[Updated in Comments Aug 23, 2014]<\/b><\/p>\n
Next week, Kentucky\u2019s Attorney General will plead in Jefferson and Franklin County Circuit Courts to be added as an intervening defendant in the disputes between Norton Healthcare and the University of Louisville<\/a> over control of Norton Kosair Children\u2019s Hospital, and that between Kosair Charities and Norton<\/a> over the use of charitable contributions and the right to raise money in the name of the hospital. The outcomes will ultimately determine the relationships (or lack thereof) between Norton, Kosair, and the University. Relations have not been going well in recent years with UofL seeking to switch its pediatric activities from Norton to KentuckyOne Health, and Kosair charities moving to substitute UofL for Norton as a chief beneficiary of its charity.<\/p>\n Last summer,<\/a> UofL sent Norton a letter claiming that the hospital system was in breach of the lease for the land on which Norton built and improved Kosair Children\u2019s Hospital (KCH). The trigger for the letter was that Norton was in talks with the University of Kentucky about ways to better coordinate clinical and teaching activities related to children\u2019s healthcare. UofL claimed this was a violation of the lease that contains wording stating that the hospital should be operated for the benefit of UofL. (UofL argues that the hospital should be operated for its exclusive<\/span> use.) In the background were several years of deteriorating overall relationships between the two institutions and disputes about the amount of money Norton was providing to UofL\u2019s Department of Pediatrics for faculty salaries, research, and other academic support. Why Norton should be responsible for financing the bulk of the University\u2019s pediatric program has never been made clear to me. No other hospital of which I am aware has such an expansive obligation.<\/p>\n If the alleged breach was not cured immediately, UofL threatened to evict Norton from the land and take possession of the hospital and its improvements. Not mentioned in UofL\u2019s complaint was that it had already agreed in writing to transfer its pediatric hospital and other clinical activities to KentuckyOne Health (KOH), UofL\u2019s new manager of University of Louisville Hospital. Such an eviction would simultaneously give KHO effective control of a full spectrum of healthcare for its system and to deny Norton the status of sponsoring teaching hospitals. [A subplot of the dispute is who gets to claim the 100+ pediatric residents and thus the system-wide Medicare and other payment bonuses that teaching hospitals enjoy.]<\/p>\n Pediatric medical care is in Norton\u2019s DNA as much as it is in UofL\u2019s. Norton not unsurprisingly did not roll over and play dead. In September 2013, Norton filed a claim for a Declaratory Judgment in Franklin District Court that UofL had no standing to evict Norton, and that in any case, Norton was not in breach of the lease or any other of the 100+ contracts it had with UofL and its Department of Pediatrics. The series of claims and counter claims that followed and a failed trial of court-ordered mediation have been reviewed earlier<\/a> in these pages. I am compiling available documents<\/a> on an earlier page.<\/p>\n Given that the land under KCH is owned by the Commonwealth, it was not surprising that UofL tried to formally enjoin the Commonwealth in the case earlier, but the Attorney General\u2019s office (AG) deferred, hoping that the two former close partners could work things out by themselves\u2013 which has not happened. The AG is now exercising its option to speak for its own interests and those of the Commonwealth. The specific state signatory on the land lease is the Finance and Administration Cabinet, which is represented in the court on behalf of the AG by Sean Riley, Chief Deputy Attorney General.<\/p>\n What might the new Norton-UofL pleading tell us?<\/strong> UofL not a signatory to the land-lease.<\/strong> Norton must have an affiliation agreement with UofL.<\/strong> Request for Special Master Commissioner or Expert Witness.<\/strong> I do not fully understand the justification for requiring Norton to make such a sweeping disclosure of its entire hospital operation. Financial information that is relevant can be obtained under the mutual protections of discovery within the existing litigation. The demand seems triggered by UofL\u2019s allegation that Norton has not reimbursed UofL for some nonspecifically-described accumulated cost deficits, and that it hid the finances of its children\u2019s hospital by incorporating it into Norton\u2019s greater hospital system as a single administrative system for Medicare purposes. To accomplish such an audit, the AG requests the appointment of a Special Master Commissioner (or alternatively an expert witness) to examine the management and books of Norton Healthcare. Such an examination is also part of the AG\u2019s pleading with respect to the Kosair Charities case discussed below. Although the Kosair Charities case is separate from the Norton-UofL one,\u00a0it looks like a tag-team match to me!