More health care drama
We’re a smidge burned out after Kosair v. Norton, but you have to go with the breaking news. We told you in Thursday’s The Closing Bell that Catholic Health Initiatives CEO Kevin Lofton was in town last week, meeting in executive session with the board of directors at subsidiary KentuckyOne Health.
This weekend, Ken Marshall, president of University of Louisville Hospital, sent a notice to employees that KentuckyOne CEO Ruth Brinkley will make a system-wide announcement concerning the status of efforts to close the budget gap.
Following Brinkley’s announcement, Marshall will hold a series of staff meetings to discuss the impact on University Hospital employees since KentuckyOne controls the hospital, University Medical Center and all Jewish Hospital & St. Mary’s Healthcare operations. The tension mounts.
From Marshall’s internal email:
Early next week, a message from KentuckyOne Health CEO Ruth Brinkley will be distributed to all employees.
The message will include an update on the work to improve the financial performance of the system. I plan on following up this message with some open forums for employees. As always, you’re welcome to ask any question. The forums will be held in the cafeteria on Tuesday, May 20.
Here are the times:
– 9:00 a.m.
– 2:00 p.m.
– 4:00 p.m
I hope you will join me.
This is all part of KentuckyOne trying to right the ship, a financial crisis that – if you’re a regular MBB reader – has been playing out for almost a year. Last August, we reported KentuckyOne fired its CFO, then its chief visioning officer. By October 2013, sources were telling us KentuckyOne was bleeding $70 million per month, the No. 1 problem market for Denver-based parent, Catholic Health Initiatives.
In February, we broke the news that Brinkley was announcing $218 million in KentuckyOne system cuts, followed by staff cuts in the hundreds. In March, an insider spent a lot of time calculating whether KentuckyOne could cut $218 million from its estimated $2 billion budget. The conclusion was, “Yes, but it will mean closing at least one major facility.
More than likely about 25 percent of costs are fixed (real or otherwise) – that would include depreciation, interest, corporate burden paid to corporate parent Catholic Health Initiatives in Denver and fixed labor and support (e.g. finance department, billing office, compliance office, plant maintenance, nursing managers, security, management, etc. etc.)
Of the remaining costs making up the 75 percent, 30-50 percent is likely “variable,” meaning those costs move with volume.
KentuckyOne executives would have had to achieve a 24-plus-percent reduction in cost to hit the $218 million and, “they are going to do that in 18 months,” the source told us then. “That has never been done, anywhere … most of these efforts are in the 2-percent-to-5-percent range. Norton, for example, is trying to reduce costs by $100 million over three years … its spend is about $1.6 billion annually.”
The only way they make the $218 million goal is a drastic move, such as closing University Hospital (unlikely) or the downtown Jewish Hospital complex (more likely).
Much-needed good news, courtesy of NuLu
• NuLu remains the hottest neighborhood in Louisville. Car Keys Express owners at 828 E. Market St. have just purchased the adjacent property to their east, with plans to create a campus. Car Keys Express, which supplies keys and remotes to auto dealerships, rental car fleets and other companies that have lots of vehicles, purchased the C.L. McBride Co. next door at 836 E. Market.
Insiders say life is good at Car Keys Express, and we have to agree. There’s a sapphire blue Maserati Granturismo in the parking lot. The company’s personnel work in a cool industrial space that used to be Flame Run glass works, which relocated to the Glassworks Building at Eighth and Market streets. Car Keys Express just paid $845,000 give or take for the C.L. McBride property. We will be following up on Car Keys Express, which just arrived in the neighborhood in 2012.
Of course, the question is, where is C.L. McBride, – a petroleum distributor – headed?
• In other NuLu news: We hear the Taj bar is planned for 807 E. Market St. in the building that used to house the late artist Stephen Irwin’s apartment and studio. Our sources tell us the plan is for a two-story club, along with outdoor seating in the courtyard.