Atlanta was still recovering from the ravages of the Civil War when four Sisters of Mercy arrived from Savannah with 50 cents in their pockets.
The Catholic nuns recognized that the city desperately needed a place to care for its sick and injured. In 1880, in a small house at Courtland and Baker streets, they opened what eventually became St. Joseph's Hospital.
The Sisters of Mercy still work at St. Joseph's, the highly regarded and thoroughly modern 410-bed facility now located in Sandy Springs. But the nuns, along with the rest of St. Joseph's leadership, are preparing to sell metro Atlanta's oldest hospital.
The decision is driven by changes in the health care marketplace that are making it difficult, if not impossible, for hospitals to maintain their independence. Market forces are pushing almost every player in health care -- hospitals, doctors, outpatient clinics and nursing homes -- to band together under the umbrella of a "health system." In the next decade, a handful of systems will emerge as the health care power players of metro Atlanta, and most local hospitals are expected to eventually be owned by one of those systems.
“We can’t continue to be a stand-alone hospital in Atlanta, which is quickly changing into a market that will be dominated by three or four large players,” said Heather Dexter, St. Joseph's chief operating officer. “We are making this deal in order to continue serving this community for the next 130 years.”
While St. Joseph's is positioning itself for long-term survival, its sale will certainly bring change to a hospital many Atlantans have turned to for top-tier, cutting-edge care in a kind setting. The hospital seeks a partner that will support its standards. But it is inevitable that St. Joseph's, the first hospital in Georgia to perform open-heart surgery, will be pushed by a new health system to adopt more efficient approaches to treatment.
St. Joseph's isn't the only metro Atlanta hospital in play. Financially ailing Henry Medical Center is in negotiations with both Emory Healthcare and Piedmont Healthcare to take over its 215-bed facility in Stockbridge. After losing money for years, county officials decided to partner with or sell to a system that has the resources to tackle everything from a conversion to electronic medical records to orchestrating changes to improve the quality of care and cost less.
"The health care delivery system has become much more complex as time has gone on," said Charles Scott, the Henry hospital's chief executive. "The end result of those challenges and that complexity is that it has become more and more difficult for a solo hospital, particularly a relatively small community hospital, to be able to succeed."
Deceptive success
A cursory look at St. Joseph's bottom line does not suggest a hospital in trouble. Its financial reports show St. Joseph's is making money and has a margin other hospitals in the state envy. But dig deeper and it becomes clear St. Joseph's is operating in the black because it has hefty investments.
Strip away the investment income and it is obvious what St. Joseph's receives from insurers is not covering the costs of delivering care. The hospital could keep padding its operation with its considerable investment income, but its leadership decided that didn't make sense.
"If you look at cash flow, the hospital is in great shape," said Dr. Eugene Davidson, a veteran surgeon and St. Joseph's board member. "But that is not a recipe for long-term viability."
St. Joseph's, which is best known for its groundbreaking care for heart patients, is filled with some of Georgia's sickest patients. It doesn't offer obstetrics or pediatric care to balance out its patient load of complex cases.
The hospital's mix means many of its patients are covered by Medicare, the government insurance program whose reimbursement rates are relatively low. St. Joseph's and other hospitals rely on more generous payments from private insurers to balance the books. But that kind of cost-shifting has become more difficult for St. Joseph's because it can't command the top-dollar payments from insurers that some larger players in the Atlanta market are getting. That fact forced the hospital's decision to stop operating as an independent facility.
St. Joseph's resisted a sale. It initially sought a partnership, first with Piedmont and then with Emory. Such a partnership would have been a way for the hospital to hold onto its values, including limits on clinical practices such as abortion and stem cell research that the Catholic Church opposes.
“We wanted a partnership to work because we weren’t quite ready to change the mission on which we built our relationship with this community,” Dexter said. “We’re the only Catholic hospital in town.”
Negotiations with both systems failed. While a partnership is still possible, the hospital has focused recently on pursuing a sale.
How much of the hospital's Catholic heritage -- from crucifixes in the waiting room to limits on clinical procedures to nuns in the boardroom -- would remain after a sale isn't clear. That's part of the negotiation process, hospital executives said.
The hospital's religious history is valued because it helped inspire care that set the hospital apart through its compassion, executives said. The Sisters of Mercy themselves "were unbelievably supportive to families and to patients," Davidson said, "and that imposed a little different atmosphere on the institution."
St. Joseph's is owned by Pennsylvania-based Catholic Health East, which operates hospitals in 11 states. The hospital's Catholic designation is a result of an official sponsorship by the Sisters of Mercy. In addition to the Sandy Springs hospital, St. Joseph's Health System includes a 25-bed hospital in Greensboro and St. Joseph's Mercy Care, which provides medical, dental and other care to homeless and uninsured Atlantans through four clinics and several mobile clinics.
While the Sisters of Mercy don't own the hospital, the order is expected to get a portion of the sale's proceeds, which it will use to support -- and possibly expand -- the Mercy Care operation.
Seeing St. Joseph's up for sale is sobering for some who know the hospital well.
"St. Joe's has been for decades a very, very high-quality, venerable organization," said Michele M. Molden, Piedmont's chief transformation officer and a former St. Joseph's executive. "Truly, there are some spectacular physicians at St. Joe's."
She added, "I think the whole city can certainly say that [a sale] is not the outcome that anybody would have liked to have seen."
Most health policy experts agree the nation's approach to health care needs to shift to one that offers incentives to keep patients healthy instead of paying hospitals and doctors more for doing more.
"The present way we finance and purchase health care is not sustainable," said William Custer, a health policy expert at Georgia State University. "It's not sustainable for St. Joe's, and it's not sustainable for the country."
Large health systems not only offer economies of scale, they can also create a structure where primary care doctors, specialists, nurses, technicians and hospital administrators work together to ensure the most effective course of treatment is prescribed for each patient.
It's likely that in the future, a health system will be paid a set price to treat a patient from beginning to end, either for one illness or the entire year. That model encourages efficiency and only works well for systems that can coordinate everything from high-tech surgery and prescriptions to a nursing service that makes sure the patient does well after leaving the hospital.
Under such a system, Custer said, "any stand-alone organization -- and we're talking hospitals, physician groups, pharmacies, labs, whatever -- is at a disadvantage relative to an integrated system that incorporates all of the disparate aspects of health care."
While some view the sale as a loss for the community, those inside St. Joseph's believe their high-quality record may end up influencing whatever health system the hospital joins, thereby extending better care to more Atlantans while also keeping St. Joseph's open for years to come.
"It's OK to be nostalgic," Davidson said. "But they have to look at this as a positive move to protect and preserve the good parts of what we can do without totally destroying what we have built over the years."
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