The Terms of the Agreement | Philip F. Lawler | Special Report | Catholic World Report | December 2010
The first decade of the 21st century was not kind to Caritas Christi, the health care system administered by the Boston archdiocese. Red ink began appearing in profusion in the group’s budget statements. An underfunded pension plan pointed toward still more ominous financial problems in the future.
The Boston archdiocese looked for a partner: a large health care corporation with the capital necessary to put the Caritas Christi hospitals back on a sound financial footing. But even deep-pocketed potential buyers were evidently frightened away by the figures. By 2008, with Caritas Christi tottering toward insolvency, the attorney general of Massachusetts—who is legally responsible for oversight of non-profit corporations in the state—felt compelled to intervene.
Under the watchful eye of the attorney general, Martha Coakley, Caritas Christi was restructured. The six-hospital system, which had been owned by the Archdiocese of Boston, became an independent secular corporation with its own governing board. The terms of the new arrangement gave the archbishop of Boston authority over questions involving the religious and moral guidance of the health care system, but the archdiocese would no longer be involved in day-to-day administration of the system.
However, the new legal structure did not eliminate the yawning pension liability. Caritas Christi—the largest health care system in the New England region, with more than 2,000 affiliated doctors, 12,000 employees, and 1,500 hospital beds—remained in financial jeopardy.
A partial solution appeared on the horizon in 2009, when Caritas Christi joined with the Missouri-based Centene Corporation to win a lucrative government contract, providing health coverage for low-income individuals under the terms of a new Massachusetts health care scheme. But Catholic activists protested the plan, pointing out that the state-administered system required coverage for abortion and contraception. After initially defending the plan, and chastising pro-lifers who suggested that Caritas Christi would be making abortion referrals under the state contract, Boston’s Cardinal Sean O’Malley finally decided that the plan could not be reconciled with the Catholic identity of the archdiocesan health care system. The cardinal ordered Caritas Christi to pull out of the contract, just before it was scheduled to take effect on July 1, 2009.
Five months later Dr. Ralph de la Torre, the energetic chief executive of Caritas Christi, had formulated a new plan. He elicited an offer from Cerberus Capital Management, one of America’s largest investment companies. Cerberus—a New York firm whose previous acquisitions had included both Chrysler and General Motors, as well as United Rentals and Remington Arms—offered to buy out the Caritas Christi system for an eye-catching $850 million. Cerberus proposed to set up a new affiliate, Steward Healthcare System, to run the hospitals.
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