Battle Over Hospital Sale Heats Up

The battle over the sale of Catholic-run Queen of Angels-Hollywood Presbyterian Medical Center to a for-profit chain has come to a head, with Cardinal Roger M. Mahony threatening to take the matter to the Vatican if the transaction is not halted by today.

Opponents of the sale see the cardinal’s call for the hospital to “cease and desist from the proposed sale” as a significant setback for the facility’s board and the nation’s second-largest hospital chain, Tenet Healthcare Corp. Tenet is seeking to buy the 409-bed community hospital for more than $86 million.

But the medical center has vowed to see the transaction through as proposed, insisting in a statement Thursday that it is a lay corporation and that “canon law does not apply to this transaction.” Tenet, too, says its interest in the deal “is undiminished.”

Indeed, a similar Tenet takeover of a Catholic hospital in St. Louis this week suggests that even an archbishop’s opposition might not be an insurmountable barrier. The Vatican approved the sale of St. Louis University Hospital over the public objections of Archbishop Justin Rigali.

The showdowns in St. Louis and Los Angeles are emblematic of a national debate over whether for-profit entities can reliably assume the charitable missions of nonprofit community or teaching hospitals.

The escalating dispute at Queen of Angels in East Hollywood pits the cardinal, the hospital medical staff, a community coalition and a labor union against a hospital board eager to sell and a health care giant eager to buy. Like many stand-alone hospitals, Queen of Angels is feeling the pinch of a health care marketplace that favors consolidation and economies of scale.

The cardinal’s ultimatum is the latest maneuver in the tug of war over the 70-plus-year-old Queen of Angels, a pivotal provider of millions of dollars in charity care each year to mostly minority and immigrant residents of East Hollywood.

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“This is a big one,” said Lark Galloway-Gilliam, a consumer advocate who, along with others such as Councilwoman Jackie Goldberg, is leading a community coalition opposing the sale. “This is one of the most important examples because it is such an important player in the county’s safety net system. . . . It opens the floodgates for the . . . tensions over for-profits taking over the health care industry.”

The issues are legal and moral, secular and, some would say, sacred.

Among secular opponents of the Queen of Angels deal, perhaps the chief worry is that key services such as obstetrics and emergency care will be lost to a community that already is underserved.

“We don’t say a for-profit cannot [ever work] but I think there is a general sentiment of skepticism,” Galloway-Gilliam said. “Does that not change the way health care is delivered? Our guts tell us yes. We know in their corporate minds are terms like consolidation and market share that make us a little nervous about preserving the integrity of that hospital.”

The religious objections are at least as formidable.

According to a letter to the hospital from the California attorney general’s office this week, Queen of Angels is bound by its current bylaws to adhere to the canons of the Roman Catholic Church, which is subject to interpretation by Mahony. And the attorney general’s office, which must approve any sale, signaled in the letter that it will defer to the church in matters of religious law.

“What we’ve said, essentially, [to the hospital] is you have to do something to deal with this,” said James Schwartz, the deputy attorney general overseeing the transaction. His office has the authority to reject the deal if it views the terms to be in conflict with the hospital’s “trust obligations,” although he emphasized no determination has been made.

One of two public meetings on the transaction, required by a new state law, has been set for Saturday at Virgil Middle School, from 10 a.m. to 3 p.m. One gauge of the level of interest within the community and beyond is that every minute of speaking time has been booked.

Mahony’s legal position is that his approval is needed for the sale. His moral stand is that in health care, profit-making and charity don’t mix.

“As health care becomes more and more viewed as a commodity to be sold for profit rather than as a public good, the basic values and principles which have maintained the integrity of health care delivery have become compromised,” he wrote last year in explaining his position.

But Tenet officials argue that there is no inherent contradiction between community service and for-profit status. The chain now operates four other Catholic hospitals, some of which serve low-income and inner-city neighborhoods, not counting the recent St. Louis acquisition.

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According to Tenet spokesman Harry Anderson, for-profit organizations are hardly gobbling up the health care industry. Though Tenet owns and operates 124 hospitals in 18 states, nonprofit chains have taken over many more stand-alone hospitals than for-profit firms, he said. And, as the St. Louis case illustrates, there is room for disagreement, even within the Catholic Church, about whether charity and profit-seeking are compatible.

The Catholic president of St. Louis University Hospital endorsed its sale to Tenet despite opposition by the archbishop and other cardinals in that region. This week, the Vatican gave its blessing to the $300-million transaction, which will be final today.

In Omaha, Creighton University officials, who have co-owned a Catholic teaching hospital with Tenet since 1995, sing the company’s praises. “Our experience here in Omaha is one of strong compatibility with the Catholic Church and Catholic education,” said Richard O’Brien, vice president of health care sciences. “It has quite a few advantages [such as] very astute managers. They know how to keep functions pretty lean” without cutting essential services.

But opponents are unsatisfied with Tenet’s vow to continue funding $15 million of charity care a year at the hospital. That figure, they fear, is low and does not allow for increases.

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Goldberg, Galloway-Gilliam and other consumer advocates contend that Tenet left itself some loopholes in the contract that would allow it to drop emergency and obstetrical services after five years or if government payments drop. Both services are in high demand; Queen of Angels delivers 6,000 babies a year. The nearest alternative, for many indigent residents, is seven miles away at L.A. County-USC Medical Center, which is downsizing.

Anderson said Tenet considers its pledges in the areas of emergency care and obstetrics to be “guarantees, not limits.” He said the company, too, considers those services vital and has no intention of axing them. Without a sale, he asked, what guarantee could the hospital offer now that any of its key services will endure?

As for hospital charity care, Anderson said $15 million is “a floor,” the minimum that will be provided. In addition, he noted that in keeping with the laws governing nonprofit conversions, the $100 million in sales proceeds and other funds will be transferred to the former hospital’s nonprofit foundation and used to support a network of clinics and community-based services.

Some community members argued that an independent foundation ought to be established, with no ties to the former hospital or its board.