Additional Details About Separation of UofL and KentuckyOne Health Emerge.

Much remains to be worked out.  University of Louisville Hospital Profitable but CHI and KentuckyOne Health suffering major financial losses.

Claimed to be effective as of Dec 14, an initial document initiating the separation and anticipated divorce of the University of Louisville and KentuckyOne Health became available today, December 22.  Given the complexity of the existing contractual partnership and some earlier hints of marital conflict, the 3-page document submitted as an amendment to the original Joint Operating Agreement (JOA) is surprisingly both short and bland.  The principal function of the amendment is to change the term length of the original agreement from 20 years to an ending date 6 months away on June 30, 2017 at which time University Medical Center, Inc. (UMC) resumes its pre-marital control of the entirety of University of Louisville Hospital and the James Graham Brown Cancer.  It is obvious that many consequent details remain to be revealed or worked out. Indeed, the document anticipates that additional counterparts to the amendment will be added.

A 6-month wind-down period for one spouse to leave the house in an orderly manner is specified by the conflict resolution agreements of the JOA.  Although not specifically mentioned in the amendment, the change of termination date triggers a cascade of other important actions of which the most important is that the complex interlocking operational Academic Affiliation Agreement (AAA) also becomes void on June 30.  A new AAA has been prepared well ahead of schedule.  It has reverted to a traditional Affiliation Agreement used between UofL and its hospital partners and returns control of all academic, clinical, educational, research, financial, and hopefully ethical matters back to the University where such belongs.  Hooray! Continue reading “Additional Details About Separation of UofL and KentuckyOne Health Emerge.”

Dr. David Dunn Receives $1.15 Million While Parting From UofL

A lot happened today at the Executive Committee meeting of the UofL Board of Trustees.  I was unable to attend. It is being reported that UofL and KentuckyOne Health are dissolving the Joint Operating Agreement under which KentuckyOne managed most of the clinical activities of University of Louisville Hospital. I do not yet have access to the details of the dissolution process which had a myriad of contractural agreements to settle including penalties and non-compete clauses. I hope to be able to provide an analysis in coming days. Much may be revealed in the fine print, including why KentuckyOne will continue to put money into University Hospital.  The two entities have agreed to prepare new Academic Affiliation Agreements that would allow UofL faculty and trainees to interact at Jewish Hospital, and for Jewish Hospital to capture the financial, research, and reputational advantages of being a teaching hospital.

Another matter that was apparently dealt with at today’s meeting was the status of Dr. David Dunn, one of the principal architects of the agreements with CHI and KentuckyOne, but who has been on the sidelines for many months while he was being investigated by the FBI for possible misuse of federal money,  To my knowledge, the status of that investigation has not been made public.  Dr. Dunn has been being paid one of the very highest salaries in the University even though his contract has reportedly expired.

Today, the status of Dr. Dunn has apparently been settled. The University provided the statement below in response to my request for an update:

“The University of Louisville and Dr. David L. Dunn have reached an agreement related to his employment at the university. As of Dec. 12, 2016, Dr. Dunn is no longer an employee of the University of Louisville. Dr. Dunn leaves the university as a tenured, full professor in good standing. To compensate for his relinquishing his tenured position, Dr. Dunn will receive $1.15 million.”

Some have speculated that the Board has taken no action with respect to Dr. Dunn because it agreed not to take other than “routine” actions in a settlement of a lawsuit by a group of community ministers over the racial make-up of the Board. Perhaps no action was appropriate.  The Board recently prefaces its retirement into executive session by declaring that it is for “routine” matters only. I must say that I felt uncomfortable with the optic earlier this month when the full Board terminated the tenure of an African-American faculty member.  To that person, no matter what the merits of the situation, the termination action was hardly routine. I would argue that an agreement to deal only with routine or non-structural matters no matters longer holds any water and in fact has already been abandoned.  That is as it should be!  Dissolution of the Joint Operating Agreement is no more or less routine than granting degrees, approving a budget, hiring fiduciary auditors, granting or removing tenure, or for that matter, raising tuition. Perhaps there are legal niceties of language to be honored, but this Board is doing exactly  exactly what needs to be done and must be allowed to do in an unfettered manner.

