If not, what then?
Surely the end-game of the years-long efforts of Catholic Health Initiatives and KentuckyOne Health to sell some or all of their hospitals in Louisville must be coming to a climax. Transferring management of University of Louisville Hospital to KentuckyOne– a move that turned out badly for both institutions– was always as much or more about saving Jewish than ULH. Many outside entities came to kick the tires of what KentuckyOne wanted to sell but walked off the lot. The last acknowledged potential buyer whose keys KentuckyOne was holding was the tag-team of the private equity firm Blue Mountain and its spinoff for-profit hospital management company, Integrity Healthcare– now majority-owned by for-profit Nantworks Companies and Nantworks owner Dr. Patrick Soon-Shiong. Sound complicated? It is! Casting a very dark curtain over this potential transaction in Louisville is last week’s announcement that Blue Mountain & Co.’s first and only attempt to take over a failing non-profit Catholic hospital chain in California has failed– the hospital system has filed for bankruptcy. These six Verity Hospitals (formerly the Daughters of Charity) might be bought by their communities, taken over by others, liquidated for their assets, or otherwise close. I cannot avoid concluding that the same result would occur in Louisville and for much the same reasons.
CHI has played this one very close to its corporate chest. Fanned by anxiety about the future, rumors have been flying in increasingly disparate and desperate directions ranging from “Blue Mountain” has taken a second look and will sign on soon; or Blue Mountain has walked away for good; or that Nantworks and Dr. Soon-Shiong will move forward with the deal without Blue Mountain; or that CHI will give Jewish to the University for a song; and even that one or both of the sister Jewish & Sts. Mary Hospitals will soon shut its doors. None of the potential players is in a strong place right now as I will outline below. The one thing I am sure of is that the ground under the downtown hospital complex is going to quake hard, and that secondary seismic activity will be felt out in the county and beyond. The Louisville Community is going to have to make some public health decisions that are both difficult and expensive.
From published reports in Modern Healthcare and other outlets, some of the active and potential deals of the players above seem to have been snake-bit. The partnership between KentuckyOne/CHI and the University of Louisville died outright, not without some venom. Jewish has been dwindling for some time now and its partnership/takeover by CHI several years ago did not turn it around. Services and doctors and patients have been drifting away. Until recently, Jewish Hospital was being kept afloat by operational profits from University Hospital made possible by Obamacared-Medicaid expansion. Jewish Hospital is now is largely dependent on Medicaid and Medicare patients– neither federal payer known for generous payment compared to privately insured patients. It is said that Jewish is losing $1 million weekly. I have no confirmation of the amount, but Financial reports from CHI confirm substantial operational losses. The prospect of such losses and $100+ millions in deferred maintenance surely must be sobering to potential saviors. The fact that KentuckyOne has already sold off its outpatient facilities, and that at least some of the land under its inpatient facilities is owned by the Commonwealth/University must certainly be complicating any ongoing negotiations. The history of the decline of this once Queen of Louisville hospitals will be told some day. For many of us it will be a sad story.
University of Louisville and its Hospital.
It is no state secret that under its recent and now discredited administration, the University of Louisville, and certainly its Medical School have been brought figuratively to their reputational and financial knees by accreditors, scandals, lawsuits, political interference, and more. Our newspapers are still full of the fallout of a disastrous decade. My faculty friends tell me of letters that have come down from on-high informing of a 20% cut to their budgets and instructions to off-load faculty who do not pull their own salary weight. I have not seen such letters, but It is fair to ask if we have arrived at the point of financial exigency that allows tenured faculty to be terminated. When asked, I understand that University officials have not ruled out this possibility. I am hearing that UofL in no longer in the loop of influence about what is going to happen. I hope that is not true.
The University of Louisville has been dependent on its clinical income to support much of its enterprise. The faculty have magnificent new outpatient facilities for both their adult and pediatric patients. Traditionally, faculty have used hospitals other than University for inpatient admissions for the majority their private patients, but this is slowly changing. Jewish Hospital has long been important to faculty practices but so also has been Norton Hospital across the street. Services such as cardiology and solid-organ transplantation are conducted almost entirely at Jewish. Nonetheless, the volume of admissions from University faculty were insufficient to keep Jewish afloat as that hospital exists now. To complicate matters, I am told that the faculty practice group itself has a substantial debt.
The University hospital that we were told needed an outside rescuer to stay open is doing pretty well now- thank you. Without Mother UofL itself drawing off profits and capital to support research and other University operations, and without having to support Jewish in the bargain, University Hospital is having a renaissance. (Nonetheless, surely a now-independent and surging University Hospital has to be worried by state and federal efforts to roll back health care reform. Its inpatient Medicaid occupancy is perhaps the highest in the Commonwealth let alone its service to the uninsured.) For the first time since I joined the University faculty in 1984, our hospital has an independent management that it does not have to subordinate its business, academic, or clinical ethic to the interests of outside organizations. I would argue that doing so in the past has led the University and Hospital to this difficult place.
