a profit in 1999. Moreover, $40 million in liabilities associated with a failed physician-owned hospital at Centura resulted in a $22 million loss at Centura. CHI reported a $53.8 million loss on $5.2 billion in revenues in 1999.
Cahill sought to address operational problems in a manner that would maintain CHI's twofold responsibility as a charitable mission and a healthcare business in terms of the limitations presented by managed care. Cahill decided to retain some medical facilities and operate them at a loss in order to serve rural communities without other healthcare options. To offset those losses, CHI renegotiated or halted low-paying managed care contracts, such as the Medicare managed care plan at St. Joseph Healthcare in Albuquerque. CHI improved collections, achieved effective cost controls, decentralized certain administrative services, and hired new managers. Divestments included the physician practices that had contributed to losses at Centura, and St. Joseph Hospital in Lancaster, Pennsylvania. Investment income of $179 million provided support for a financial turnaround at CHI. By the close of the fiscal year ended June 30, 2000, CHI rebounded, with $96.5 million in net income on revenues of $5.6 billion.
CHI continued to streamline operations in 2000 and 2001. In the fall of 2000 CHI closed St. Ansgar's Health Center, a 20-bed hospital, in Park River, North Dakota, with a population of less than 1,600 people. Park River's only medical facility, St. Ansgar suffered from structural aging and outdated equipment, and $4 million in annual revenue did not support renovation or acquisition of new equipment. That Noridian Blue Cross and Blue Shield and government programs reduced reimbursement for healthcare services worsened the hospital's financial troubles. CHI determined that hospitals in Grafton, 15 miles away, and in Fargo and Grand Forks could better serve the community's needs. CHI decided to transform St. Ansgar into an outpatient center. Divestment in early 2001 involved the transfer of three hospitals in the Philadelphia area, one in Trenton, New Jersey, and one in Brackenville, Delaware, to Catholic Health East. Two years of discussions with Ardent Health Services culminated in the sale of the troubled St. Joseph Healthcare System in Albuquerque. Unwilling to invest an estimated $50 million over the next several years to sustain that healthcare system, CHI sold it in July 2002.
CHI Pursuing Efficiency and Cost Saving Through New Technology
During 2003, CHI initiated widespread operational improvements through the application of new technologies. These included the installation of a documentation and coding system to track service delivery and point-of-use dispensing equipment to track supplies. The latter tracked supplies as they were charged to each patient, then it automatically initiated the resupply process and collected information for management oversight.
Implementation of the Advanced Clinical Information System consolidated patient information from different locales, such as the laboratory, pharmacy, nurse's station, emergency room, scheduling, and the patient's bedside, into one patient record. As a decision-making tool, the system provided medication administration and physician order entry to reduce errors.
Also in 2003, CHI launched a five-year program to standardize human resource, payroll, accounts payable, supply chain management, and scheduling across the entire organization. Toward that end, 13 market-based organizations and the national office provided data for analysis in order to design an efficient system of administration. CHI intended to begin implementation at test locations in early 2005. CHI opened the Information Technology Center in February 2004 in order to provide space for software development.
CHI Continuing Growth, Development, and Community Service
CHI utilized its financial equilibrium and cost efficiency measures to improve the quality of patient care and facility development. In 2004 CHI initiated STEEEP, an acronym for safe, timely, efficient, effective, equitable, person-centered care. Toward that end, in January 2005 CHI began to use Rapid Response Teams who intervened to address a patient's worsening condition before that condition became critical. With a goal to decrease mortality by 5 percent by June 2006, CHI reduced mortality by 6.25 percent, saving about 450 lives.
Capital development involved several large and small projects. CHI installed an Air Ambulance facility and began construction on an 80-bed patient care facility at Mercy Medical Center in Durango, Colorado. A Bone and Joint Center opened at Caritas Health Center in Louisville, Kentucky, and Heart Centers opened at Good Samaritan Health Systems in Kearney, Nebraska, and at St. Vincent Health in Little Rock, Arkansas. Larger projects included construction of St. Joseph Medical Center, a new $143 million health campus and hospital in Reading, Pennsylvania. In 2005, CHI began a $122 million expansion and renovation project at Good Samaritan Hospital in Dayton, Ohio, and construction of a $67 million, nine-story tower of patient rooms at St. Francis in Grand Island, Nebraska.
