Hospital merger

Governor rejects merger of University of Louisville Hospital with St. Joseph

Beshear: state should retain control of public asset

jbrammer@herald-leader.comDecember 31, 2011 

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Gov. Steve Beshear delivers his inaugural address during the swearing-in ceremony Tuesday, Dec. 13, 2011 at the Capitol in Frankfort. Photo by Jonathan Palmer

JONATHAN PALMER — © 2011 Herald-Leader Buy Photo

FRANKFORT — Gov. Steve Beshear has rejected a controversial merger of three hospital systems in the state, saying, "The risks to the public outweigh the potential benefits."

The merger would have united University of Louisville Hospital with Jewish Hospital & St. Mary's HealthCare in Louisville, and St. Joseph Health System in Lexington.

Denver-based Catholic Health Initiatives, which owns St. Joseph, would have had control of the new system.

Concern about the merger primarily focused on the policy that CHI follows Catholic health directives.

With the merger, U of L Hospital had agreed not to perform certain procedures that the directives do not allow, such as sterilizations.

Beshear said, "Significant legal and policy concerns have been raised about this proposed merger, including constitutional and public policy questions about the influence of a religious entity on a publicly owned institution, especially regarding reproductive issues.

"In addition, if for some reason in the future the merger partners were forced to separate, the potential costs of that unwinding could be significant and have a detrimental impact not only on University Hospital, but also on the taxpayers of this state."

Beshear said most troubling to him was "the loss of control of a public asset.

"University Hospital is a public asset with an important public mission, and if this merger were allowed to happen, U of L and the public would have only indirect and minority influence over the new statewide network's affairs and its use of state assets."

Beshear said many of these issues were raised and analyzed in a report from Attorney General Jack Conway, "who recommends not going forward with the merger."

Spokesmen for St. Joseph and U of L Health Care said the hospitals plan to continue to pursue the proposed merger.

Jeff Murphy, regional director of marketing, communications and public relations at Saint Joseph Health System in Lexington, said in a prepared written statement, also released by U of L:

"We received the Attorney General's report at 9 this morning and subsequent Governor's decision. We are disappointed on behalf of patients across the Commonwealth who would be the greatest beneficiaries of the proposed merger, and who have the most to lose if the merger does not move forward.

"As recently noted by a respected independent health care expert engaged by the Jefferson County Attorney, this merger is crucial to the future of University of Louisville Hospital.

"Each of the partners remains committed to working together to further the joint vision that has guided us over the last several months. We firmly believe that a strong alignment between our organizations will have positive benefits for the communities we serve and the health care of Kentuckians across the state.

"We will continue to work with the Governor's office and other government officials to address the inaccuracies and noted concerns in the report. We look forward to delivering a transaction in a form that the Governor would feel compelled to approve."

Conway, a Democrat from Louisville, said in a statement that he advised Beshear that he "should not at this time approve the proposed new affiliation agreement and new lease.

"I support the University of Louisville and its mission, but it is a public agency with an obligation to inform and work with state government regarding the control of a public asset such as University Hospital," Conway said.

Conway said he is "committed to working with all parties to ensure that our hospitals continue to fulfill their missions as leading trauma centers, teaching hospitals and nationally renowned research facilities."

Conway also said that his office's review of the proposed merger "presented an unprecedented combination of entities and a myriad of legal and public policy issues. Some of those issues were addressed by the parties, but many of them were not resolved.

"Of particular concern was the loss of control of a valuable state asset and the services it provides to the public."

Beshear said he consulted Conway, state Auditor Crit Luallen, U of L officials and the proposed merger partners, health care and finance experts and "concerned citizens from across the Commonwealth" before he made his decision.

He said U of L Hospital "provides high-quality health care services, and I greatly appreciate their efforts to improve those services, improve the health status of Kentuckians and find ways to grow and expand the mission of the university health care system."

Beshear also said that he knows that "the changing health care industry has caused significant challenges for both university and Jewish Hospital & St. Mary's Healthcare.

"I am committed to assisting both facilities in reaching our shared goals of providing quality care, especially to our poorest and most vulnerable citizens, as well as finding ways to ensure both facilities remain on strong financial footing."

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