Details of Settlement Between University of Louisville and Norton Healthcare.

Congratulations are in order!

Last December 17, representatives of the University of Louisville, Norton Healthcare, and the Commonwealth of Kentucky signed a set of agreements that, for the next eight years at least, settle disputes over the physical, programatic, and financial control of the currently named Kosair Children’s Hospital.  Both principal parties pledge a new beginning and promise to work together for the benefit of our community.  I congratulate them.  All of us should take them at their word, and help in whatever way we can to honor their promises to each other and to us.  After all, Children’s Hospital is a unique and vital resource for our community.  This and related litigation has not been helpful for it.

In a series of articles in these pages beginning over two years ago, I made available to the public as many documents relevant to the dispute as possible to allow readers to form opinions of their own about the dispute. In this spirit, and in what I trust will be the the last installment of the series, I publish in their entirety the settlement documents which were kindly provided to me by the University.

In brief summary, it appears to me that both parties got most of what they initially declared was most important to them. Norton receives adequate protection against the threat of eviction from their hospital.  The Hospital’s medical staff remains open to all credentialed physicians in the community and Norton retains the ability to cooperate academically and clinically with the University of Kentucky.  The University is declared to be the sole academic sponsor of the graduate medical education program at the hospital and is assured of a predictable and generous flow of financial support – albeit with a greater degree of accountability attached.  One might reasonably ask then, why did it take so long to come to agreement? What changed in the recalcitrant endgame?  I will venture a few thoughts on this question at the end of this article.  In the meantime, here are the four documents with a few comments about each.

1. Amendment to the Land Lease.
A change or clarification to the lease of the land under the Hospital was a critical part of the settlement and which required the agreement of the the Commonwealth (as the Lessor). For its part, Norton agrees to make $35 million of capital improvements and repairs to the hospital over the next 5 years (which it probably would have done anyway.)  All other past, present, and future financial obligations in the lease are otherwise declared satisfied. It is also made clear that only the Commonwealth, and not the University, may assert a claim for breach or default.  Additionally, “Norton shall not be in default … if UofL unilaterally determines not to continue its affiliation in pediatrics at Kosair Children’s Hospital.” Presumably this new language and other provisions in the settlement provided Norton the confidence they needed to move ahead in the face of the University’s earlier pledge to turn its pediatric service to KentuckyOne Health.

A 1981 agreement contemporary with the initial lease allowed for a representative of UofL to sit on Norton’s Board of Directors and attend its Executive Committee meetings. In less competitive times, that practice may have acceptable, but given the University’s new and nearly exclusive partnership with KentuckyOne, it became unreasonable if not inappropriate.  These requirements are dropped.  Instead, Norton will now “permit a representative of the University to present annually to the board of Norton.”

2. Settlement Agreement.
The first 6 of the 10 pages contain the meat of the agreement as well as a brief chronology of the claims and counter-claims. Since they catalog the principle concerns of the parties, I urge readers to review them.  Principle clauses include financial commitments to the University accompanied by increased accountability for expenditures to Norton. In terms of pediatric medical training,  University clinicians promise to use Children’s hospital, for at lest half of their inpatient admissions and Norton promises to make at least 90% of its inpatient resident slots available to UofL. It is made clear that physicians other than UofL faculty may admit and treat their own patients. Important for the University, it “shall have the right to be the sole sponsoring institution for pediatric residency at Kosair Children’s Hospital” but Norton is allowed to implement its letter of intent of Aug 23, 2013 with the University of Kentucky to cooperate over pediatric cardiology and other initiatives.

The amount of money now in play is considerable. For the next 8 years, Norton promises to pay $30 million yearly in “Annual Support Payments” for use of the Department of Pediatrics.  This amount is intended to cover all of a large existing array of current contracts and payments. In addition, in a pool of funding termed “Additional Financial Support,” Norton agrees to pay the University $24 million in aggregate over the eight year term of the settlement.  The use of these latter funds, as well as unspent money from the former Annual Support Payments are subject to recommendations of a new joint hospital governance committee and ultimately approval by both Norton and the University.  As a final sweetener, Norton agrees to pay UofL a one-time lump sum of $8 million to settle all outstanding additional claims related to expenses incurred by the Department of Pediatrics for services provided at the Hospital.  It is not obvious to outsiders how much of the money specified in the settlement is “new” money. What is clear are stipulations of accountability and how the money may be spent. For example, Norton is permitted to audit the use of the funding.

The partnership of UofL with KentuckyOne was obviously a touchy subject for the negotiators.  Accordingly, the University agrees not to participate with other organizations in providing pediatric services within a core set of counties termed the “Greater Louisville Region.” The right to collaborate outside the core counties is maintained.

Specialty Physicians.
If Norton identifies a need for a pediatric specialist, it agrees to give the University the first right to recruit an an acceptable individual, but retains the right make such a hire itself if UofL cannot do so in a timely manner.  Norton agrees to encourage its current employed physicians to accept faculty status.

