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Capulets and Montagues, Hatfields and McCoys and Norton and U of L

by Terry Boyd

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In any other city, covering health care is about as exciting as covering actuarial tables.

Not in Louisville, baby. Here, it’s like someone cast “West Side Story” with all the characters wearing mid-priced, ill-fitting Macy’s suits.

Top Norton Healthcare and University of Louisville executives have had a decade of painfully public rumbles over everything from neurosurgeons to hospital operating contracts to who gets the money from the Quality Care Charity Trust that covers treatment for indigent people.

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But those were polite sparing compared to an ongoing and escalating showdown. Norton and U of L execs are feuding (there’s no other word for it) over whether Norton has the legal right to even discuss a possible operating agreement with the University of Kentucky. That agreement would bring together Norton’s Kosair Children’s Hospital and UK’s Kentucky Children’s Hospital, the only two pediatric hospitals in Kentucky.

In IL’s three-year history, we’ve never received so much inside scoop and so many internal documents and emails (most of which our legal types nixed using) for one story. We also hear in excruciating detail about the very personal rivalries, especially between Norton President and CEO Steve Williams on one side, and U of L  President James Ramsey and Dr. David Dunn, U of L’s executive vice president for Health Affairs, on the other.

Back and forths included a mercurial Dunn hanging up on Williams, say insiders, after calling Williams “a bully.”

It all started last week when both the Courier-Journal and Business First ran seemingly innocuous briefs from news releases announcing the UK/Norton scheme without realizing its impact. Dunn must still read the newspaper, because last Friday, all hell broke loose. (“Can you imagine,” said one wag, “being the guys at UK and realizing what you just stepped in?”)

Last Friday, CJ health care reporter Laura Ungar posted a story, “Norton Healthcare deal upsets University of Louisville,” that had the most understated headline in newspaper history.

In it, the always introspective, measured and understated Dunn was quoted as saying:

“We remain skeptical that the proposed arrangement is anything more than an attempt by Norton to control resources and referrals and maintain its bottom line as one of the top ten wealthiest not-for-profit companies in the health care arena.”

There was the predictable response from Norton officials. But even then, insiders were baffled as to what was really going on. In two days of background conversations last weekend with doctors, administrators and attorneys, it began to be clear the children’s hospital feud was really about U of L’s joint operating agreement last November with Denver-based Catholic Health Initiatives.

In that deal, U of L agreed to merge University of Louisville Hospital with CHI’s operations in Kentucky under a joint operating agreement – a deal which includes what’s left of Jewish Hospital & St. Mary’s HealthCare – to form KentuckyOne Health.

Yesterday, Williams charged in a news conference that the U of L/CHI agreement opened the door to U of L, which controls the land lease for Kosair, evicting Norton and handing over Kosair’s pediatric operations to CHI/KentuckyOne.

“We would be saddened to learn that this eviction threat is instead an effort by the university to transfer the hospital we own to Denver, Colorado-based Catholic Health Initiatives, as they did with their university hospital last year,” Williams said at the beginning of the Q&A session.

Dunn has stated that the Norton/UK negotiations were covert, and that he was shocked and amazed that Norton is looking for a better deal because Norton already has a pediatrics partner … U of L.

Williams countered yesterday:

“Well, if we want to talk about surprises, on November 12 we certainly were surprised when the announcement was made on the KentuckyOne/U of L deal. We were certainly surprised the option had been given to CHI that time of their choice, which could be annually going forward, that they could take the pediatric relationship that had been in place … since 1962. That was a big surprise. We had never heard of that.”

What had really happened, say our sources, is that U of L and Norton had been working for years to negotiate a revised academic affiliation agreement for pediatricians. The negotiations reached the “term sheet” stage of final financial details on Oct. 1, 2012 … just four weeks before Norton officials learned that U of L was doing the deal with CHI.

(See an internal email here.)

Ouch.

Then, when U of L execs, including Dunn, found out about the UK/Norton deal, we started getting internal docs and emails like these that confirmed that below the surface, this feud had been simmering for months:

What are you hearing about all the happenings with the UK/Norton partnership? I have gotten a ton of calls and know that (U of L President James) Ramsey and Dunn are pissed. Apparently (UK President Eli) Capiluto dropped the bomb on Ramsey at the (Fancy Farm) ham breakfast and then walked away.

Several sources sent us versions of this internal Norton document telling employees about the UK/Kosair deal, which certainly could be interpreted at U of L as  Norton executives being in a checkmate mode of blocking CHI’s expansion and trying to corner all the pediatric assets in the state:

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That led to Dr. Gerard Rabalais and others at U of L sending internal emails such as this:

We do not support the redistribution of Norton Healthcare resources for pediatric services, generated as the result of the hard work and dedication of our university faculty and staff, until Norton Healthcare provides the support they have promised but failed to provide to our faculty and staff at the Children’s Hospital Norton Healthcare currently manages in Louisville.

U of L and Norton insiders agree on one point – that Dunn’s blunt language in CJ stories essentially accusing greedy Norton officials of moving over the years to steal U of L’s pediatrics business, then threatening to evict Norton operations at Kosair keeps the feud front and center with the public.

“You don’t see Gerry Rabalais and Mike Bukosky blowing up in public,” said a source, referring to U of L’s chairman of the Department of Pediatrics and University of Louisville Physicians CEO, respectively.

“Here’s what’s really going on,” said yet another wag. “It’s too hot to play golf.”

As we’ve said so many times about public showdowns between corporations – especially charitable institutions – the only people who benefit from all the sturm und drang are the attorneys and crisis PR experts.

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