UofL’s attempt to find a partner for a potential purchase of Jewish Hospital and other health care facilities is “uncommon” and unlikely to generate much attention from players in the health care industry, a former hospital executive and professor at the University of Kentucky said.
“I think it’s not very likely that they’ll find many parties who are interested,” Lawrence Prybil, emeritus professor of Healthcare Leadership at UK, told Insider Wednesday.
The university Tuesday evening filed a request for proposal, a formal step to seek a partner who would pay for an acquisition of Jewish and up to eight other medical facilities that the KentuckyOne Health system has been trying to sell for nearly two years.
University President Neeli Bendapudi said Tuesday that the institution is looking for a partner with both adequate capital and operational expertise, though the potential acquisition cost and details about the cooperation among the parties had yet to be determined.
Both Norton Healthcare and Baptist Health, the two other big Louisville health care players, told Insider via email Wednesday that they had not yet made a decision as to whether they will submit a response to UofL’s request.
Prybil said that for either Norton or Baptist to step into the kind of partnership that the university has proposed “would be a very, very big venture” and the health systems would have to weigh very carefully such a deal’s costs and benefits to them and the community.
“I think that KentuckyOne Health’s experience has demonstrated that there aren’t a lot of partners that are interested in acquiring these properties,” he said.
Nashville, Tenn.-based Ardent Health, one of the parties with whom the university has been corresponding, said it does “not comment on speculation regarding plans which the company may or may not be considering.”
The medical facilities, especially Jewish, are critical to the university and serve as a staging area for many School of Medicine-related functions, including cardiology, organ transplantation and neurosurgery services. The hospital has been struggling financially, and prolonged discussions between KentuckyOne and prospective buyer BlueMountain Capital Management had raised doubts about the facility’s survival.
KentuckyOne has been trying to shed the Louisville assets, which also include Sts. Mary & Elizabeth Hospital, since May of 2017. Jewish and Sts. Mary & Elizabeth posted operating losses of nearly $29 million in the six months ended Dec. 31, according to a report filed last week by Catholic Health Initiatives. The report also indicated that the two facilities’ liabilities, at $81.7 million, were about four times as high as their assets.
Bendapudi said Tuesday that the request for proposal reflects the university’s interest in setting up its health sciences campus for growth and “to say we’ve tried everything, we’ve left no stone unturned, we want to explore all possibilities so that we can support the health care needs of our community.”
Potential university partners have to respond by March 8 — 16 business days from Tuesday.
Prybil, former CEO for a six-state division of the Daughters of Charity National Health System, told Insider that the university is unlikely to find many respondents, particularly given the short time horizon.
The university, according to the RFP, is asking potential partners for information including a proposed governance structure, the amount of money they are willing to contribute and “a detailed description/list of due diligence information (including, but not limited to legal, financial, operational and regulatory information) you require to compete your investigation.”
That due diligence process, a comprehensive appraisal of assets and liabilities involving nine medical facilities with combined revenue of about $820 million, has been described by KentuckyOne leaders as “extremely complex and in many ways unique within the industry.”
Those leaders have cited the deal’s complexity as one of the reasons why their negotiations with New York-based alternative asset management firm BlueMountain Capital have taken much longer than expected.
Prybil said that if the university is merely seeking a partner to agree to a discussion about a potential deal, a 16-day time frame may be small but “plausible.” However, he said that no party in that short a period is going to make a firm offer and put hundreds of millions of dollars at risk, especially given the lack of clarity about ownership and decision making structures.
The university told Insider via email Wednesday that it “included considerable detail in the RFP about the market, facilities, history and expectations (and expects) the information to be helpful in the due diligence process.”
Of course, at least one potential buyer has been performing its due diligence since late 2017: BlueMountain Capital Management, the firm that at least until late last year was KentuckyOne’s exclusive negotiating partner. (The parties recently have described the negotiations as “confidential,” but they have avoided the term “exclusive.”)
BlueMountain declined to comment Tuesday on the university’s plan to file an RFP and on Wednesday declined to say whether it planned to respond to the request.
University spokesman John Karman III told Insider via email Wednesday that university officials have had no correspondence with BlueMountain officials — with or without the presence or participation of Catholic Health Initiatives or KentuckyOne officials — regarding a deal involving the KentuckyOne facilities.
The university and the attorney general’s office could not say Wednesday whether UofL was required by law to go through an RFP process to find an acquisition partner. The Kentucky Finance and Administration Cabinet, which oversees RFPs, could not be reached late Wednesday afternoon.
UofL had used the request for proposal approach in 2012 for its hospital’s previous tie-up with Jewish Hospital and KentuckyOne Health, though the parties ended their joint operating agreement in 2017. UofL initially wanted its hospital to merge with Jewish Hospital and other medical facilities, but then-Gov. Steve Beshear rejected that deal after criticism from Attorney General Jack Conway, who had suggested the institution go through an RFP process.