University of Louisville to acquire KentuckyOne facilities in Louisville, Ky.

September 15, 2019

Pending regulatory and Catholic Church approvals, the University of Louisville is poised to acquire on Nov. 1 three acute care hospitals, a neuroscience and rehabilitation center, a behavioral health hospital, as well as physician groups and outpatient facilities in Louisville, Ky., from subsidiaries of Catholic Health Initiatives.

Under the terms of the acquisition, the University of Louisville will pay an amount based on the financial liquidity of the facilities at the time of the acquisition. The university has agreed to pay $10 million, but that amount will be increased or reduced based on whether the estimated combined net working capital of the facilities on Oct. 31 is greater or less than $76.4 million, which represents their target net working capital as of Dec. 31, 2018.

The sellers are Jewish Hospital and St. Mary's Healthcare, KentuckyOne Health, and CHI Kentucky — all related entities and all part of CommonSpirit Health. CHI merged with Dignity Health early this year to create CommonSpirit Health.

The sellers also have agreed to cancel two promissory notes amounting to $19.7 million from University Medical Center, a university subsidiary. Those promissory notes are related to a 2013 joint operating agreement between two CHI subsidiaries, KentuckyOne Health, University of Louisville and University Medical Center.

As part of the acquisition agreement, in order to support the facilities' use and operations, the foundation of Jewish Hospital and St. Mary's Healthcare will provide $40 million to the University of Louisville over four years; the Jewish Heritage Fund for Excellence has committed $10 million; and the Economic Development Cabinet of the Kentucky state government will provide a loan of $50 million to the university. That loan will begin at an interest rate of zero and then will transition to a low-interest rate. Half of the principal will be forgivable if the university meets certain criteria.

Plans call for the acquired facilities to rebrand with the moniker "U of L" when the deal closes.

Currently, Sts. Mary and Elizabeth Hospital, one of the three acute care hospitals changing ownership in the deal, and Our Lady of Peace Hospital, the behavioral health hospital, are Catholic facilities. Once the acquisition is complete, the facilities no longer will be Catholic, according to information from KentuckyOne.

KentuckyOne was the result of a 2013 merger between two CHI subsidiaries, Jewish Hospital and St. Mary's HealthCare of Louisville and Saint Joseph Health System of Lexington, Ky. Englewood, Colo.-based CHI continued to operate the combined entity after the merger. For a time, the University of Louisville Hospital and the James Graham Brown Cancer Center were part of KentuckyOne through a joint operating agreement but that agreement was dissolved June 30, 2017.

In May 2017, CHI had announced plans to divest of nine of its KentuckyOne facilities — most of them in Louisville — and to retain the remaining eight hospitals in central and eastern Kentucky. The eight that it retained were rebranded in January as "CHI Saint Joseph Health."

CHI transferred ownership of Saint Joseph Martin of Martin, Ky., one of the facilities slated for sale, to Appalachian Regional Healthcare on June 30, 2018.

CHI had been negotiating to sell the remaining Louisville-area facilities to the New York-based management firm BlueMountain Capital Management. Those talks ended with no sale. CHI began negotiating with the university last fall.

In June, the university ended talks, saying that it could not secure a partner to help it finance the deal, and it could not put the university's finances at risk by acquiring the KentuckyOne facilities. The discussions between CHI and the university resumed in August after the state agreed to provide the loan and the foundations agreed to infuse capital into the facilities slated for acquisition.

According to information from KentuckyOne and the university, the terms of the acquisition will enable the university to preserve about 5,000 jobs associated with the acquired facilities and to maintain and strengthen health care in and around Louisville. The university has no plans to close facilities or reduce services, according to information from the university.

Organizations set for acquisition by University of Louisville

  • Jewish Hospital of Louisville, Ky., including a heart and lung center and outpatient center
  • Frazier Rehabilitation and Neuroscience Center of Louisville
  • Sts. Mary and Elizabeth Hospital of Louisville, a Catholic facility
  • Jewish Hospital of Shelbyville, Ky.
  • Our Lady of Peace Hospital of Louisville, a Catholic behavioral health facility
  • Physician groups affiliated with KentuckyOne Health
  • Outpatient facilities


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