U of L Hospital merger again rejected, Beshear not satisfied

Print
Email
|

by Joe Arnold

WHAS11.com

Posted on January 9, 2012 at 12:26 PM

Updated Monday, Jan 9 at 10:28 PM

(WHAS11) After a "careful" evaluation, Governor Steve Beshear has again rejected a proposed merger involving University of Louisville Hospital. 

The decision came ten days after the governor said that the risks to the public outweighed the potential benefits of the proposed merger with Jewish Hospital & St. Mary's HealthCare in Louisville and St. Joseph Health System in Lexington, a part of Denver-based Catholic Health Initiatives.

For several days, U of L officials had been negotiating with the governor and Attorney General Jack Conway to craft a deal Beshear could accept.

"They came to us and the Attorney General and I took a look at it - took a very hard look at it," Beshear told WHAS11.

But, University of Louisville Healthcare officials were ultimately unable to satisfy Beshear's concerns that the merger would lead to the state losing control over a public asset.

"There is no question that in my mind and the attorney general's mind that University Hospital is a public asset," Beshear reiterated on Monday, "And we need to make sure that the public continues to receive the services that they get now and that control of that asset remains either in the public's hands or is easy to get back if things change and go wrong."

"We just had a lot of concerns about the deal from those perspectives," Beshear said.

University of Louisville Hospital President & CEO Jim Taylor said he was shocked and dismayed by Beshear's decision, and that the governor had pushed them away from the negotiating table.

"I think the governor in the way in which he went about this with no conversation with us, no negotiation over a period of time, I think he sent a very clear message that he is not going to approve this merger," Taylor said.

In a letter to university supporters and alumni Monday night, U of L President James Ramsey said he was "extremely disappointed" in Beshear's decision after what university representatives thought was a positive conversation with the governor last week.

And, Ramsey said Beshear's reluctance to approve the merger was a recent development.

"We began our in depth merger conversations with the governor 18 months ago," Ramsey says in the letter.  "He has never expressed any concerns to us about the governance structure of the proposed merged entity."

"So, we look forward to hearing a proposal from the Governor’s office that will make good on his promise to help University of Louisville Hospital | James Graham Brown Cancer Center remain, in his words, on 'strong financial footing.'" Ramsey wrote.

Ramsey repeated earlier warnings that - without the merger or more money from the state - the hospital would be forced to cut services and support for the Medical School in the coming months.

Beshear,  however, said the hospital appears to be in good shape.

"You know, the University Hospital is a valuable asset," Beshear told WHAS11's Joe Arnold, "I think I saw where last year they had a $13 million profit.  So it looks like they are being run well.  I think there will be a lot of options out there for the University Hospital."

On Friday, Jewish Hospital & St. Mary's HealthCare in Louisville and St. Joseph Health System in Lexington moved forward with their portion of the merger, without U of L.

"The Attorney General and I are committed to working with them to explore whatever options may be out there," Beshear said, "whether it be with the current merger partners or whether it's with some other entities that might be interested in exploring different kinds of partnerships with University."

Given his firm rejections, Beshear was asked if University Healthcare should have pursued the merger in the first place or should have better perceived the potential concerns.

"I think that the University and the other merger partners proceeded in good faith," Beshear responded.  "They worked hard.  This is a very complicated deal that they worked through and I think they tried their best to address these things."

Jim Taylor, CEO of University Hospital / James Graham Brown Cancer Center, was expected to address the media with reaction to the governor's decision.

The proposed merger had been met with an aggressive opposition campaign led by the Louisville Courier-Journal editorial page, a grassroots effort and several well-connected citizens who commissioned a poll on the issue.

“I am proud of the Governor’s decision," said writer and historian Emily Bingham, speaking on behalf of the community activists. 

"Following the insistence of the merging parties that he reconsider his decision, Governor Beshear has reaffirmed his conclusion that any union of a public asset like University Hospital should not proceed under the constitutional cloud created by the proposed deal," Bingham said in a statement.  "University Hospital has a mission critical to Kentucky taxpayers and the medically underserved and with the support and guidance of state officials, it must now move forward transparently to secure its future consistent with its status as a public entity.”


Letter from U of L President James Ramsey:

 

 

 

From the desk of Jim Ramsey

 
Hospital Merger Update

January 9, 2012 Dear friends,

We are extremely disappointed that Governor Beshear has again refused to approve a hospital merger that would stabilize the financial condition of University Hospital, expand the teaching and research opportunities in our Medical School and, most importantly, provide better health care opportunities for the people of Kentucky.

In a meeting last week with the governor, hospital and university leaders presented two alternatives to the original merger plan and had, what we believed to be, a positive conversation with the Governor and other state officials. Those alternatives were:

1. A revised merger structure to allow the University of Louisville to maintain its existing level of control over University Hospital.
2. A listing of annual and one-time funding required to keep University of Louisville Hospital up-to-date and compliant with federal standards. This funding includes:
· $50 million annually to meet viable financial status, cover incremental operating cost of federally mandated IT upgrades, cover lost revenue from Passport changes, and cover debt service increases not offset by new revenues
· $350-$500 million in state bonded capital for facilities expansion, IT capital investment, and catch-up

As part of the merger, University Medical Center stood to benefit enormously by becoming part of a robust statewide health care system that would have provided expanded access to clinical volumes for teaching and clinical trials, and the UofL Health Sciences Center would have received an infusion of $200 million to invest in new programs, technologies, clinical and translational research, and new jobs through faculty and staff recruitment.

As a small, stand-alone, inner-city hospital with a payor mix that includes 20-25 percent indigent care, University Hospital is unable to generate adequate capital from operations and is not a favorable lending risk. As an independent consultant hired by the Jefferson County Attorney wrote about the downside of University Hospital remaining independent and not merging: “If this were to occur to the University of Louisville Hospital, the financial consequences would be dire. Local taxpayers would be asked to make up for the losses incurred as good-paying patients migrate to other hospitals in established systems. There is no guarantee that the hospital will go down this path, but the possibility is too real to ignore. The formation of CHI-Kentucky takes the University of Louisville Hospital down a different path and likely prevents this financial catastrophe.”

Without state funding and state backing for borrowing, reduction in clinical services and support for the UofL School of Medicine will occur in the coming months. The hospital’s governing body will necessarily be considering the required reductions soon, working to minimize their effect on our most vulnerable patients.

We began our in depth merger conversations with the governor 18 months ago. He has never expressed any concerns to us about the governance structure of the proposed merged entity.

So, we look forward to hearing a proposal from the Governor’s office that will make good on his promise to help University of Louisville Hospital | James Graham Brown Cancer Center remain, in his words, on “strong financial footing.”

Follow me on Facebook.

Jim Ramsey Signature

 

Print
Email
|