UofL and KentuckyOne Agree to Extend Their Academic Affiliation Agreement Another Four Months.

Barely within the statutory requirement for a response to an open records request, I received two critical pieces of the new contractual agreements between the University of Louisville and KentuckyOne Health that extend the current terms of their Academic Affiliation Agreement (AAA) and Master Support and Services Agreement (MSSA). These documents define the conditions and financial arrangements between the institutions for another four months with an option for automatic renewals. The extensions give some breathing room to the organizations currently working behind the scenes to determine the future of KentuckyOne’s operations in Louisville and simultaneously protect the ability of UofL to place students and trainees at Jewish Hospital and Fraser Rehabilitation Institute while simultaneously allowing Jewish Hospital (and Sts. Mary & Elizabeth) to maintain their status as a teaching hospital for Medicare purposes.

The AAA extends the financial obligations of KentuckyOne to the University until April 30, 2019 at the existing prorated monthly amount of $1.98 million for a total of an additional $7.92 million. This is a blessing for financially strapped UofL. The attachments to the agreements that I requested were not provided leaving me to assume that the intended ultimate beneficiaries of the continuing financial support remain unchanged. (Previous versions of Attachment-C contain a lot of personnel details so I will not to post a copy here.)

The two agreements referenced above are interlocking and these second amendments reinforce their connection.  Specifically, item 3 of the AAA notes that its Exhibit C is amended by adding the “Second Amendment to Master Support and Services Agreement.”  Linking the documents together makes sense, but I am not exactly sure what that looks like in final print, and I do not understand the reasons for changes in term-lengths of the Agreements.  The major clause in the new MSSA allows the agreements to automatically renew for periods of 10 months (up from the previous 6 months of potential auto-renewal) further deferring any last-minute anxiety for the concerned!  (There are several versions of earlier AAAs in circulation. The new language appears to amend Section 8.1 of the previous first amendment to the AAA by deleting and replacing its second sentence. In the original version of the AAA available to me, Section 8.1 contains only a single sentence! Any confusion is probably only mine and I will clarify later for this record if I can.)

Final Comment.
The extension of the agreements was, as I argue previously, critically important for the integrity of the two institutions. Obligations to students, trainees, and patients alone are manifestly inviolable. I commend KentuckyOne for shouldering its responsibility which will certainly present challenges. Its parent organization, Catholic Health Initiatives (CHI), has been under financial stress for some time and which I suspect has complicated its intended merger with Dignity Health anticipated at the end of this month. The long-sought goal of CHI to sell QualChoise, its poorly performing health insurance division, was recently announced and which may give the corporation some temporary room to maneuver financially.

As desirable as the extensions to the current Agreements are, the can is only being kicked further down the road. I have no information or prediction of what is yet to come. It is not clear that Blue Mountain Capital is currently the only party negotiating with KentuckyOne to buy its Louisville hospitals, or to what extent UofL will succeed in finding the money or a partner to take over (and at what non-financial cost).  We are still wandering in the dark woods without even a trail of breadcrumbs to follow. Not all fairytales end well for their protagonists.

Peter Hasselbacher, MD
Emeritus Professor of Medicine
President, KHPI
January 8, 2019

Our Unregulated Militia Is Killing Our Children.

Special interest  or public health issue?
I cannot conceive that any health professional would consider the incidence of death and injury from firearms as other than a public health issue. Surely the absolute numbers of people killed or injured (in excess of 100,000 per year); whether self-induced or by others; by accident or on purpose places the matter squarely before us on a regular basis no matter where we live. This uninterrupted endemic parade of victims is punctuated by epidemic outbreaks in crowded places like schools or workplaces.  There are carriers of this disease in all 50 states. No cure has emerged for this essentially American pandemic. The most recent outbreak which stimulated me to write this article occurred last month in Florida at the Marjory Stoneman Douglas High School in Parkland where 17 students were killed by another student, and 17 others wounded by an AR-15 military machine gun– a.k.a. assault rifle. The damage caused by this gun unnerves even hardened professionals.

Unlike most other epidemics of disease, reliable information about how to prevent non-military people from death-by-bullet is scarce because of a bizarre broad governmental prohibition to even study the matter. The self-censorship is deafening in a recent 476-page report from the U.S. Department of Health and Human Services.  It is titled, “Health, United States, 2016” but the words “gun” or “firearm” are not to be found in it. Disturbingly, it remains unclear that any meaningful national attempts to control this epidemic will be made or even that individual states will be permitted to do so.   Undeterred, advocacy groups are increasingly demanding that immediate and definitive action be taken to protect themselves and the rest of us.

Our young adults step forward.
Last Monday evening, I unexpectedly met a group of students from St. Francis High School here in Louisville who had come out for a program of Kentucky to the World to hear Nobel Laureate and scientist Phillip Sharp talk about the value of education for individuals and our communities. In chatting with the students, I learned that they were planning to participate in the National School Walkout to protest against gun violence and to demand gun control. I was touched by their commitment, and as a father of former students of St. Francis how could I not stand with them? Continue reading “Our Unregulated Militia Is Killing Our Children.”

