UofL said its narrow time frame to seek a partner to buy the struggling Jewish Hospital and other facilities was dictated by the letter of intent it sent in December to the health care assets’ owner, Catholic Health Initiatives.
The university on Feb. 19 had issued a request for proposal, a formal step to identifying a potential partner in the joint venture. A spokesman, John Drees, on Tuesday told Insider via email, “The RFP will help us align our efforts with the timing that was set forth in the December letter.”
While University President Neeli Bendapudi said the institution was casting “a wide net” in its search, interested parties have to respond by Friday, March 8.
Kentucky law requires public entities, such as the university, to go through a public procurement process to negotiate and award contracts “to ensure fair and equitable treatment of all parties and safeguard the integrity of the procurement system,” according to the Kentucky Finance & Administration Cabinet.
Most commonly, public agencies complete purchases through sealed bids, but the cabinet said procurements “involving technical or complex requirements may be bid as competitive negotiations by formal Request for Proposal (RFP).”
Pamela Trautner, the cabinet’s public information officer, also told Insider that state law prohibits public entities from corresponding or reaching an agreement with an outside party before issuing a competitive solicitation.
An RFP process or another solicitation also can be triggered, such as when the public entity receives an unsolicited proposal that the entity wishes to pursue. However, Drees told Insider that the university has not received any such proposals.
Both RFPs and bids must be advertised for at least seven days.
The university’s actions also may be informed by the reaction it received from public officials the last time it tried to merge with Jewish Hospital, in 2011.
At the time, the attorney general, Jack Conway, sharply criticized the university for having been in discussions with the hospital, Catholic Health Initiatives, and other parties for about a year before seeking input from the state.
Conway in December 2011 wrote that the university “presumed to negotiate the disposition and long-term use of a clear public asset in an unprecedented venture rife with complexities and permanent implications for the future … without fully or timely engaging or consulting with the appropriate agencies of the Commonwealth, notably the office of the Governor and the Finance and Administration Cabinet.”
Conway and the governor at the time, Steve Beshear, blocked the merger, prompting the university to employ an RFP process, which, about a year later, resulted in a joint operating agreement involving the university and the would-be merger partners.
Local health care observer offers praise and skepticism
Dr. Peter Hasselbacher, emeritus professor of medicine at the University of Louisville, who writes on the local health care industry through the Kentucky Health Policy Institute, praised the university for trying to get involved but said that he was skeptical about the gambit paying off.
The institution’s effort is preferable to the alternative of the institution sitting on the sidelines while CHI and another outside party determine the future of local health care assets that are critical to the community and the university, he said.
“Maybe this is a way to give (the university) more leverage,” Hasselbacher said.
Another positive step, he said, is that the university is speaking with one voice, together with its physician group — previously largely outside university control — which had made it difficult for the university to compete with the rest of the state in the health care arena.
However, Hasselbacher also said that he was surprised by the university’s proposal to continue to operate the local health care assets with a partner, a model that has proved unsuccessful for years.
Insider had reported in late December that UofL had submitted a non-binding letter of intent to KentuckyOne parent Catholic Health Initiatives, based in Denver, to acquire the health system’s Louisville-based assets.
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.
Some of the language in the RFP also reveals an air of desperation on the university’s part, Hasselbacher said.
When the university writes that it is looking for a partner to help the institution “compete more effectively,” it is essentially acknowledging that isn’t competing effectively, he said. And when it writes that a partnership could build a “bridge to future profitability,” the university is saying that its health care operations aren’t profitable.
Meanwhile, the university in the RFP says it is looking for a partner to put up a lot of money to purchase the hospitals and other assets, while the it “retains meaningful control of the governance of the clinical enterprise, with certain additional reserve powers related to the academic mission and community needs.”
“They’re asking for a lot here,” Hasselbacher said, while “(it) appears to me, and likely would to potential offerors, that UofL is playing from a very weak hand.”
He said he was “skeptical” about the university’s plan to continue operating the KentuckyOne health care assets in a joint venture, a model that, for years, has not been successful with Catholic Health Initiatives.
“I’m not sure that’s a successful venture in anybody’s hand,” Hasselbacher said.