Peter Hasselbacher, MD
Emeritus Professor of Medicine, UofL
President, KHPI.
December 13, 2016

What Is Happening To Our Downtown Louisville Medical Center?

A number of threads that I have been following this past year or so came to a head this last month. These include a guilty verdict in federal court for a cardiologist in Ashland, Kentucky who had been accused of falsifying billing records to secure payment for performing medically unnecessary invasive procedures. The Leapfrog organization published its updated list of hospital safety grades. Additionally, and certainly not least, there are worsening signs of a dysfunctional and perhaps disintegrating relationship between the University of Louisville and KentuckyOne Health, the unit of Catholic Health Initiatives (CHI) that in Louisville owns Jewish and Sts. Mary and Elizabeth Hospitals, and manages the University of Louisville Hospital and its James Graham Brown Cancer Center. Although these themes are not necessarily unrelated to each other, in this article I will comment on the UofL/KentuckyOne situation and deal with others subsequently. First some background for what promises to be a major change in the alignments of the downtown medical center. Continue reading “What Is Happening To Our Downtown Louisville Medical Center?”

Issues of Quality and Safety at University and Other Hospitals.

Is Rome Burning While Nero Fiddles?

Screen Shot 2016-06-07 at 10.24.46 PMKentucky’s Hospitals have not done well in the past on national Hospital Rankings including the Leapfrog Hospital Safety Score.  Things seem to be getting worse. In the most recent iteration last month, once again Kentucky had fewer ‘A’-rated hospitals than the national median and more hospitals rated near the bottom with increasing numbers of ‘D’s.  More troublesome is the observation that 5 of the 6 hospitals receiving a ‘D’ are in the same hospital system. Three of these are in Louisville including two of our major teaching hospitals. Continue reading “Issues of Quality and Safety at University and Other Hospitals.”

Norton vs. UofL Lawsuit on Front Burner Again.

Is accreditation of UofL Medical School hanging on the result?

This case has been slowly grinding through the court system since it was filed in September of 2013.  Although things had been brewing for some time, the trigger event was a letter of agreement between Norton and the University of Kentucky to work more collaboratively at Kosair Children’s Hospital.  An indignant UofL fired off a letter threatening to evict Norton physically from its hospital and retain the hospital’s equipment for itself.  UofL’s self-righteous demand was much discredited when it emerged that the University had earlier promised to turn over its pediatric service to KentuckyOne Health– Norton’s chief downtown rival that badly needs a children’s hospital for its planned statewide system.  Norton responded by filing a lawsuit requesting a judicial determination that UofL had no standing to take over the hospital to use with its new best friends. The festering boil is more than ripe to lance! Continue reading “Norton vs. UofL Lawsuit on Front Burner Again.”

Catholic Health Initiatives Bond Rating Drops Again.

In late January, Moody’s, a major bond-rating organization, downgraded the long-term debt of Catholic Health Initiatives (CHI) to A2 from A1. This was the third one-notch drop in as many years. According to municipalbonds.com, the downgrade “follows a fourth year of declining operating performance, and a second year of very poor consolidated results.” Other factors reported to have contributed to the weaker credit profile included “high leverage (which has more than doubled since 2011), declining liquidity, rapid expansion, high capital spending, and poor same-store utilization and revenue growth.” A prior negative outlook was maintained. The rating for CHI’s self-liquidity-backed commercial paper remained at P-1, the best rating possible.

moodys-rating-system

Continue reading “Catholic Health Initiatives Bond Rating Drops Again.”

Standard & Poor Downgrades Catholic Health Initiatives Bond Rating.

Operating losses recalculated as greater than reported.

[See also Addenda of Dec 19 & 20 below]

Perhaps it was predictable, but Standard & Poor’s bond rating service downgraded its rating of Catholic Health Initiatives from A+ to A with a negative outlook based on large and unexpected losses in first quarter FY 2015, and an inability to meet the financial targets needed to deal with last year’s losses. The downgrade effects the $7 Billion of existing CHI debt for which Kentucky’s operations are also on the hook. CHI pointed to challenges in a few of its markets (particularly Kentucky) investments in capabilities, and costs in implementing computerized medical record systems.

