PASADENA — In a move described as highly unusual, owners of St. Luke of Pasadena plan to sell the 52-year-old Catholic hospital to a private profit-making firm.
St. Joseph Health System, which manages eight hospitals owned by the Sisters of St. Joseph of Orange, has signed a letter of intent with Summit Health Ltd. under which ownership of the hospital could be transferred to the Los Angeles-based health-care firm as early as Jan. 1.
The Vatican-approved sale came as a surprise because Catholic hospitals are almost never sold to profit-making concerns. People ranging from employees to the chairman of the board of trustees, which oversees day-to-day operations and was not informed of the proposed sale before it was announced on Oct. 1, said the move was unexpected.
"I am disappointed because now we won't have a Catholic hospital," said John Watkins, chairman of the board of trustees.
Sister Suzanne Sassus, general superior of the order which set up St. Joseph Health System to help administer the hospitals, said that escalating costs at the aging facility had been cutting into the quality of care at St. Luke.
"It was becoming more difficult for us to maintain our values," she said. "The financial situation was impacting on our philosophy of care.
"It was a difficult decision to make and we even considered closing it as a hospital and perhaps turning it into a home for the aged.
"But we finally concluded that our primary duty was to safeguard the employees and their families who depend on St. Luke for their livelihood, and the only way we could do that was to find someone who could put a lot of money into it."
Alan Chamison, senior vice president of St. Joseph Health System, said the "first preference was to interest another Catholic system, but we were unsuccessful." He said that the 167-bed hospital needs extensive upgrading and renovation, but does not generate enough revenue to finance the necessary capital improvements.
According to Gayle Ensign, president of the 46-member California Assn. of Catholic Hospitals, the proposed sale is apparently the first of its kind in the state.
"A change of ownership in Catholic hospitals here has gone to other Catholics," she said.
"Most of our hospitals are in good financial shape and are run efficiently, so I hope this is not a trend of the future," Ensign said. "But this is a changing time for hospitals and we are likely to see community hospitals in general sold. The for-profit entities here are strong because they have access to capital.
"Historically health care was never meant to be a big business--hospitals were in the community because of the need," she added. "Community hospitals still are a social institution, especially Catholic hospitals."
Although there have been a few exceptions, the sale of a Catholic hospital to a profit-making
firm is very unusual, said Diane Moeller, vice
president and director of member services for the Catholic Health Assn. of the United States. She said that the 623 hospitals in the association include almost all the Catholic hospitals in the country.
Moeller said that no Catholic hospitals have been sold to investor-owned companies in the
last five years.
"A couple of small hospitals have been turned over to nonprofit community groups to prevent their closure," she said. "And if you go back far enough (in time), more than 10 years ago some Catholic hospitals were sold to investors."
The sale of St. Luke would leave the San Gabriel Valley with only two Catholic hospitals, Queen of the Valley in West Covina and Santa Teresita in Duarte.
Chamison said that St. Joseph Health System had quietly let it be known that it wanted to sell St. Luke.
Robert Herzig, vice president of corporate development for Summit, said his firm became interested in the Pasadena hospital because his company specifically looks at community hospitals when making acquisitions.
"Pasadena is a community that supports St. Luke and that is why the hospital appeals to us," he said.
Neither Summit nor St. Joseph would discuss the possible purchase price. However, Chamison said at least $12 million in proceeds from the sale would go to liquidate St. Luke's liabilities. Other proceeds would go to other hospitals in the St. Joseph Health System to reduce their $173 million in long-term debt, Chamison said.
Local Catholic charities may also benefit from the sale. The St. Luke Foundation, a nonprofit corporation created in 1979 to support development of the hospital, has $2.5 million, Chamison said, and it will be up to foundation members to decide how to use it. Although it could go to the Sisters of St. Joseph of Orange, he said, it probably will remain in the area in which it it was raised.