<\/p>\n Equal treatment under the law?<\/strong> What is good for the goose is good for the gander.<\/strong> Further comment:<\/strong> In UofL\u2019s favor the AG concludes that the language of the lease requires that Norton have an affiliation agreement with the University. If we are to believe their words, an affiliation agreement is what UofL is demanding. (The court will also need to decide whether the verbal affiliation agreement that Norton claims was reached on Jan 20, 2014 (denied by UofL) is enforceable!)<\/p>\n The demand that Norton expose its private parts to the public without a similar disclosure from UofL, the state\u2019s own agency, will likely be a bitter pill placed in the hand of Norton. Wednesday\u2019s hearing will reveal how Norton will to choose deal with this.<\/p>\n I am much less familiar with the ins- and outs of this case which\u00a0has not been in the public eye very long. I do not have a copy of Kosair Charity’s initial complaint. [I did but forgot! PH] \u00a0It is clear that Kosair Charities and UofL have entered a new and very much closer relationship. Kosair is financing a new office building for the private practices of the Department of Pediatrics, and UofL is renaming its new Translational Research building after Kosair Charities. In my opinion, UofL has weaned KC away from Norton and is anticipating big bucks of clinical and research support!<\/p>\n The basic structure of the filing is similar to the previous one. Asserting that the Commonwealth has an interest in supervising and protecting the Commonwealth\u2019s charitable assets, the Attorney General\u2019s office works through the legal criteria to justify its request to intervene as a plaintiff with Kosair Charities Committee, Inc. (KC). By other reports, KC argues that Norton has misused its charitable contributions over many years by merging its contributions with those of the parent company, Norton Healthcare. KC\u00a0claims that Norton entities other than its Children\u2019s hospital are benefiting from KC\u2019s money. From this perspective AG\u2019s request to intervene is not unreasonable.<\/p>\n Is it improper for hospitals to merge? Certainly not in Louisville!<\/strong> Merging hospitals is not nefarious in itself. There are other reasons for combining hospitals into a single administrative unit. Jewish Hospital and Sts. Mary and Elizabeth Hospital did so a few years ago. Jewish and Sts. Mary & Elizabeth Hospital are now a single teaching hospital for Medicare purposes. In addition to strategic reimbursement issues related to teaching hospitals, there a host of other of financial and management efficiencies that can be gained by eliminating redundancy. Even University of Louisville Hospital put itself and its residents up for merger! \u00a0Profits from University Hospital are currently being used to prop up other hospitals in the KentuckyOne system. \u00a0Is the pot calling the kettle wrong?<\/p>\n [I forgot to mention that one of the major reasons hospitals seek to merge is to strengthen their clout with insurance companies when reimbursement rates are negotiated. They hope to be too “big to be excluded” from provider networks, especially as the push is towards narrower ones. For example, University Hospital and the University Physicians’ Practice group have both \u00a0been excluded from Humana networks, at least in the past. If the University entities come\u00a0to the table as a bargaining entity with KentuckyOne, exclusion\u00a0might be harder to demand for both adult and pediatric services.]<\/p>\n What might the AG know that we do not?<\/strong> Norton\u2019s responses.<\/strong> Text of last week\u2019s press release by Norton: Text of message to Norton\u2019s employees of July 30: Concluding remark.<\/strong> I invite Norton, the University of Louisville, or Kosair Charities to help me correct any errors of fact I may have made.<\/p>\n Peter Hasselbacher, MD [Addendum Aug 5: A copy of Kosair Charities’ First Amended Complaint of June 6 has been made available\u2013 see below. \u00a0The parties have not provided\u00a0the several affilliation agreements and reports referred to between Norton and Kosair stretching back to the formation of the present Children’s Hospital that are essential to understanding the complex and multi-faceted arguments offered\u00a0in the Complaint. The Complaint refers to correspondence between\u00a0Kosair to Norton as early as July 2013 related to\u00a0notice of material breaches of their various agreements that would be helpful\u00a0to the public in understanding what is happening to\u00a0this community resource. \u00a0Norton has to my knowledge\u00a0not yet responded in court to the Complaint. PH]<\/p>\n The full text of the Attorney General\u2019s pleadings can be downloaded here. \u2022 First Amended Complaint<\/a> by Kosair Charities Committee, Inc. June 6, 2014 \u2022 Summary of the relevant Kentucky Rules of Civil Procedure<\/a> that shape the language and format of the above pleadings.<\/p>\n1. UofL and Norton in their Ultimate Cage-Match.<\/strong><\/h1>\n