Last month I attended an update given to faculty by University Hospital administration. I am optimistic. The hospital has the highest occupancy in the city and is seeking more beds. It is recovering hospital rooms that were being used for non-clinical purposes and looks to build a new wing. It is addressing its quality ratings, reliable or not, with commitment. In my experience however, and especially given the expansion of medical class sizes, it does not presently contain enough beds in either volume or diversity of diagnoses to support its teaching mission. I am concerned too about clinical teaching facility support at our Veterans Hospital from which patients are being diverted to private care, and whose very existence as a general hospital is under threat. Jewish Hospital has not, during my history there, had a formal teaching service in the sense of a ward or service in which students, interns, and residents run the show under the close supervision of an attending physician– as opposed to a tag-along-and-watch amanuensis arrangement. As will become apparent, I would like to see a new life for at least some of the more modern KentuckyOne facilities placed in the service of medical education with an implied or defined social covenant to care for those of our community excluded– for whatever reason– from its other medical institutions. For now, my faculty friends are pretty much in the dark and in in general assume the Blue Mountain deal has fallen through. In truth, the University does not have a strong hand to play with against any outside buyer right now.
Catholic Health Initiatives.
CHI itself has been struggling for better footing under its heavy load of debt and difficulty making an operational profit. Just as negotiations here in Louisville been sequentially delayed, so to has the discussion of an existential merger of CHI and Dignity Health– a Catholic hospital and healthcare system largely in the western half of the country. The cheerful optimism that surrounded the early phases of the negotiations has become somewhat more guarded and yet-another postponement seems to be happening. Financial and governance issues are probably part of the reason for delay, but surprisingly, so are religious ones! Unbeknownst to me and probably you is that a number of the hospitals in the Dignity system are not Catholic. The United States Conference of Catholic Bishops and the Vatican itself are apparently taking a harder look at how far they are willing to stretch their own religious ethic to do business with non-Catholic organizations. Good! The experience here in Louisville tells us that work-arounds for financial purposes can too easily be cast as hypocrisy and contribute to bringing the whole house down. (No birth control allowed? Just lie in the medical record and say the pills are for something else.Such work-arounds require ethic-busting enabling by healthcare professionals.) I have no firm opinion whether CHI is a viable organization (it might not be), but certainly it has a full plate and the present situation in Louisville is not helping. No doubt CHI would like to stop the hemorrhage of cash and get Jewish Hospital and some of other Louisville assets off its books. It has been trying to do so for years, not months. Even closing the hospital outright would be a rational decision.
The reports from California following the filing for bankruptcy are not very flattering to its new managers or for that matter to its private investor backers. Promises were made to California’s Attorney General before Blue Mountain was allowed to take over management with an option to buy. These included maintaining the same level of charity care, upgrading facilities, and staying open for 6 years. These things do not appear to have happened as promised. In California, the Attorney General has a good bit to say about if, when, and how a for-profit organization can take over a non-profit one. In Kentucky, the state has less control over a transaction’s result, although our Attorney General does have some power of approval over the disposition of charitable assets. Recall events when Anthem took over Blue Cross of Kentucky in the 1990’s. One of the results was the formation of the Foundation for a Health Kentucky. The Kentucky Legislature intervened with requirements for that conversion also. (Who can tell us how Blue Mountain expected to get any money for its investors from a takeover? Management fees are there of course, and business can be off-loaded to affiliated partners, but how can you get blood out of a stone?) I do not know if closing the doors of Jewish Hospital is under active consideration as some attest, but the players are not doing their due diligence if they are not clear about what that process would entail. For example, in Kentucky, labor law says that a hospital of the size of Jewish has to give employees and government 60-days notice before closing. KentuckyOne has an Academic Affiliation Agreement (i.e. contract) with UofL that promises $millions through December of this year. I am unclear about what would happen to Jewish Hospital’s Certificates of Need for its acute care hospital or specialty services like transplant or cardiology should it sell, close, or merely shut its doors to patients as some fear. According to MergerWatch, Kentucky does not require Certificate of Need review when an acute care hospital closes or merges, even when important or essential services may be lost to the community. (Public hearings anyone?)
What will happen if Jewish Hospital collapses.
