Archdiocese of Philadelphia sells nursing homes for $145 million
The Archdiocese of Philadelphia has signed an agreement of sale valued at $145 million for six nursing homes and one assisted living facility operated by archdiocesan Catholic Health Care Services to Center Management Group, it was announced today, July 1.
CMG is a Flushing, N.Y.-based for-profit health care management company that already owns and operates 15 nursing homes in New York and New Jersey. Under the agreement, CMG pledged to maintain the Catholic character of the nursing homes.
Skilled nursing facilities included in the agreement are Immaculate Mary Home and St. John Neumann Home, Northeast Philadelphia; St. Monica Manor, South Philadelphia; St. Francis Country House, Darby; St. Martha Manor, Downingtown and St. Mary Manor, a senior living community with skilled nursing care and assisted and independent living units located in Lansdale.
Also included is Villa St. Martha, a senior living community with assisted and independent living units in Downingtown.
In total, facilities operated by Catholic Health Care Services have approximately 1,400 beds which are included in this agreement of sale. It does not include Villa St. Joseph, Darby, a residence for retired priests or St. John Vianney Center, Downingtown, a behavioral treatment and education center for priests and religious, or some independent living facilities in the archdiocese that will be retained.
It also does not affect nursing facilities owned and operated by religious congregations, but only those directly owned by the archdiocese.
Under terms of the agreement, approximately 1,100 full-time and 950 part-time nursing home staff members will become employees of CMG at their current rate of pay when the agreement closes, the date for which has not been set. They will receive health benefits under CMG’s health care plans, and current employee eligibility, accrual and vesting plans, vacation and sick time will carry over along with any unused sick, holiday, vacation and personal time that has been earned but not used prior to the closing.
As a condition of the sale Center Management Group has agreed to retain all residents living in the facilities at the closing date regardless of their Medicare, Medicaid, private or commercial pay status.
Under a stewardship agreement with the archdiocese, CMG will operate each facility in accordance with the moral, ethical and social teachings of the Catholic Church as expressed in the “Ethical and Religious Directives for Catholic Health Care.”
CMG will maintain the pastoral presence of Catholic priests and chaplains at each facility at their expense along with a pastoral care department. Existing chapels and places of worship along with signs and symbols of Catholic identity will be maintained, and Mass and the sacraments are required to be maintained regularly at each facility.
Also, an advisory board will be established and maintain responsibility for advising Center Management Group and the management of each facility on issues of Catholic identity as they relate to nursing homes.
The sale of the nursing homes, which were placed on the market last August, is part of the ongoing effort to address the very serious financial problems that were allowed to build up for decades to the point that they jeopardized the ability of the archdiocese to cover employee and priest pensions as well as the deposits by the parishes into the archdiocesan-operated Trust and Loan Fund.
The $145 million sale price for the nursing homes will be decreased by certain obligations under the terms of the agreement. Coupled with the initial payment of $53 million for the long-term lease of the archdiocesan cemeteries, both deals will go a long way toward easing the financial crisis.
“This agreement will serve the archdiocese and its people well by ensuring the nursing homes presently operated by Catholic Health Care Services will continue to be dignified centers of care for the elderly in the Catholic tradition and in accord with the moral and ethical teachings of the church,” Archbishop Charles J. Chaput said in a statement. “I did not arrive at this decision lightly. It came only after a great deal of consultation, discussion and prayer.
“Center Management Group has a great deal of experience in operating nursing homes and they’ve guaranteed the conditions I set forth some time ago in terms of fair treatment of current employees and residents. Center Management Group was selected from a group of nearly 30 initial bidders in a competitive process that focused largely on the personal commitment of potential buyers to provide the highest possible quality of health care in a manner consistent with Catholic identity and moral teaching.”
Archbishop Chaput noted progress on the archdiocese’s financial issues. “We become a little more stable with each step we take,” he said. “We still have a way to go, but everything is being done so that we can best fulfill the church’s mission of evangelization and service to those in need.”
CMG already has some experience in operating former Catholic facilities in New York in acquired nursing homes and retaining Catholic identity even when not contractually required to do so.
“We are enthusiastic about the future and grateful for Archbishop Charles Chaput’s confidence in our ability,” said Charles-Edouard Gros, the CEO of Center Management Group, which he founded in 1999.
“We have the experience of maintaining Catholic presence in skilled nursing communities,” he said. “Part of Center Management is to service the residents and the staff and to give the residents what they need to live optimally and happily and part of that is that they are able to practice their religion appropriately and have the love and support associated with that. We are very excited to be working with the archdiocese to maintain the same level of religious conviction and religious ability as to the residents of the facilities.
Gros himself brings an interesting empathy to the task. After receiving his master’s degree in public health service management and policy with a concentration in gerontology from New York Medical College in 2001 he trained as an EMT/paramedic, emergency medicine at St. Vincent Catholic Medical Centers and still volunteers as a paramedic.
“I want to bring a high level of professionalism to the industry, coupled with my love for medicine,” he said. “I have also always loved hotels and another dream I had as a child was owning hotels. Even if I haven’t owned hotels, I’ve taken that philosophy of hospitality and brought it to the nursing environment. We hope to bring that to the forefront coupled with the strong Catholic basis in the community. It will be a special and wonderful environment for the residents.”
Although the sale is generally expected to close before the end of the year, there are several conditions that must be met including Vatican approval for the sale, which has already been requested, and CMG’s obtaining the necessary licensing to operate the nursing homes. Both conditions are not expected to be problematic.
The $145 million sale price for the nursing homes will be reduced by residents’ accounts receivable, which was approximately $17 million at June 30, 2013; external bank debt of approximately $8.3 million incurred for renovation and redesign of St. Monica Manor; set asides for continuing archdiocesan CHCS ministries; post-closing risks and closing costs, according to archdiocesan Chief Financial Officer Timothy O’Shaughnessy.
The net funds will be available to apply against “underfunded balance sheet liabilities” and should be “in the range of $95 million,” he estimates.
These underfunded liabilities include the Trust and Loan Fund, which primarily receives deposits from parishes and makes loans to them; the Self-Insurance Reserve, the Priests’ Pension Fund and the Lay Employees Retirement Fund.
The total of these liabilities has already been reduced to approximately $290 million from $340 million as a result of the recently completed Catholic cemeteries transaction with StoneMor Partners.
At the same time the archdiocese has been addressing its annual operating deficit which stood at $39.2 million in the fiscal year ending June 2012 and is currently estimated at $4 million to $5 million. All of this has been accomplished by such measures as the long-term lease of the Catholic cemeteries, the sale of the archbishop’s residence and the summer home in Ventnor, N.J., and a 25 percent decrease in personnel at the Archdiocesan Pastoral Center.
Further funds can be raised through the sale of other archdiocesan properties that are also on the market, O’Shaughnessy said.
“Unfortunately, problems of this magnitude require solutions of equal magnitude,” he said. “They are painful decisions. Nobody wanted to do this. The archbishop has been clear — we are going to fix our financial problems.”
Lou Baldwin is a freelance writer in Philadelphia.