\nMost of the Commonwealth\u2019s motion to be presented next Wednesday is an exercise in the Rules of Civil Procedure<\/a> outlining why the Commonwealth has a right to intervene. It is, to a large extent, legal \u201cboiler-plate\u201d evoking the magic words of compliance with the Rules. Because the Commonwealth wishes to intervene as a defendant, it must also respond to plaintiff Norton\u2019s First Amended Complaint. It does so in what I am coming to understand is the common strategy of agreeing with as little as possible, and denying or side-stepping as much as can be done regarding Norton\u2019s claims and positions. However, the Commonwealth\u2019s brief makes some unequivocal statements in its filing that are both interesting and important.<\/p>\n
\nThe motion to intervene and its accompanying response to Norton\u2019s complaint states that the Cabinet\u2019s interests are not adequately represented by either Norton or UofL, and that the Commonwealth needs and is entitled to its own seat at the table. The AG strongly asserts that UofL was not a party to the land lease, and that that the land is owned by the Commonwealth which is also the \u201cLessor\u201d in the lease). Furthermore, the Commonwealth has \u201cnot formally asserted any breach of the ground lease.\u201dEven if a breach were found to have occurred, the land and its contents would revert to the control of the Commonwealth\u2019s Finance and Administration Cabinet, not UofL. The Commonwealth has an interest in protecting not just its land and its University agency, but also the health of the children of the Commonwealth. [Bravo for the AG!]<\/p>\n
\nOn another contested issue, the AG declares several times that the language of the lease requires Norton have an ongoing academic affiliation agreement with UofL, but also recognizes that such an agreement from 2008 is still valid. Of course, this requirement cuts both ways. \u00a0UofL must have one too. \u00a0I do not see that the Attorney General takes any position on whether KCH must operate exclusively in the interest of UofL. Norton and UofL have had difficulty coming to agreement on an update to their current affiliation agreement, relying by default on the existing one. Although UofL claims that it is Norton that is dragging its heels on a new agreement, if UofL wants to deliver the children\u2019s hospital that it promised to KentuckyOne, it may be in UofL\u2019s interest not to come to a new agreement with Norton. [Talk about Machiavellian thinking on my part!]<\/p>\n
\nA new wrinkle introduced in the AG filings is a request for a \u201cfull and fair accounting for operations and finances of Kosair Children\u2019s Hospital and the plaintiff Norton Healthcare in order to aid the court and the parties in resolving the case.\u201d This bunker-busting demand seeks to examine not just Children\u2019s Hospital, but also the entire multi-hospital Norton Healthcare system in Louisville?<\/p>\n
\nI find it ironic that UofL, which has bent over backwards from having to reveal to the public even routine internal matters, and which continues to fight in court against having to reveal is finances to the AG and other state authorities, is now in a partnership with the AG demanding sweeping disclosures from Norton that will presumably be made public. In my opinion, any such approved review of Norton should be paired with a similar requirement for UofL. What, for example, has UofL done with the multi-millions Norton has given it? Are the salaries demanded reasonable ones? Who in the University benefited and for what purposes?<\/p>\n
\nTo my knowledge, UofL has never submitted to such a financial audit even in the presence of illegal and inappropriate dealings that hid behind its iron curtain. No such sweeping demand for financial accountability was made of the University of Louisville when it was accused of mis-managing QCCT funding for indigent care or of Medicaid Passport money. Seems to me that several parallel issues are involved in this current case. UofL did not come out looking very good in the limited state audits that were done.<\/p>\n
