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As noted in last month's letter, we are an industry undergoing great change. Catholic Health East faces some of the same challenges faced by other health systems, large and small, throughout the nation—increasing competition, an explosion in the cost and complexity of technology, the imperative to enhance quality and patient safety, and the growth of our nation's uninsured and underinsured populations. These factors will affect our long-term ability to meet the health care needs of our communities, especially those of our most vulnerable citizens: the poor and underserved. The uncertainty and critical challenges faced by all members of our ministry, while daunting, are far from insurmountable. So many of you and your colleagues worked together last year to help develop CHE's Vision 2017, our desired health care delivery model designed to meet the challenges of the future. At the System level, we are committed to continue to assess opportunities for standardization and centralization to improve the efficiency and effectiveness of our services. At the national level, the pressures of the health care environment have resulted in an accelerated volume of mergers and closures. Between 1994 and 2004, the total number of acute care hospitals in the United States dropped 10% (to just over 5,700), while the number of acute care beds declined by about 18%, to 956,000. For Catholic hospitals, the period 1990-2003 witnessed a small growth in the number of hospitals (from 535 to 569), but a 40% decline in the number of Catholic systems (from 74 to 44) during this time period. In addition, between 1990 and 2001, there were 171 mergers between Catholic and secular hospitals. What has propelled the increased merging of Catholic systems? According to a recent study, much of the growth in co-sponsored Catholic systems during the 1990's was a function of hospital location and geography; this resulted in the assemblage of a diverse set of hospitals and communities that offered diversification, but most did not create regional operating synergies. Some of the past decade's merger activity represents the reconfiguration of systems based on congregational culture, values, and deliberate business strategies. With this landscape as a background, CHE formed a System Future Task Force earlier this year, charged with assessing CHE's performance as a system, its strengths and challenges, and recommending the best strategy for the future of our health care ministry. With the assistance of Navigant, and the input of board members, Sponsors, and RHC and System Office leaders, this Task Force conducted interviews and researched and analyzed a great deal of data. One of the key findings of the Task Force is that, while CHE can be justifiably proud of its many accomplishments—including strong historical performance on key metrics such as quality improvement and patient/resident satisfaction—the System has not performed as well on financial measures as other Catholic health systems. Why? Much of this is attributed to our comparatively decentralized operating model, and a portfolio that is weighted too heavily towards acute care hospitals located in challenged markets. What does this mean for the future? The Task Force concluded that continuation of the "status quo" will not allow CHE to continue to fulfill its Mission. Our financial challenges will, over time, diminish our collective ability to serve the poor…and will increasingly limit our ability to strengthen the role and identity of our Catholic health ministry. Change is needed, and the time is now. But what will be the most successful recipe for change? The Task Force considered several scenarios, including pursuing our current strategic direction, building a larger system, obtaining a new CHE co-sponsor, joining a larger Catholic health system, transforming into a different type of system, or a combination of scenarios. After a great deal of consideration, the Task Force recommended that CHE pursue a single strategy with two concurrent paths: A & B. Path "A" represents the active pursuit of CHE's current strategic plan, and "B" calls for exploratory/collaborative discussions with other Catholic health systems. Both paths are consistent with our 2017 Goals and Strategies. Path A—the active pursuit of CHE's current strategic plan—requires our continued, accelerated direction towards systemness, standardization and centralization—where there is value. It also necessitates the continued, focused implementation of each RHC's ministry assessment outcomes, and calls for CHE to pursue growth opportunities in four key ways: networking locally to develop local scale and leverage; growing existing services; developing new services in existing markets; and stepping into new markets. Path A recognizes the fact that we cannot succeed as a System unless we accelerate the pace of change throughout the System. Path B—the initiation of exploratory/collaborative discussions with other Catholic health systems—is in a sense not a "new" strategy. In the past, CHE has had occasion to talk with other systems on related issues. Indeed, CHE's Vision 2017 includes goals to "…pursue growth opportunities by developing collaborative relationships…" and "… (to) enhance the Catholic health care ministry by system-to-system partnerships and/or merger when there is cultural and values alignment." Path B, simply put, represents the development of an action plan for these goals. Our focus is to carefully review and evaluate potential collaborative partners ahead of time, ensuring that those we talk to are "culturally consistent" with CHE, would complement or enhance our System, would enhance our local ministries, and would add value to CHE. Where are we in this process? CHE's Board of Directors, as well as RHC board chairs and CEO's, endorsed this approach in late September. Our next steps, firmly in the hands of each RHC, require each RHC to finalize their Long Range Strategic and Financial Plans, achieve their 2007 goals, and implement their ministry assessment recommendations. Concurrently, discussions with other systems will be initiated. For the entire health care industry, this is indeed a time of challenge and change. The one constant through all of this…is the energy and devotion of our Board members, Sponsors, and colleagues. I thank all of you for your hard work and commitment to being a transforming, healing presence in the communities we serve. As the CHE family works together to best meet these challenges, I am committed to being open with our goals, our strategies, and our progress. Stay tuned!
Sincerely yours,
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