More Expensive Medical Services or Products Does Not Equate To Better.

I have been writing articles for this health policy blog since 2009– almost all of the 390 posts since 2011. Of them, the one most frequently accessed by the public is a 2012 article titled “Horse Liniment for Your Arthritis and Healthcare Reform.”  I encourage you to read it also, because it provides my background for this article, and explains why I write a lot about how pharmaceutical companies – with the active consent of our elected government officials – are gouging the public. The earlier article caught my attention because of a tiny advertisement in the Courier-Journal notifying me that an “arthritis pain mystery” had been solved and that the secret was horse liniment. In my studied professional opinion, the claims were vastly overblown and that in any event, the “secret” was not a secret at all. The ingredients in the horse liniment were available in a variety of over-the-counter joint-rub-ons at a fraction of the cost of the “miracle” liniment offered for sale. I lament the fact that the public at large could be motivated to part with their money in such a way, but alas, physicians are equally as vulnerable to bamboozlement by the traditional pharmaceutical industry– think OxyContin. Sadly, the marketing approaches I wrote about in 2012 are still alive and well. Such advertisements in the Courier-Journal are now bigger and more numerous than ever.  A recent such sparked today’s article. Continue reading “More Expensive Medical Services or Products Does Not Equate To Better.”

KentuckyOne Health Has Already Sold Most of Its Real-estate Assets in Louisville.

KentuckyOne’s two acute care hospitals and its business operations in Louisville still remain on the sales block.

Soon after I clicked the button to publish last week’s update on the status of the sale of Catholic Health Initiative’s assets in Louisville, I was told by an anonymous reader that a group of capital investors was the last of potential buyers still in the game. Perhaps naively I have been assuming that only other hospital systems would be interested in acquiring the clinical operations of  Catholic Health Initiatives (CHI)/ KentuckyOne Health in Louisville. I was aware that at least parts of one of the doctors office buildings next to downtown Jewish Hospital had been transferred to a new landlord.  A quick look at the Jefferson County Property Valuation Administrator’s (PVA) website and a bit of Internet research revealed much more.  Beginning in 2015 and finishing in the spring of 2016, CHI sold all of its local medical office buildings and outpatient medical centers (of which I am aware) to a single, investor-owned, national real-estate investment trust (REIT) – Physicians Realty Trust and Physicians Realty L. P.  (Nasdaq- DOC).  I must be the last person in Louisville who knew the extent of these real-estate sales.   This third-party owner is now necessarily a major player in planning the future of not only the downtown medical Center, but the healthcare infrastructure of the Jefferson County region. The rents must flow! Continue reading “KentuckyOne Health Has Already Sold Most of Its Real-estate Assets in Louisville.”

The Search For A New President of UofL Must Be More Open.

The University of Louisville is trying hard to recover from what can arguably be considered its darkest hours.  It has, and is still weathering challenges to its accreditation at several levels.  It has been turned upside down by a string of scandals that may yet lead to criminal charges.  All of this has been well-reported publicly resulting in a community consensus that a lack of transparency and accountability at the highest administrative and governance levels allowed corrupt and abusive practices to fester for years.  Where there should have been openness, there was deliberate obfuscation.  It is against this background that the UofL’s Board of Trustees seeks to appoint a new President of the University using a process that could not be more opaque.  Faculty members, some administrators, and students who have the most skin in the game are openly critical.  I am too.

The descriptors ‘open’ or ‘closed’ in reference to such a search are by themselves poorly defined. However, the recruitment process selected by the Trustees would deliver us as Deus ex machina, a new president to solve our problems, but one who would not be named until after they were appointed.  Such a process meets my definition of ‘secret.’  More of the same is the last thing we need.  The Board is increasingly being criticized for its retreat into opaqueness generally.  Its meetings are carefully scripted and I have yet personally to hear a substantive discussion publicly.  I must conclude, as I have in the past, that all major discussions or decisions occur behind closed doors.  Perversely, even those Trustee representatives of faculty, staff, and students are prohibited from sharing information with their own respective constituencies – or for that matter even sharing their own opinions publically. The assumption of this posture by the Board beggars the concept of shared governance. Continue reading “The Search For A New President of UofL Must Be More Open.”

Fiduciary Audit of UofL Foundation Looks Really Really Grim

Just got 269 pages of documents with a summary.

The summary supports previous claims of major financial mismanagement– if not worse. Oversight by Foundation Board was feeble if not inadequate. Ramsey supporters, enablers, and apologists, and  shares blame with former President Ramsey and other University executives. The so-called elite, chardonnay swilling, trouble makers who dared rock the boast and ask questions are vindicated in spades.

You can read the executive summary here.

Statements by current UofL President and Chairs of UofL Trustees and Foundation affirm their commitment to transparency and emphasize that the report reflects the management of previous administrations and boards.

Bad enough to put people in jail or to claw-back money?  We’ll have to see.

More when I dig into the details.

