(WHAS11) --Three Kentucky hospital systems plan to merge within the next year in a move that reflects the changing realities of the U.S. health care system.
The plan was revealed when the University of Louisville Boardof Trustees voted on Thursday to allow President James Ramsey to sign a letter of intent with Jewish Hospital & St. Mary's HealthCare and Catholic Health Initiatives (CHI). The Denver based CHIis already part owner of the Jewish Hospital system. Its eight Kentucky 'St. Joseph' hospitals and a $300 million capital investment are its contribution to the deal.
'What's contemplated is a single organization,' said St. Joseph executive Gene Woods, 'One board and one leadership structure.'
Woods says the existing hospital boards would be dissolved. The university estimated the new entity wouldhave more then 3,000 physicians throughout Kentucky at more than 90 locations. Thecombined revenue of the three systems is approximately$2 billion.
'Yes, this is a financial transaction,' University President James Ramsey told the board, 'but more than that this is a transaction to improve the quality of health care to the people of our community and our state.'
U of L says the merger of the three health systems would provide health care access to more than 2 million citizens and would expand to virtaully all 120 Kentucky counties. The university pointed to severalfactorsto justify the expansion and merger plan, notably thathalfof the state is medically underserved and that there is ascarcity of physicians throughout the state.
With health care reform being implemented and scrutinize, the merger comes at an uncertain time for health care -- and in a tough environment for hospital corporations.
'We've spent the last several years improving the organization, making it stronger,' saidJanice James, Jewish Hospital interimCEO, 'and this partnership will allow us to expand research and other care to the citizens of Kentucky with partners that we already had a strong relationship with over the years.'
In a presentation to the Trustees, financial advisor Mark Carter explained that U of L has found it difficult to accumulate funds for its Medical Center to grow and toincrease its debt capacity.The cash flow generated by University Medical Center operations is 'constricted,' according to an analysis for the university. Without the merger, U of L came to the conclusion it did not have the money to fulfill its goals
'How much liquid cash is on our balance sheet?' explained Carter,'And in both these cases, these have been challenges for University Medical Center.'
Denver based Catholic Health Initiatives, however, has ready cash aspart of themerger.
'As part of this transaction, we'll be bringing in an additional $300 million into this Commonwealth,' saidPaul Edgett, CHI Sr. Vice-President, 'and we believe that that will be a good starting point to launch this statewide network and to be able to provide the resources necessary to prepare for the future.'
Edgett says the capital infusion would apply across the newly formed system and not just to the current hospitals owned and operated by CHIin Kentucky. Only CHI's Kentucky hospitals and not other facilities it owns in 19 other states are involved in the merger. Edgett added that all CHIhospitals could benefit from an affiliation with the university.
The merger would bring together hospital systems with disparate origins and missions.
'Due diligence and making sure we understand each other's organizations thoroughly,' said Paul Edgett, Senior Vice-President of Catholic Health Initiatives, 'We'll be doing integration planning and how to combine each others organizations for efficiency and effectiveness. And then we'll be doing cultural assessmens, mission assessments to make sure thatas effectively capitilaze on the strengths of allthe organizations. Those are all parallel workstreams that we'll be doing over the next six to twelve months.'
With Roman Catholic teaching potentially in conflict with research and reproductive health practices of the University of Louisville, the letter of intent and eventual agreement will require careful wording. Endorsing the merger plan before the University of Louisville Board of Trustees, U of L Medical School Dean Dr. Edward Halperin said 'the problem is not a problem.'
'There are Catholic teaching hospitals,' echoed University Hospital CEO Jim Taylor, 'There are other organizations that have merged with Catholic hospitals or Catholic systems and they have found ways to make sure that women's services that are needed are available to women.'
Taylor noted that abortions are not performed at the University of Louisville Medical Center.
The university did not release the letter of intent approved by the board.