Other advancements included a cooperative venture to provide cardiology services from the Nebraska Heart Institute at St. Francis in Grand Island. Alegent Health introduced the Community Benefit Trust Fund, to provide healthcare to vulnerable populations in Omaha. St. Joseph Hospital, in Lexington, Kentucky, opened a Center for Orthopedics and Neuroscience, the first such facility in that region. At Jewish Hospital in Louisville, two doctors performed the first total heart transplant using the AbioCor self-contained, artificial replacement heart. In 2006, the U.S. Food and Drug Administration approved the facility as one of about ten hospitals to offer the service.
In 2006 CHI's Mission and Ministry Fund reached its goal of attaining a $100 million base from which to fund projects from earned interest. Thus, the market-based organizations would no longer need to contribute a percentage of revenues to support the fund or new grant giving projects. Over the previous ten years, the Mission and Ministry Fund awarded $19 million in grants to local communities. These grants supported immigrant mentoring programs, school-based clinics and counseling, health and wellness education, palliative care programs, support services for at-risk youth, and many other programs.
CHI expressed its commitment to social responsibility through a variety of activities. In early 2006, the Social Responsibility Investment Staff Committee approved a $900,000 loan from the Direct Community Investment Program to the Greater Albuquerque Housing Partnership (GAHP). The loan would support GAHP's continuing efforts to provide affordable rental and homeownership units at housing developments throughout the Albuquerque, New Mexico, area. CHI filed shareholder resolutions with pharmaceutical companies and tobacco companies, attempting to influence policies for the benefit of public health and safety.
In December 2006, CHI established the Price Transparency Work Group to provide consumer information about the price of hospital care and services. The program consisted of three parts. Price transparency involved listing charges for the most frequently used inpatient and outpatient services, with data provided on a local market average. Patient communications concerned the availability of financial assistance and how to communicate that information to patients. Point-of-Service Estimation offered patients an estimate of expected cost after insurance and financial assistance had been applied to the total price of service. CHI implemented the program at four of its market-based hospital systems for a three-month test pilot in late 2006.
Building for the Future
CHI's activities in 2007 reflected the vision to grow and improve for the 21st century. For instance, CHI took action toward improving clinical knowledge by utilizing its market-based organizations, and their large patient population and medical staff, as a base for research and development that would lead to innovative advancements in patient care. The Catholic Health Oncology Network coordinated clinical research conducted through the CHI network organizations nationwide. Another development involved collaboration with Catholic Health East and Ascension Health of St. Louis in the formation of a $200 million venture capital fund, Catholic Health Venture II (CHV II), to invest in the development of healthcare-related technologies and operational ventures. Each of three partners in CHV II held one seat and invested undisclosed amounts, and Ascension Health, the largest partner, managed the organization.
CHI's expansion as a national healthcare system continued. CHI's first significant merger in a decade occurred in early 2007, when Saint Clare's Health System of northwest New Jersey signed an agreement to join CHI. Saint Clare's operated four hospital campuses and other health facilities. In Colorado Springs, construction continued on a 350,000-square-foot medical facility. CHI expected the new St. Francis Medical Center to open on schedule, in August 2008. In June CHI construction commenced on St. Anthony's Hospital in Gig Harbor, Washington. CHI expected the 217,000-square-foot, 80-bed facility to open in 2009.
In 2007 the CHI Connect program began implementation of a new enterprise resource management system intended to streamline redundancies in the administrative functions. CHI installed the system at its Denver headquarters, at Memorial Health Care in Chattanooga, and at two community health services organizations. After a testing period, CHI initiated organization-wide implementation on a quarterly schedule beginning in July 2007; CHI expected the project to be completed in January 2009.
Principal Subsidiaries
Alegent Health (50%); Caritas Health Services; Catholic Health Corporation; Catholic Materials Management Alliance (20%); Catholic Healthcare Audit Network (33%); Catholic Health Venture II, LP (33%).
Principal Competitors
Ascension Health; Catholic Healthcare East; Catholic Healthcare West; GG NSC Holdings LLC; HCA, Inc.
Further Reading
"Advanced Clinical Information System Moves to Testing Stage," Initiatives, June/July 2004, p. 6.
