Financially troubled St. Joseph Medical Center ended its search for a new owner Friday, announcing that it has entered an agreement to become part of the rapidly expanding University of Maryland Medical System.
The announcement was greeted with cheers at the Towson hospital, said Dr. Paul McAfee, head of spinal surgery.
"If the doctors in the operating room and emergency room had flowers, they would have thrown them," he said, adding that UMMS plans to upgrade the facilities and turn the hospital into a major surgery center.
St. Joseph, reeling from a scandal over unnecessary surgeries performed by one of its doctors, said in a statement Friday that parent company Catholic Health Initiatives had agreed to a recommendation from the St. Joseph board of directors to accept an offer from UMMS.
UMMS won the bidding competition over two other finalists, LifeBridge Health, which owns Sinai and Northwest hospitals, and Ascension Health, which owns St. Agnes Hospital in Baltimore.
St. Joseph did not disclose financial details of the transaction and said the hospitals are still working on a final contract, which could take months to hammer out. A St. Joseph's representative did not say why it chose UMMS over the other bidders and declined to speak further about the deal while talks continue.
The hospital said Catholic Health Initiatives, as well as federal, state and church authorities, still must approve a final plan.
Former state Sen. Francis X. Kelly, a UMMS board member who worked on negotiations with St. Joseph, said the Towson hospital has a respected staff that could be made even better with more resources.
"This is a game changer in health care in Maryland," Kelly said. "This is a tremendous opportunity for two great institutions to come together to really improve the quality of health care in this state."
St. Joseph sought bidders as it coped with complaints that its star cardiologist, Dr. Mark Midei, had placed stents in the arteries of hundreds of patients who may not have needed them. The hospital notified about 600 patients in 2009 who might have had the unnecessary surgeries.
Midei was forced to resign from the hospital, and the Maryland Board of Physicians revoked his state license, although he is fighting that decision.
But the fallout at the hospital has continued as its damaged reputation led to a decline in revenue and patient admissions. St. Joseph's patient net revenue fell from $361 million in fiscal 2009 to $299 million in fiscal 2011, which ended June 30, according to the Maryland Health Services Cost Review Commission, which sets hospital rates in the state. (Fiscal year 2011 numbers are unaudited.) Patient admissions, meanwhile, dropped from 35,486 in 2009 to 26,942 in 2011. Doctors and other staff voluntarily left the hospital for other opportunities, and 17 people were recently laid off.
The hospital and Catholic Health Initiatives also face millions of dollars in lawsuits from many of the former patients. Catholic Health Initiatives, not UMMS, would be responsible for the liabilities under the deal.
St. Joseph had also agreed to increased federal oversight after federal accusations of a kickback scheme that resulted in a $22 million settlement and repayment of funds for questionable procedures.
McAfee said he expects St. Joseph will be able to attract new doctors and other staff with Maryland at the helm. He said that the other bidders, particularly LifeBridge, would have been good partners but that he thought UMMS had the most resources.
Under the deal with UMMS, St. Joseph's Catholic identity and religious heritage will be maintained. It is unclear what that means, but typically UMMS allows its community hospitals to operate autonomously, and Kelly said the issue over religion shouldn't be a problem.
"All of the ethical standards of the church will be upheld," Kelly said. "That won't be a problem at all."
Cardinal Edwin O'Brien must approve the sale, and in rare instances the pope has stepped in and killed hospital deals. O'Brien has said he prefers that the buyer be a Catholic hospital.
"I was disappointed to learn of the decision to sell St. Joseph Medical Center to a non-Catholic ownership group given the high priority we place on maintaining the Catholic identity of our many institutions in the Archdiocese of Baltimore," he said in a statement. "The hospital and its staff of outstanding doctors, nurses, physicians and other healthcare workers, have a special connection to the Catholic community in the Archdiocese, as well as to countless others, and I pray these ties will not be severed by today's decision."
Reproductive health conflicts sometimes make mergers between Catholic and non-Catholic hospitals controversial but do not have to derail them. Baltimore has some examples of Catholic hospitals that have merged effectively with non-Catholic affiliates. Some adopted the Catholic practices, while others didn't.
Memorial Hospital of Cumberland joined with Sacred Heart Hospital in the 1990s but continued performing sterilizations and other reproductive services. Both hospitals were eventually torn down and replaced with one hospital: Western Maryland Regional Medical System, which does not follow Catholic doctrine.
When Liberty Medical Center in West Baltimore merged with Bon Secours Baltimore Health System in the 1990s, it adopted Catholic practices.
Columbia-based MedStar Health has three Catholic institutions in its nine-hospital system. The hospitals act independently, so religious-based hospitals follow Catholic doctrines and the other affiliates follow their own rules.
LifeBridge Health had sought a partnership with St. Joseph even though some of its hospitals are Jewish institutions. LifeBridge officials thought it would help the system expand geographically.
LifeBridge spokeswoman Jill Bloom wished UMMS luck Friday. "We put our best foot forward," Bloom said. "We put a lot of work into the deal, and we would have liked to have been the one who they chose. But we're still a very strong system."
St. Agnes was the only Catholic bidder.
"St. Agnes Hospital was honored to participate in this process," spokeswoman Kirstan Cecil said. "We are confident that University of Maryland Medical Center will provide excellent leadership during this transition while continuing to provide a high level of care to the patients of the Northern Baltimore area."
St. Joseph will join a system that has been rapidly expanding over the past decade, using its reputation and strong finances to lure smaller community hospitals. The aggressive expansion has enabled UMMS, which includes its medical school, to double in size to 12 hospitals in the past six years, expanding its reach to almost every corner of the state.
With operating revenue of $2.3 billion and 15,200 employees, the system owns more Maryland hospitals than any other entity. MedStar is the next largest, with six hospitals in Maryland and three in Washington, D.C.
Robert A. Chrencik, president and CEO of UMMS, told The Balltimore Sun in December that St. Joseph's financial situation was troubling but that his system had the "medical horsepower" to turn it around.
He said it would allow the University of Maryland to move into a part of the state where it doesn't have a presence. Many Maryland graduates practice at St. Joseph, and Chrencik said Maryland's strong cardiovascular, orthopedic and cancer practices would fill voids at St. Joseph.