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Move follows governor's rejection of original three-way merger plans

Two Kentucky systems connected with Catholic Health Initiatives have merged to form that state's largest health care provider. Original plans had called for a three-way merger involving a public university hospital and cancer center, but Kentucky's governor rejected that merger proposal.

The successful merger involving Jewish Hospital & St. Mary's HealthCare of Louisville, Ky., and Saint Joseph Health System of Lexington, Ky., closed on Jan. 1. Those organizations had planned to merge with the University Medical Center-operated University of Louisville Hospital and Louisville's James Graham Brown Cancer Center in a deal involving a $320 million infusion by CHI. However, Kentucky Attorney General Jack Conway recommended in a Dec. 29 report that the governor not approve the merger as proposed, and Gov. Steve Beshear rejected the merger shortly thereafter. The governor met with University of Louisville representatives who appealed to him to reconsider, but the governor said in a Jan. 9 statement that the university representatives were not able to satisfy his and Conway's concerns.

The successfully merged system, called KentuckyOne Health, is continuing to explore ways to partner with University Medical Center, although KentuckyOne could not specify as Catholic Health World went to press what that partnership might involve.

KentuckyOne now has fiduciary responsibility for the Jewish Hospital & St. Mary's and Saint Joseph organizations. Jewish Hospital & St. Mary's is jointly sponsored by CHI and Jewish Hospital HealthCare Services and includes three inpatient hospitals, four outpatient hospitals, a psychiatric hospital, specialty centers, behavioral health sites and other facilities in north central Kentucky — some of them Catholic and some Jewish. The CHI-sponsored Saint Joseph includes eight Catholic hospitals in the center of the state. Under the merger, all facilities retain their premerger religious affiliations.

Englewood, Colo.-based CHI still will invest $320 million in KentuckyOne, including in an electronic health record system, other technology improvements, facility upgrades and equipment.

Bob Hewett, former chair of the Saint Joseph system board, chairs the newly formed board of KentuckyOne. He said the merger will enable the providers to better address health care concerns, including the need for preventive care, perhaps through the development of wellness centers — or facilities where clinicians will provide preventive care to help people stay healthy or manage chronic conditions — and the need for better access to physicians, perhaps through the use of telemedicine. Also, the merger is expected to improve collaboration among providers in the new system, including in the areas of cardiology, orthopedics and women's care.

Ruth W. Brinkley is president and chief executive of KentuckyOne. She had been executive in residence — an advocacy role — in Ascension Health's Washington, DC, advocacy office. Prior to that, she was president and chief executive of Ascension Health's Carondelet Health Network in Tucson, Ariz. Brinkley plans to announce her leadership team later this month.

KentuckyOne has a 15-member board, with 10 members appointed by CHI and five by Jewish Hospital HealthCare Services.

Kentucky leaders concerned with three-way merger

On Dec. 29, Kentucky Attorney General Jack Conway issued a report expressing concern about a proposed merger involving Jewish Hospital & St. Mary's HealthCare of Louisville, Ky.; Saint Joseph Health System of Lexington, Ky.; and University Medical Center, which operates the University of Louisville Hospital.

In the report, the attorney general said that, particularly since the University of Louisville Hospital is a state-owned asset, the proposed merger presented "significant and unprecedented public policy issues." He said that this is the first proposal in Kentucky to involve a publicly owned safety net hospital and a Catholic system subject to the Ethical and Religious Directives for Catholic Health Care Services.

Among the concerns outlined in the report:

• The University of Louisville did not involve the attorney general and governor in the negotiations early enough.
• If the merger partners in time were to decide to unwind the merger, the university might be required to repurchase the hospital as well as additional facilities. If the university is not financially able to do so, the state may be on the hook for money.
• There are potential constitutional questions regarding church and state separation since the merger would involve a public hospital's agreement not to provide certain services prohibited by the ethical and religious directives. (It has not been determined by a court whether the University Medical Center is a public entity.)
• Once merged, the hospital may no longer be considered a public agency that is subject to open records laws. The state is concerned with the potential loss of control over records, and it also questions how transparent records would be under such a merger.
• There are questions about whether payments to sponsors might alter the original purpose of a charitable contribution or result in the transfer of charitable assets out of the state of Kentucky.

Copyright © 2012 by the Catholic Health Association of the United States
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