Albanese, Elizabeth, "Catholic Health Initiatives Hits Market with $350M Sale," Bond Buyer, October 3, 2001, p. 3.
------, "Upgraded Catholic Health Initiatives to Wrap Up Multi-Piece, 3-State Deal," Bond Buyer, October 25, 2002, p. 3.
"Ardent Health Acquiring St. Joseph's in New Mexico from Catholic Health Initiatives," Healthcare Strategic Management, July 2002, p. 5.
Austin, Marsha, "Catholic Health Expects $37M Loss," Denver Business Journal, June 18, 1999, p. 10A.
------, "Health Care's Denver Giant," Denver Business Journal, June 25, 1999, p. 1A.
Bellandi, Deanna, "CHI Posts First-Time Loss; Despite Losing Money, Things Are Starting to Look up in Markets with Turnaround Plans," Modern Healthcare, April 3, 2000, p. 42.
------, "Designed for Growth: Catholic Megasystem CHI Set to Take Off," Modern Healthcare, April 13, 1998, p. 36.
------, "Shrinking the 'Quality Gap'; Catholic Health Initiatives Is First Major System to Earn National Award," Modern Healthcare, April 9, 2001, p. 21.
Benmour, Eric, "Catholic Health Initiatives Expands Reach," Denver Business Journal, September 12, 1997, p. 5A.
"Catholic Health Initiatives Engages in Community Investment, Shareholder Activism," Initiatives, June 2006, p. 10.
"Catholic Health Initiatives in Denver Pioneers Disaster Planning Program," Hospital Materials Management, November 2006, p. 10.
"Catholic Health Initiatives Launches Research & Development Initiative," Initiatives, September/October 2007, p. 6.
"Catholic IDN Agrees to Let Consorta Negotiate Customized Purchasing Deals," Hospitals Materials Management, March 2003, p. 5.
"CHI Connect Is Here," Initiatives, January/February 2007, p. 4.
"CHI Installing Automated Dispensing Equipment from PSR Excellence," Hospital Materials Management, May 2003, p. 4.
Doehrman, Marylou, "Q&A with John DiCola, Senior VP of Strategy and Biz Development," Colorado Springs Business Journal, January 5, 2007.
Galloro, Vince, "Retrenchment in South Dakota; Catholic Health Initiatives to Close Rural Hospital; Community to Use It for Outpatient Clinic," Modern Healthcare, October 30, 2000, p. 52.
George, John, "CHI Expanding Its Home Health-care Services," Philadelphia Business Journal, April 2, 1999, p. 5.
------, "Merger of Catholic Hospitals Pending," Philadelphia Business Journal, April 13, 2001, p. 15.
Grazier, Kyle L. "Deborah M. Lee-Eddie, CHE Sr. V.P., Operations, Catholic Health Initiatives, Denver, Colorado," Journal of Healthcare Management, November-December 2003, p. 351.
"Interview with Kevin Lofton, FACHE, President and Chief Executive Officer, Catholic Health Initiatives, Denver, Colorado," Journal of Healthcare Management, September-October 2004, p. 281.
Jaklevic, Mary Chris, "CHI Blazes a Trail Through the Internet," Modern Healthcare, October 16, 2000, p. 92.
"Kevin Lofton," Modern Healthcare, August 7, 2006, p. 100.
Kirchheimer, Barbara, "Albuquerque on the Block; St. Joseph Needs More Than CHI Wants to Give," Modern Healthcare, November 12, 2001, p. 18.
Moore, J. Duncan, Jr., "CHI Buys Jewish Hospital: Medicare, Other Declining Payments Cited for Sale," Modern Healthcare, October 5, 1998, p. 18.
"Price Transparency Work Group to Launch Pilot Project," Initiatives, December 2006, p. 6.
"St. Clare's Health System Joins Catholic Health Initiatives," Initiatives, March/April 2007, p. 3.
Shields, Yvette, "Health Care Merger Process Is a Long and Arduous Road, Panelists Say," Bond Buyer, September 26, 2000, p. 6.
"Social Responsibility Update," Initiatives, April/May 2005, p. 2.
"Three Catholic Systems Launch $200 Million Venture Capital Fund," Modern Healthcare, October 8, 2007, p. 4.
"'To Make a Difference,'" Healthcare Financial Management, February 2006, p. 52.
— Mary Tradii
