If it's good enough for buying bandages, it's good enough for managing money.
That is the approach that some Catholic health care systems are taking in the management of their pension funds.
Catholic health care systems, which often are made up of individual hospitals in different states and regions, sought to achieve economies of scale by forming a network to purchase supplies, said Michael Footer, principal in the Richmond, Va., office of William M. Mercer Inc.
They now are extending that philosophy to include their pension funds.
"When you come together as a health system, you gain economies of scale for purchasing," said Jerry Widman, chief financial officer for The Daughters of Charity National Health System, St. Louis.
"Then you say, 'we can apply this to other areas,' " said Mr. Widman. "It (consolidating pension funds) puts on the list things that heretofore were considered difficult to do."
Individual Catholic hospitals increasingly have joined health systems in the past 10 years, said David Smith, vice president of human resources with The Daughters of Charity.
"As they do it, they are combining pension plans," said Mr. Smith.
There are no accurate numbers on the level of mergers and acquisitions between Catholic hospitals and Catholic health systems, but several industry watchers confirm that it is an active segment within the not-for-profit hospital universe.
Overall, Catholic systems control 509 hospitals, according to Modern Healthcare's 1998 Multi-unit Providers Survey. For-profit companies control 879 hospitals, a 6% increase from 1997.
"They (Catholic health care systems) may include five, 10, or 50 hospitals over a multistate area," said Mr. Footer. "Each may have had a relationship with an order, but each had its own board and controlled its own destiny."
The religious orders gradually have gained influence over the operations of the different hospitals, and while they don't mandate pension plan uniformity without the individual hospital board's approval, it has occurred more frequently, according to Mr. Footer.
Providence Services, Spokane, Wash., would like to consolidate the pension plans of 16 of the 25 health care entities that comprise its system, said Fran Burkhart, benefits manager.
Nine of Providence's health care companies will come under one defined benefit plan at the beginning of the year. That plan will have about $115 million in assets covering 5,500 participants.
Providence recently converted nine tax-deferred annuity plans to a cash balance plan; the company also will offer a match in its 403(b) plan, said Bill Fisher, vice president-finance.
"The thinking is we would like to do something like it (systemwide)," said Mr. Burkhart. "There is a cost-savings element, if you can being everyone under one umbrella.
"It gives economies of scale," he said. "It's hard to control benefits with so many different plans.
"It makes administration easier."
History shows, however, that implementation is difficult.
The Daughters of Charity undertook a consolidation of pension plans for its 40 different health care entities about 13 years ago, said Mr. Smith. The system's hospitals are located in the Midwest and eastern United States.
"We were probably the first major Catholic hospital system to do it when we formed our own system," he said.
Economies of scale of a different sort was the motivation for the consolidation, according to Mr. Smith.
"The tax relief act of 1986 was going to cause changes in all the pensions in hospitals sponsored by the Daughters of Charity," said Mr. Smith, who oversaw the consolidation. "That gave us the impetus to do it once instead of for 40 plans.
"It was very complex and took a long time," he said. "We concluded it in about 14 months."
Mr. Widman declined to reveal the total assets of the Daughters of Charity plan.
Providence's consolidation promises to be as complex, should it and the affiliate health organizations decide to take the plunge.
"The first thing we have to get them to do is to buy into the defined benefit concept," said Mr. Burkhart.
By converting the tax-deferred annuity plan to cash balance and offering a 403(b), Mr. Fisher hopes to "narrow the gap" between the defined benefit plan and the defined contribution plans that the affiliate institutions have.
"Hopefully, they will take a look at it in the future," said Mr. Fisher. "We won't force it."
