The University of Louisville is moving forward with a new deal to buy Jewish Hospital in a move its president said is risky but will ensure the facility's doors stay open while also greatly expanding the size of U of L Health's operation.
The school's board of trustees gave President Neeli Bendapudi's plan its blessing Wednesday in a unanimous vote.
The vote clears the way for the university to finalize an agreement with KentuckyOne Health and its parent organization, CommonSpirit Health, that will allow it to buy Jewish as well as other local operations, including Our Lady of Peace Hospital.
The state will help make the deal happen with a plan to provide U of L with a $50 million loan.
Although Jewish has been losing money for years and taking responsibility for running it entails a significant degree of risk, Bendapudi said there are upsides, too. Adding Jewish and other KentuckyOne assets to U of L Health, which already oversees the university hospital, would turn it into a "$1.5 billion enterprise with no debt."
"We see tremendous opportunity," she said in an interview earlier this week.
Earlier this year, U of L tried and failed to find a partner to provide the financial backing it needed to buy Jewish and KentuckyOne's other local facilities. However, Bendapudi indicated the university kept searching for a way to make such a sale feasible, in large part because she didn't want the city to lose a major employer and health care provider.
"We never really gave up because I was very concerned about the community," she said. "A hospital of this size closing is not an everyday occurrence."
Here's how the tentative deal with KentuckyOne is slated to work, according to information provided by the university and Bendapudi:
The university will acquire Jewish Hospital (including its outpatient care center); the Frazier Rehab and Neuroscience Center; Sts. Mary and Elizabeth Hospital; Jewish Hospital Shelbyville; Our Lady of Peace Hospital; four outpatient medical centers (Jewish East, South, Southwest and Northeast); and Jewish's visitor and employee parking garages.
U of L (or its assignee/affiliate) will pay about $10 million to acquire these assets.
The sellers, which include KentuckyOne and certain affiliates, are expected to provide $76.4 million in "net working capital," including accounts receivable.
The $10 million purchase price U of L pays may be adjusted if the sellers provide more or less than the estimated $76.4 million in capital.
Additionally, CommonSpirit will cancel two promissory notes totaling $19.7 million, which a U of L affiliate still owes the firm. (Bendapudi indicated the debt is related to KentuckyOne's former management of U of L Hospital, which fully came back under university oversight in mid-2017.)
The goal is to close the deal on November 1.
When the deal closes, the Jewish Hospital and St. Mary's Healthcare Foundation -- which Bendapudi said is controlled by CommonSpirit -- will pay U of L $40 million in quarterly installments of $2.5 million. That money will go toward running the operations the university is purchasing.
The sellers agree to a five-year non-compete agreement that will restrict their ability to operate in certain Kentucky and Indiana counties. They also agree to refrain from soliciting certain key employees for two years.
The university would not take on any debt from this planned sale, Bendapudi said, and won't assume any liabilities for the operations it's buying until the deal closes.
Bendapudi also said two other funding sources are key parts of the university's plan to buy these facilities: A proposed $50 million loan from state government and a $10 million contribution from the Jewish Heritage Fund for Excellence, which would be provided when the sale becomes official.
The state's involvement
The long-term,$50 million loan is being arranged by the Kentucky Cabinet for Economic Development but also would require legislative approval.
Half of it would be forgivable as long as the university meets certain targets, with a 1% interest rate kicking in after the first five years. Those targets would involve the university maintaining certain job and wage levels or establishing and running clinics in under-served areas, according to information the university gave the Courier Journal.
A draft document the Courier Journal obtained also indicates that the economic development cabinet would make the loan contingent upon the legislature's approval of $50 million in additional appropriations for the cabinet and expects that would happen early next year.
"It does not eliminate all risk," Bendapudi said Monday of the proposed state loan. "As you can imagine with this, it is risky because it's a promise from the legislature that they will introduce it in their regular session in January 2020."
The state got involved in the university's effort to buy Jewish only recently. Bendapudi indicated that discussions about Jewish's future began in earnest with state officials within the past few weeks.
She also indicated they're going on faith that the legislature will come through because lawmakers recognize what's at stake here. "It's really hard to recruit companies, (and) it's really hard to keep companies if people cannot get healthcare," she said.
She also expressed gratitude toward the Jewish Heritage Fund for Excellence's plan to contribute $10 million.
Bendapudi said that contribution and the state loan, along with the sellers' anticipated provision of around $76.4 million in net working capital and the $40 million that would come in installments through the Jewish Hospital and St. Mary's Healthcare Foundation, would constitute the funding the university needs as it takes over the responsibility of running Jewish and KentuckyOne's other local facilities.
"We will have capital costs. We'll need to put money in," she explained.
Can U of L turn Jewish around?
Jewish has been losing money for years -- with an earnings report showing a combined $29 million in losses for Jewish and St. Mary's Healthcare during the six months that ended in December 2018 alone -- and it's estimated that it needs around $300 million to $500 million in upgrades.
Bendapudi acknowledged that the university will take on a big challenge by buying Jewish, and noted that she doesn't expect the financial situation to improve overnight.
"We will still lose money the first couple of years," she said, although the university will work to mitigate the losses. "This is a risk for the university. We are aware of that."
However, she pointed to her insistence since her inauguration last year as U of L's president that Louisville, as a public university, is part of the broader community and must act in ways that benefit the city and the commonwealth.
"I cannot think of a bigger need for this community," she said of Jewish's survival. "I'm hoping there is an appreciation for the fact that this (hospital) would have closed but for the university."
Todd high school receives threat, students questioned
BY the Kentucky New Era
Just a week after students in Todd County returned to school for a new year, the Todd County Schools district has received a threat directed toward the Todd County Central High School campus.
A letter posted online by Todd County Schools Superintendent Ed Oyler said the threat was from students who had been identified.
He said the threat was received Tuesday during the morning commute, and he said school administrators responded by contacting law enforcement agencies when the threat was received.
"As a matter of precaution, we take all threats toward our school communities of this nature very seriously," he said in the letter, which was addressed to district staff, students, parents and the community.
The letter was posted on the district's Facebook page.
Oyler said the students who were involved in making the threats were questioned by school administrators as well as law enforcement.
"No specific person was targeted, however, any threats to our students and school staff are totally unacceptable and will not be tolerated," the superintendent wrote in the letter.
"As a result," he added, "the purpose of this letter is to notify all parents and guardians that school district officials will pursue immediate legal charges to the absolute fullest extent of the law against anyone who make such threats, including students."
The superintendent said school officials will be advocating to their highest abilities for a swift prosecution and severe punishment.
He thanked both the Todd County Sheriff's Department and the Elkton Police Department for their quick response and their assistance with the situation, and he noted that those departments' quick action allowed officials to capably and efficiently handle the incident.
"Together we can prevent this unnecessary, dangerous and disruptive crime from victimizing our schools," Oyler said, adding that "we appreciate your partnership in keeping our school the safest place for your student to learn and grow."
Anyone with questions was urged to contact their child's principal.
She is confident in the team the university has put together at U of L Health, including CEO Tom Miller, who previously led Quorum Health, a Tennessee-based firm with a portfolio that includes 26 hospitals in 14 states, according to its website.
Bendapudi also said the university already successfully tackled problems at U of L Hospital after it resumed control of that operation from KentuckyOne that are similar in nature to certain issues that need to be addressed at Jewish Hospital.
"It's all about execution ... Hiring good people into some key roles and then building on the strength we have," she said.