Here is a copy of the entire document. (6.7 MB)  What do you see that sticks out as either good or bad?

Peter Hasselbacher, MD
President, KHPI
8 June 2017
4:50 pm

Somethings Big Are In The Air

The Executive Committee of the UofL Board of Trustees is assembling now. The executive committee can act for the whole. I predict it will vote on the relationship with KentuckyOne Health. It is likely the vote will involve severance of the joint operating agreements. UMC would then take control of the entire Hospital. From what I have heard, and because of recent financial events, I will be surprised if this does not happen.

Tomorrow the State Auditor will announce the results of the audit of the relationship between the University and its Foundation. I understand that the audit will not be kind.

We will soon know more.

Peter Hasselbacher

Drop In Value of UofL Endowment Confirmed.

Endowment growth stalling compared to other institutions.

Numerous earlier reports by Mr. Chris Otts of WDRB brought to the attention of the public information about financial dealings of enough concern that at least two major donors to the University of Louisville withdraw their support, triggering in large measure an intervention by the University of Board of Trustees to take a more controlling role in the University of Louisville Foundation and a full-scale fiduciary audit. This latter offers the potential to clear the air or to lead to even more troublesome revelations. Mr. Otts’s latest report  deals with unauthorized spending of the University’s endowment by the Foundation in support of its commercial research, real estate, and other agendas both known and unknown. The result has been a substantial fall in the value of the endowment as its principal is consumed.

Sparked by Mr. Otts’s use of information provided to him by the University as reported to the American Association of College and University Business Officers (NACUBO); and by comments made by Trustees Greenberg and Benz at last week’s meeting of UofL Trustees raising serious concerns about the endowment; I went to NACUBO’s website myself.  Summary files for public use are available including the market values of the endowments of some 850 of the most important Colleges and Universities in the US and Canada from 1990 to 2015.  I abstracted these and plotted the market value of UofL’s endowment along with its rank among other institutions in this regard. Spending information or investment yields for individual institutions are not made available to the public, although summary statistics on aggregates in broad categories are available. A static image is presented below, and an interactive version revealing the underlying data is available.

In summary, the amount of our endowment rose progressively from 1990 until around 2007 after which much volatility occurred to the point that the market value of the endowment in 2016 is indeed less than it was 10 years ago in 2006!  UofL appears to be eating its nest egg, and compared to other institutions of higher education, is losing ground in endowment growth.

uofl-endowment-1900-2016
Continue reading “Drop In Value of UofL Endowment Confirmed.”

Credit Ratings for UofL, UofL Foundation, and CHI Downgraded.

Financial stresses abound.

In the space of a week, Moody’s Investor Services released credit opinions for the University of Louisville and the University of Louisville Foundation; and Catholic Health Initiatives published its Annual Report for the Fiscal year ending June 30, 2016.  The results were not very pretty. The rating for the bulk of the University’s existing bonds dropped one grade to A1 with an outlook determined to be stable. The Foundation did not fare as well. Its rating dropped three steps to A3 with an outlook revised to negative. Catholic Health Initiatives disclosed operating and non-operating losses totaling $667 million. CHI had declines in its own bond ratings earlier this year, due largely to excessive debt reported to stand at $9 Billion as it seeks to partner or merge with another Catholic hospital chain. The drops in grade and financial losses are by themselves troubling.  However, language in the details of the reports links the organizations together, highlights the harmful consequences of recent management and political manipulations on the University, overestimates the health of current business relationships between the parties, and underestimates the impact of promised roll-backs to Medicaid and the Affordable Care Act on the financial health of our local hospitals and the University.  For these reasons, I fear that things are going to get worse before they get better. Continue reading “Credit Ratings for UofL, UofL Foundation, and CHI Downgraded.”

Ramsey Supporters on UofL Foundation Resisting Oversight by University Trustees.

Later this morning, the Board of Directors of the University of Louisville Foundation will meet to discuss matters crucial to its future relationship to the University of Louisville. Following the forced resignation of former UofL Pres. James Ramsey, a Foundation board comprised largely of friends and appointees of Ramsey seems more interested in protecting his legacy and image than in facing up to the wholesale loss of confidence in the Foundation by the community. Having been forced to partially lift the curtain on its internal activities, and in the face of refusal to fully disclose its confusing if not inappropriate financial machinations to University of Louisville trustees, the Foundation still clings to the incomprehensible belief that it has the right to select and oversee the outside entity that will audit its financial activities. If allowed to do so, the Foundation would thus define both the scope of such an examination and control the dissemination of its result. After all, he who pays the piper calls the tune. All this from a Board of Directors that appeared prepared to retain Ramsey as President of the Foundation and award him even more money from the University’s assets. Of course, it is possible that more than just protecting Ramsey’s reputation is at stake. As yet undocumented allegations of financial mismanagement or worse are circulating. Certainly it is in the interest of the entire University community that no doubts remain after a long-overdue, no-holds-barred audit of the vaults of the Foundation. It is follow the money time! Continue reading “Ramsey Supporters on UofL Foundation Resisting Oversight by University Trustees.”