\nIt appears to me that the AG gives each side one of the bones they seem to be demanding. In Norton\u2019s favor, the AG states that UofL does not have the independent authority to declare that Norton is in default of its land-lease, nor to evict Norton from the property. No default would then exist at present. Even in the case of any future default, the Hospital is not UofL\u2019s to give away at its pleasure. The well-being of the children of Kentucky is also a factor, and UofL cannot claim sole responsibility for that.<\/p>\n2. Motion to Intervene in Kosair Charities v. Norton Healthcare.<\/strong><\/h1>\n
\nSome years ago, and well after its relationship with KC began, Norton merged its Louisville hospitals into a single economic unit for a variety of reasons. One of these must have been to capture the extra Medicare revenue that results from having medical residents in your hospital. KCH has lots of residents but few Medicare patients. By combining its hospitals into one administrative unit, the financial benefits of having residents in your program are spread over hospitals that have lots of Medicare patients.<\/p>\n
\nOn the face of it, the AG\u2019s petition to intervene as a plaintiff against Norton comes across as very critical of Norton. I do not know if this means that the AG actually believes the claims of Kosair Charities against Norton, or if the AG is only restating Kosair\u2019s claims as part of the protocol of asking to intervene as a plaintiff. Perhaps we can be educated on protocol by some of the lawyers among us. Neither am I familiar with the accounting rules imposed upon recipients of charitable donations. Presumably it will not be too difficult to sort such bookkeeping things out. However, given the relatively small amounts of money Kosair Charities donates each year to Children\u2019s Hospital for naming rights of the hospital ($3 and more recently\u00a0$6 Million yearly) compared to what I understand from\u00a0public reports is a much greater amount of charity care provided by Norton in their children\u2019s hospital, its hard to believe there has been any \u201csurplus\u201d charitable funds to rake off the top to add to the budgets of Norton\u2019s other hospitals.<\/p>\n
\nNorton responded publically to this news last week and sent an announcement to its employees.<\/p>\n
\nAlthough the Attorney General’s filings today are riddled with inaccuracies and misinformation, we welcome an independent assessment of how funds are used by all parties involved. A review of U of L’s finances will reveal questionable practices that are already under public scrutiny, and that Kosair Charities has broken their contractual agreement to provide financial support to the hospital that bears their name. We are confident an independent review will find that Norton Healthcare is compliant with all IRS, regulatory and financial reporting standards maintained by health systems nationwide.<\/em><\/p>\n
\nYesterday, Norton Healthcare was notified that Jack Conway, the Attorney General for the state of Kentucky, announced his intention to get involved in our legal issues with both the University of Louisville School of Medicine and Kosair Charities. Both of these issues have been generating significant media attention for the past year and both are currently in the court system seeking resolution. Although there had been no conversation between the Attorney General\u2019s office and Norton Healthcare about Mr. Conway\u2019s decision to become an active participant, we remain confident that we have done the right things in the right way. Once all the facts are presented, we are confident the courts will agree with our positions. What follows is the official statement we have given to the media in response to yesterday\u2019s filings.<\/em><\/p>\n
\nIt is a sad business indeed that these three important Louisville institutions have come to the point of interlocking lawsuits, joined at the very least by the demand by the AG for a Special Master Commissioner\u2013 or will there be two separate Commissioners? Given that the disputes to date have been presented to the public largely by way of press releases, and interpreted mostly by journalists such as I, it was inevitable and perhaps even best that the matter is now in the hands of the courts. It may be that only when the protagonists are placed under oath that the motivations behind these disputes will become clear, and that an understandable and verifiable story will be available to a public that also has a dog in this fight.<\/p>\n
\nPresident, KHPI
\nEmeritus Professor of Medicine, UofL
\nAugust 3, 2014<\/p>\n
\n\u2022 Pleading re. intervening in\u00a0Norton Healthcare v. University of Louisville<\/a>.
\n\u2022 Pleading re. intervening in\u00a0Kosair Charities v. Norton Healthcare
\n<\/a><\/p>\n
\n\u2022 Initial Complaint<\/a> by Kosair, May 8, 2014<\/p>\nShare this:<\/h3>