Healthcare Business News
Kentucky Governor Steve Beshear

University of Louisville Hospital announces JOA with KentuckyOne Health

By Ashok Selvam
Posted: November 14, 2012 - 4:30 pm ET

(Updated with comment from Archdiocese of Louisville at 4:30 p.m. ET.)

University of Louisville Hospital announced another proposal to partner with KentuckyOne Health, this time through a joint-operating agreement with the system formed last year through the merger of two organizations affiliated with Catholic Health Initiatives.

After several rejections over the past year, Kentucky Gov. Steve Beshear and the deal's partners said at a Wednesday news conference that this plan satisfies critics and that the partners signed the proposal.

The joint-operating agreement cedes day-to-day operations of the hospital to KentuckyOne. However, operation of the hospital's Center for Women and Infants would remain with University of Louisville Hospital. There's no transfer of assets, and the agreement will go into effect before March 1.

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The current hospital's board will remain intact and managerial control will stay local. Hospital President and CEO Jim Taylor and KentuckyOne CEO Ruth Brinkley will be in charge of how the money invested by KentuckyOne would be spent, Taylor said. KentuckyOne plans on investing $543.5 million in the hospital over the first five years of the agreement, and that figure could increase to $1.4 billion over 20 years. Brinkley said the size and scope of the deal positions KentuckyOne as the only system in the state that “can truly address population health management in a meaningful way.”

KentuckyOne initially planned to include University of Louisville Hospital, but Beshear and other state officials rejected the $620 million merger last year and cited problems with turning over a state-funded asset to a private company headquartered outside of Kentucky. Other critics grew concerned about the hospital having to follow Catholic ethical and religious directives that would eliminate reproductive services. Under the joint-operating agreement, officials said the availability of reproductive services would remain the same, as the hospital, not CHI, would continue to operate the Center for Women and Infants. Additionally, $15 million would go toward center renovations. Last year's proposal would have bused University of Louisville Hospital patients who wanted abortions and other services to other affiliated facilities.

KentuckyOne formed when Jewish Hospital & St. Mary's HealthCare, Louisville, merged with St. Joseph Health System, Lexington, Ky., in a $320 million deal.

“No one's going to be shuttled, and everyone is going to receive the same care in this community,” Kentucky Attorney General Jack Conway said. “It means the process worked.”

Conway last year said the deal wasn't in the best interest in the state, echoing Beshear's concerns. He also scrutinized the policies in place for unwinding the proposed deal, saying the state needed more protections. The revised proposal addresses those concerns, Conway said. He and Beshear said hospital officials listened and learned from past criticism.

Hospital officials maintained after the governor's rejection that as a safety net facility, they needed an investment partner or else the hospital faced deep service cuts. They conducted another search for a partner and received two bids—from KentuckyOne and from Health Management Associates in Naples, Fla., said Dr. David Dunn, the hospital executive vice president for health affairs. He added that influx of money will be of crucial help to the hospital's academic side.

“This likely will become immediately a model that is viewed on the national stage as something that other people will want to embark on,” Dunn said.

The request for proposals and bid consideration faced large opposition locally with complaints that the process wasn't transparent enough. Conway and Beshear said additional transparency measures were put into the agreement, but not at the expense of sharing sensitive information with the public that could have compromised the competitive-bidding process.

“Neither the attorney general nor I viewed our role in this process as one to tell the University of Louisville what their best deal was,” Beshear said. “That is a business decision that the University of Louisville and the medical center and its partner have made collaboratively. Our role was to make sure whatever deal they proposed to accept met the concern that both the attorney general and I, and the general public, raised over the last years as we originally went through this process.”

The Archdiocese of Louisville released a statement saying that “there does not appear to be moral roadblocks to continuing recognition of KentuckyOne Health by the church.” Louisville Archbishop Joseph Kurtz has the option of officially recognizing KentuckyOne as a Catholic health system. The church wasn't involved in developing the new agreement.

“We are hopeful that this effort will benefit patients through improved care, better access, lower cost, and a commitment to care for the poor and marginalized,” the archdiocese's statement read.

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