3. Amendment to Master Academic Affiliation Agreement.
Difficulty in negotiating an update to the earlier agreement of 2008 was an early indicator of difficulties between the two parties.  As part of the settlement, a way forward is agreed to.  With respect to   the training programs for students and residents, the University has full authority.  However, with respect to clinical programs and operations at Children’s Hospital there are considerable changes including shared responsibility.  Chief among these is the formation of a new system of Governance and Leadership under the auspices of a Pediatric Academic Medical Center Committee (PAMCC). This new committee is made up of three representatives each from the University and Norton and which which must act by majority vote. The PAMCC shall make recommendations with respect to the following at Children’s Hospital:  relationship management, access and quality of care, negotiating additional contracts, ensuring accountability and transparency, changes and expansions of services, approving a Medical Director and Chief of Staff, and defining the scope and responsibilities of these two latter officers.  What else is there left to oversee? This is a powerful body that must work together for the hospital and the Department of Pediatrics to succeed! It will be telling to see who is appointed to the committee.

4. Agreed Order of Dismissal.
This one-pager is a joint request to the court by the three parties to dismiss the case, with each party to bear its own costs. Thus endeth the litigation.

Other Comments:

Is this an enduring fix?
The settlement’s term runs for the next eight years. That aught to be long enough to heal the wounds that have been festering for more than two decades. If all goes as is promised, and the pediatric partnership flourishes as we all want it to, then renewal in to the future should be no problem.  The settlement makes it clear however, that there remains a basic disagreement about who is responsible for funding an academic medical center in pediatrics. UofL will have to learn how to work successfully with more than a single clinical partner – which in my opinion would be a desirable goal – but its parallel relationship with KentuckyOne will always be there as a complicating factor.

Aside from local healthcare and academic politics, the born-again Norton-University partnership will have to survive the tidal wave of national change in a healthcare system that is testing and changing everything that has gone on before.

Kosair Charities vs. Norton Healthcare?
While Norton was grappling with the University, in the other corner waiting for the tag was Kosair Charities which was actively switching its financial support from the hospital that bore its name to the University’s research activities.  The last I heard, this litigation was proceeding apace.

In my opinion, Norton does not need Kosair. In fact, I believe Norton would have more credibility at present if Kosair Charities was out of the Louisville hospital picture altogether. To my mind, Kosair Charity’s overblown claims about misuse of its donated funding blew away like so much smoke. With its new and better-integrated relationship with the Department of Pediatrics, a Norton Children’s Hospital can do just fine without Kosair stirring the pot.  Admittedly, there would continue to be some awkwardness for the University if it affiliates with the Kosair name on its research buildings and outpatient clinics but not on its hospital and other major clinical facilities.

My personal advice to Kosair Charities is this. If you want to continue to be able to raise money in the name of the hospital, that you swallow your pride and pony up what you have been withholding. Norton and the University have pledged to work together for their mutual benefit and that of the children of our community. Follow their lead.  Either withdraw gracefully, or be perceived as trying to make even more trouble for a Children’s hospital whose reputation has been injured by the troubles of these past few years and in which you played a role.  If you want to stay in the Children’s Hospital game – and if Norton will still have you – be a better partner by making a bigger financial contribution more commensurate with the naming rights of the hospital, and stop throwing mud on the enterprise.

How did this come to pass?
Norton and the University appeared to come close to agreement numerous times over the past three years only to have things blow up at the last minute.  It made no difference whether the negotiations were held independently, or under the supervision of court-ordered mediations. You can form your own opinion if any blame need be assigned. It is clear to me that movement on the dispute only occurred when the UofL Board of Trustees became active in the process, and that only occurred because the executive leadership of the University was crumbling.

Will anyone else rise to sabotage the settlement?
The Board as a whole had voted some time earlier to allow its Executive Committee to act on its behalf as the litigation proceeded.  In the meantime, Dr. David Dunn, the University’s chief strategist and negotiator in the dispute with Norton, was put on leave while he is under FBI investigation, and President James Ramsey was distracted by his sombrero episode and losing the support of both his Board and community. The Teflon had worn off.  A mere handful of days after Dr. Dunn left the picture, Board Chair Larry Benz brokered and announced a comprehensive settlement that appears to give both sides what they claim to have wanted all along!  Is there any reason to doubt why President Ramsey has joined with Governor Bevin to remove Mr. Benz and other Trustees from the Board?

I do not personally believe that Dr. Dunn can return to his former position and I believe that President Ramsey’s useful time at the University has long passed. He has become an embattled President. I cannot personally imagine that either of these two men could be constructive in closing the gap that emerged between the two long-time allies – Norton Healthcare and the University of Louisville.  The settlement sits in a precarious position, but the rank-and-file staff and professionals at Children’s Hospital have continued to work effectively together throughout. They deserve the support of the community and protection from those who will rise to sabotage the settlement.  We as a community must not let that happen.

If I have made an error of fact, help me correct it.

Peter Hasselbacher, MD
President, KHPI
Emeritus Professor of Medicine, UofL
26 Jan 2016