The deal to save Jewish Hospital and other local health care facilities is in trouble, four sources told Insider this week, and some of the potentially affected parties are preparing for the downtown hospital’s closure.
“Everybody at this point is pretty much preparing for the worst,” one source familiar with the matter told Insider this week.
Two other sources told Insider that the deal, which involves the New York-based hedge fund BlueMountain Capital Management acquiring Jewish and other Louisville facilities owned by KentuckyOne Health, is dead.
The sources asked to remain anonymous as they would be affected by how the situation plays out.
And Dr. Peter Hasselbacher, emeritus professor of medicine at the University of Louisville, told Insider via email that he believes the deal is likely dead “and that Jewish Hospital will not be able to function much longer as a general acute care hospital.”
However, both BlueMountain and KentuckyOne told Insider via email this week that negotiations continued.
“The negotiations and due diligence to reach an agreement with BlueMountain Capital Management for the sale of these facilities continue, are extremely complex, and in many ways unique (within) the industry,” KentuckyOne spokesman David McArthur said. “We are committed to completing the transaction as soon as possible.”
Jewish Hospital for years has been losing money and until recently had been propped up financially by the profitable University Hospital, which KentuckyOne managed. However, the University Hospital’s management — and profit — have reverted to the University of Louisville, leaving Jewish in a more precarious financial situation and its owner with greater incentives to sell it.
KentuckyOne in May 2017 cited “significant challenges” in the health care industry as its motivation to sell Frazier Rehab Institute; Sts. Mary & Elizabeth Hospital; Medical Centers Jewish East, South, Southwest and Northeast; Jewish Hospital Shelbyville; Saint Joseph Martin; and KentuckyOne Health Medical provider practices in Louisville and Martin. In December, the nonprofit health system said that it had entered “exclusive negotiations” with BlueMountain.
According to the most recent quarterly operating statement from KentuckyOne’s parent, the Denver-based Catholic Health Initiatives, Jewish Hospital and St. Mary’s Healthcare (JHSMH) through the first nine months of fiscal 2018 were incurring operating losses of more than $1 million per week. And that’s before structuring, impairment and other losses. Plus, losses are increasing. Through the first nine months of the prior year, JHSMH incurred operating losses of about $726,000 per week.
“Even closing the hospital outright would be a rational decision,” Hasselbacher wrote in a recent article on the Kentucky Health Policy Institute blog.
Hospitals have been closing in the U.S. at a fairly constant — albeit slow — clip. In the last eight years, an annual net average 35 U.S. hospitals have closed, according to the American Hospital Association.
The closing of Jewish Hospital, a downtown facility that employs thousands of highly skilled and paid health care professionals and takes care of tens of thousands of patients, would have far-reaching consequences for many parts of the Louisville community, though the extent of the impact would depend, in part, on the speed with which the 462-bed facility is shuttered, one of the sources told Insider.
JHSMH employed nearly 6,000 in 2015, the latest year for which IRS records are available — though employment had declined by about 2,000 since 2010. The number of volunteers, meanwhile, had risen by 43 percent, to nearly 1,000.
Last year, JHSMH generated operating revenue of $781 million, according to CHI.
According to the Foundation for a Healthy Kentucky, the facilities count more than 100,000 inpatient days annually, and about 60 percent of those patients are on government insurance, either Medicare or Medicaid.
Concerns about patients
Health care professionals told Insider Louisville that they worried especially about the hospital’s uninsured and government-insured patients, in part because other Louisville hospitals may not be able to handle all of them, never mind that some of those patients may not easily be able to travel to the other hospitals. If patients did without diagnostic or treatment services, their health would deteriorate faster, which ultimately would make their care more expensive and/or lead to earlier deaths, these professionals said.
“I really don’t know what would happen to them,” one source said. “There’d be some scrambling.”
And Dr. Wayne Tuckson, president-elect of the Greater Louisville Medical Society, said that a major hospital closing in downtown would certainly prompt concerns about access and availability of service for that facility’s current patients. But he said he expects that whatever the outcome of the negotiations, the involved parties will have a plan that takes care of the patients, as their fate would be the communities’ obvious first concern.
As for the hospital’s employees, Tuckson said, some of them probably could find jobs at other local health care facilities, as some have capacity and will need to treat more patients if Jewish closes. But some employees likely would no longer be needed, he said.
Another source told Insider that some local doctors already are trying to pursue other opportunities, both within and outside of Louisville.
Jewish Hospital also provides important and broad medical services to the Louisville community that are not available elsewhere, including its prestigious cardiovascular surgery and organ transplant programs, which also hold enormous importance to the University of Louisville Medical School.
KentuckyOne said that the hospital, opened in 1905, develops “leading-edge advancements in hand and microsurgery, heart and lung care, orthopedics and sports medicine, neuroscience, organ transplantation and outpatient care.”
Jewish Hospital staff performed the world’s first successful hand transplant and “continues to be recognized for its specialized heart care procedures, including the implantation of ventricular assist devices (VAD), and transcatheter aortic valve replacement (TAVR).”
Hasselbacher has suggested that the university should take over parts of the operations, though one of the sources familiar with the matter wondered whether the educational institution could manage such an acquisition given its financial situation, especially without support from the governor’s office, which, given their frosty relationship, also seems unlikely.
Another source said that the loss of Jewish and some of the other facilities also would generate some cash flow concerns for the university, while the loss of some programs might accelerate discussions about which specialty programs are critical to the medical school going forward.
Overall, one of the sources said, some consolidation among Louisville health care providers could benefit patients because it would reduce the local health care system’s inefficiency and complexity. The problem, the source said, is that the likely consolidation in Louisville will be forced upon the community — rather than being guided with a vision for improving patient care.
The original deadline for the BlueMountain-KentuckyOne deal was this week — though KentuckyOne CEO Chuck Neumann said recently that the parties hope to conclude negotiations “around the end of summer.”
The Academic Affiliation Agreement between the university and KentuckyOne runs through Dec. 31. The parties amended it in February in anticipation of a deal being closed by that point.
“Any relationship between the parties beyond that date is being discussed by the parties,” McArthur said.
Tuckson encouraged BlueMountain and KentuckyOne to reach a decision soon, so that the community can quickly address any remaining challenges.
“Let’s make a decision,” he said. “It’s time.”
“(T) he community of Louisville needs to step up its financial and other support for its health care system. This is a public health issue,” he wrote on his blog. “It is not the responsibility of the University of Louisville or any other medical provider to solely finance the care of the citizenry of Louisville. … what happens in Louisville must not lie solely in the hands of outside corporations or (be) planned in the dark.”
Negotiations at this point are occurring without much government oversight or input: The state attorney general’s office told Insider that it is “monitoring this situation” though its jurisdiction covers only the handling of charitable assets or any involvement of state property.
The Kentucky Cabinet for Health and Family Services said that state law requires health care providers to notify the agency within 30 days of reducing or terminating a health service, such as the closing of a hospital.