A $100 million financing deal between Caritas Christi Health Care and Ascension Health of St. Louis is on hold, leaving the hospital chain without needed capital at a time when the economy is slumping badly.
At the same time, Caritas Christi, the state's second-largest hospital system, plans to lay off about 160 workers - 1.2 percent of it workforce of 13,000 - to cut expenses.
The two moves make a financial turnaround for the Archdiocese of Boston's six-hospital chain more challenging for chief executive Ralph de la Torre, who took over in May.
Just six weeks ago, Caritas Christi unveiled Ascension's planned investment as an innovative financing solution that would strengthen the ties between the two Catholic healthcare organizations. Yesterday, Brian Carty, Caritas Christi's chief marketing officer, said Ascension never planned to invest directly in the Boston chain. Instead, it wanted to merely participate in a larger public bond offering, buying $100 million of the notes, according to Carty.
But with credit markets frozen because of the nation's ongoing economic crisis, Caritas Christi is unable to sell bonds, Carty said. That also rules out Ascension's participation.
"The bond markets are closed," said Carty, particularly for those with less than stellar credit.
In an Oct. 24 report, the bond rating agency Standard & Poor's said Caritas Christi planned to sell $100 million in bonds directly to Ascension. If that was the original plan, it could indicate that Ascension has now lost faith in Caritas Christi and decided against the investment.
An Ascension spokeswoman declined to comment on the financing arrangement.
Caritas Christi had earlier sought to be acquired by Ascension, the largest Catholic healthcare chain in the United States. That deal fell through, as did a tentative one with another Catholic healthcare system. Caritas Christi later decided to continue operating on its own.
In October, de la Torre said the $100 million would enable the chain to upgrade outdated facilities, including operating rooms at St. Anne's Hospital in Fall River and the emergency departments at Good Samaritan Medical Center in Brockton, Caritas Holy Family Hospital in Methuen, and the chain's flagship, St. Elizabeth's Medical Center in Boston.
It is unclear whether all of those projects will move forward now. Construction on St. Elizabeth's emergency department upgrade is already underway.
Marc Bard, a hospital consultant who has advised Caritas Christi on other matters, said the chain is being hurt by the broader economic downturn.
"Elective surgery is down across America, and the fixed costs in hospitals remain the same," said Bard. "The number of uninsured is up across America and the fixed costs remain. Most hospitals find themselves in a relatively overstaffed position.
"This is not mismanagement, or a sign of weakness at Caritas, this is just the world as we know it today," he added.
Carty said the 160 layoffs would affect employees at all levels within the chain.
"We're going to try to make this as equitable as possible," he said.
In the Oct. 24 report, S&P said "earnings need to improve" at Caritas Christi. For the fiscal year ended Sept. 30, the agency projected a loss of between $20 million and $25 million for Caritas.
One-time charges such as severance pay, closing doctors' offices, and write-offs of unused property are expected to turn a modest operating profit into a loss.
De la Torre has said he wants to keep all six Caritas Christi hospitals operating as full-service community hospitals, including Carney Hospital in Dorchester.
The system has sought to clamp down on referrals to caregivers outside of the Caritas Christi chain, to maximize revenue generated by each patient.
Jeffrey Krasner can be reached at firstname.lastname@example.org.