Jewish has been and is handling its share of care of Medicaid beneficiaries and those individuals unable for whatever reason to participate in our employment-based healthcare system. Even some Medicare patients are reportedly having trouble finding a willing provider and medical home. The remaining downtown hospitals (University and Norton) will be swamped if not overwhelmed. Sharing with the outlying hospitals is not likely sufficient to take up much if any of the load. University Hospital is already full. Without a landing pad for transplant, rehab, cardiology, and other specialty services historically housed at Jewish, the University will lose access to those teaching services. (The heart transplant program seems to be dwindling to nothingness in any event. Only 7 of the 105 adult heart transplant programs did fewer than Jewish in 2017). The historic separate but unequal systems of medical care will be perpetuated further. Accreditation issues will threaten UofL again and at least some will ask the old question of whether we really need two state medical schools in Kentucky. Private for-profit organizations may bid for specialty services like Frazier Rehab or cardiology (Cleveland Clinic?) and cherry-pick or otherwise not play well with existing medical entities. Assets may be liquidated for non-medical purposes. On the other hand, maybe there really are too many beds in downtown Louisville anyway and closing Jewish is simply biting the bullet for the pain of something that should have been done before. Perhaps CHI will want to keep at least one Catholic hospital presence in Louisville and keep Sts. Mary & Elizabeth open. Our Lady of Peace gets at least some good state contracts and has entered with a splash the potentially lucrative business of addiction medicine.
I assert that all of us should be thinking about what our medical needs and landscape need to be in the future. I am quoted as saying that what will happen soon to medical care and education in Louisville is likely to colossal or even catastrophic. I still believe that. Colossal is not necessarily bad however. Lots more can be said here, but this is long enough as a first effort following my sabbatical from writing in this series. Professional investigative reporters are pressing for better information now. Surely, we will know more soon.
What should happen? (Not in any particular order):
If we do not know where we want to go, it will be difficult to get there! In the spirit of suggesting at least a direction, here is a solution from me. These thoughts may be folly but I challenge my readers to suggest something better! This is too important to be left to out-of-towners.
1. Give Jewish Hospital– at least the more modern facilities– to University Hospital to expand into. The University or its Commonwealth patron already controls some of the land.
2. Use some of the outdated hospital space for non-technical services like management of substance abuse or other public services. This is part of what happens when hospitals are closed elsewhere.
3. Transfer the certificate of need for solid organ transplantation (it it does not already own it) to the University of Louisville and help get its Hospital transplant-certified by Medicare, or failing that, let the University of Kentucky and local partners continue or develop their cooperation to consolidate transplants across Kentucky. Not doing enough transplants is worse than not doing any.
4. Sell Frazier Rehab Hospital to Norton and continue to let UofL use it to house their Department of Rehab Medicine. The adjacent Norton Children’s Hospital can use some extra space. A for-profit might swoop in for the still-good government payments to rehab hospitals but not continue Frazier’s charitable community services.
5. Reopen clinical teaching services at the Norton hospitals– even Baptist if it is willing and able. A greater variety of patients is essential for medical education. Guarantee adequate faculty supervision. (Clinical faculty are just as important as lab scientists even if they don’t bring in grants or file patents. Is not teaching supposed to be the primary goal of medical schools anyway?) Establishing additional teaching sites is needed as a hedge to further reductions at the Louisville VA.
6. UofL should be given the charge to manage its own hospital and prove that it can manage what is left of Jewish. My understanding is that the Board of Trustees has already given University Hospital the authority to manage other entities. After all, don’t most other medical schools run their own hospitals?
7. Require the newly configured University Hospital system to set a single standard of care for all of its patients. All must enter through the same doors. University Hospital has been kept down for too long.
8. This last will be difficult to hear, but the community of Louisville needs to step up its financial and other support for its healthcare system. This is a public health issue. It is not the responsibility of the University of Louisville or any other medical provider to solely finance the care of the citizenry of Louisville. The QCCT Trust had limited success, but in my opinion was both insufficient, inequitable, and vulnerable to abuse.
9. I reserve the right to add additional of my ideas and yours in this list.
We need a plan. We deserve a plan! A solution by default or accident would represent a betrayal of the Louisville Community by the parties and our leadership. Abandoning patients is a serious professional matter. Yes things change– as they must– but what happens in Louisville must not lie solely in the hands of outside corporations or planned in the dark.
Peter Hasselbacher, MD
Emeritus Professor of Medicine, UofL
September 5, 2018
What I have written represents my best understanding and is a compilation of what I have found in the public domain. If I have made an unintentional error in fact, please help me correct it. If you have some better ideas of what kind of healthcare system we should be living with for the next decades, share them with us. If you wish to share your ideas with me confidentially to allow me to present them on your behalf, please feel free to do so using the confidential link in the Blogroll segment of the sidebar. If you wish me to elaborate on one or more of the aspects I touch on above, let me know that too.
I will populate this article with some links soon.
[Addendum, 17 September 2018: I edited the initial language of this article for grammar, clarity, and to add additional thoughts. Sorry about no links yet!]