CHI’s own “unaudited” financial report declared a $134.7 Million operating loss, but S&P recalculated this to $641 Million. Expenses were up 11% while revenues grew only by 8%. As reported by Modern Healthcare, S&P’s analyst predicted that plans by Catholic Health Initiatives to turn around its operations likely won’t be enough to avoid losses for fiscal 2015 based in part on poor performance last year— “It’s just a big hole to dig out of… They missed on their targets last year. We didn’t feel like there was a strong track record to show they will do well.” Continue reading “Standard & Poor Downgrades Catholic Health Initiatives Bond Rating.”

Catholic Health Initiatives Loses $198 Million in First Quarter.

Kentucky operations show improvement.

CHI’s corporate first quarter financial update for the months July through September of 2014 was made public last Friday. The report was not good. There was a loss in patient care services of $122 Million that increased to $132 Million after “restructuring, impairment and other losses’” and was magnified further by non-operating losses to a total loss of $198 Million. This represents 5.4% of total operating revenues and is therefore meaningful. In the same quarter last year, there was a profit of $401 Million— a $599 Million swing in the wrong direction.

Last year CHI’s KentuckyOne operation was generating the greatest losses for the organization. This year its first quarter results showed a positive $1.7 Million profit. Of course, this is before “restructuring” or covering its share of national non-operating losses. I think it is safe to assume that KentuckyOne Health and any other Kentucky operations were paying out more money than they were bringing in. The KentuckyOne region remains at the bottom of the list of CHI regions in terms of operating income. Kentucky contributes substantial operating revenues, but its operating earnings margin is only 0.3% before all the adjustments. Continue reading “Catholic Health Initiatives Loses $198 Million in First Quarter.”

Catholic Health Initiatives Annual Report, FY 2014.

KentuckyOne Health still losing money– But how fast?

CHI riding a wave of acquisitions?

Once again Chris Otts of WDRB is first in our region to report on the release of Catholic Health Initiative’s (CHI’s) annual financial report for FY 2014. Data from the financial report shows continuing losses in CHI’s Kentucky operations of $69 million for the fiscal year ending June 30, amounting to a loss of 3.2% of Kentucky revenues. This compares to a modest profit of $33 million in FY 2013. I do not claim to fully understand such financial reports [help requested!], but Mr. Otts notes that the loss is stated before deducting financial expenses that would make the numbers worse. Continue reading “Catholic Health Initiatives Annual Report, FY 2014.”

KentuckyOne Health Is More Than “Talking” with Tenet Healthcare.

In with both feet. But how far?

26 July 2014, 3:30 pm

Reports that KentuckyOne Health was talking with Community Health Systems of Nashville about the sale of Jewish Hospital drew unequivocal denials from KentuckyOne. The hospital system and its partner, the University of Lousiville, finally broke silence and admitted that the couple had gotten off to an unanticipated (but perhaps not unpredictable) rocky start to their marriage. An additional report that Catholic Health Initiatives was talking with Tenet Healthcare has not been denied publicly to my knowledge, as of course it could not be. The fact is that Tenet is now fully engaged in providing services at Jewish Hospital. How much of the Jewish Hospital operation has been transferred to Tenet, and the ultimate outcome of the involvement of yet another out-of-state-corporation in Louisville remains to be seen.

There were of course any number of reasons CHI might wish to talk to Tenet. For one thing, since 2012, the two large corporations have been partners in jointly owned Conifer Health Solutions. Conifer specializes in “revenue-cycle” services for hospitals, including many, if not most of CHI’s. To my non-business mind, such services involve getting every last nickel that’s due out of patient billings. Since KentuckyOne Health has been losing money for CHI, it is not surprising that calls for outside help may well have been suggested or demanded. Continue reading “KentuckyOne Health Is More Than “Talking” with Tenet Healthcare.”