Category: Hospital Mergers

Catholic Health Initiatives Third Quarter Financial Report, FY 2017

Is it good enough to turn the tide for CHI?

Catholic Health Initiatives released today its most recent quarterly report covering the first 9 months ending March 31, 2017. Making sense out of the raw financial numbers is for me probably like having a banker decipher a complicated clinical trial or biochemical research paper. I will leave it to the financial experts to explain it to us. To my first pass and naive evaluation, it looks like CHI is hanging on, but not improving to the extent needed to deal with its $8.8 Billion dept. I suspect this is not going to help their bond rating very much. This report reveals much about why CHI is taking the drastic downsizing actions in Kentucky that we are now seeing unroll. This may be an existential move for the company.

At the end of this article, I show extracted verbatim text from the report that I think will be of interest to us here in Louisville and Kentucky. You can read the full report yourself here.

In summary:

• It is very clear that KentuckyOne Health is the weak sister of the CHI regions.

•In Louisville, University Medical Center (UMC) making a profit. (This is not the same as University of Louisville Hospital, is it?) On dissolution of the UofL partnership. CHI expects to incur a loss of $279.4 million, but I have no understanding what that means. Who can help us?

•CHI hopes to close on its facilities that have been designated for sale by the end of 2017. Those facilities lost $61 million in the first three quarters. The estimated total assets for the KentuckyOne operations being divested as of March 31 2017 is $534.9 million. KentuckyOne/CHI hopes to complete the sale(s) by the end of the year.

•The possible merger with Dignity is not a sure thing.

•CHI has been selling other of its physical assets to raise money to the tune of over $1 billion in gross proceeds. (Does this go to its current bottom line and make matters look better in the current year?) It now must pay rent to the new owners of $52.7 million yearly.

•KentuckyOne Health won its first few cases in the litigation over unnecessary angioplasties in St. Joseph London, but began to lose the most recent cases with high monetary verdicts. Settlements are now being made for at least some cases. I suspect this is not going to be cheap.

What does the statement say to you? I expect many others in the business world are going to help us tomorrow. If I have made mistakes in reading this report, help me fix them.

Peter Hasselbacher, MD
President, KHPI
Emeritus Professor of Medicine, UofL
May 19, 2017 Continue reading “Catholic Health Initiatives Third Quarter Financial Report, FY 2017”

KentuckyOne Health To Sell Its Major Assets In Louisville.

Beginning last Thursday, word began trickling out to journalists and the public that KentuckyOne Health, a major regional unit of Catholic Health Initiatives (CHI), was preparing to announce plans to sell almost all its hospitals and medical centers in Louisville and a handful elsewhere in the state. I had been told earlier in the week that the announcement would be made today, Monday, but there were so many leaks that KentuckyOne sent an email to its employees outlining its plans.  I presume KentuckyOne wanted take control of the message before the reportage dam broke. The email can be read here.

For those of us in Louisville, the only major facility not being sold is Our Lady of Peace, a psychiatric hospital.  Both of KentuckyOne’s acute care hospitals, (Jewish Hospital and Sts. Mary and Elizabeth Hospital), the Frazier Rehabilitation Institute, and all four outpatient Medical Centers (Jewish East, South, Southwest, and Northeast) are on the chopping block. Nearby Jewish Hospital Shelbyville, which recently underwent a critical review by the Inspector General for an EMTALA violation, is also for sale.  KentuckyOne employs many physicians. The fate of individual owned- or contracted medical practices in Louisville and elsewhere is not clear to me from the email. Continue reading “KentuckyOne Health To Sell Its Major Assets In Louisville.”

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