KentuckyOne Health to slim down operations

June 1, 2017

By JULIE MINDA

KentuckyOne Health of Louisville, Ky., plans to restructure its operations, divesting of nine of its facilities — most of them in Louisville — and retaining eight facilities. The system, the largest health care provider in the state, said in a press release that its goal is to "focus its operations on a smaller footprint centered in central and eastern Kentucky," although it is retaining one Louisville hospital.

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The plan follows a December announcement that KentuckyOne no longer would be managing the University of Louisville Hospital and the related James Graham Brown Cancer Center as of July 1. The Catholic health system, the University of Louisville and University Medical Center revised their four-year-old joint operating agreement in order to bring the University of Louisville Hospital and the cancer center under the management of University Medical Center, which is the organization that operated the hospital and cancer center prior to the agreement that linked KentuckyOne and the university.

KentuckyOne Health announced May 19 that Ruth Brinkley made the decision to resign as the system's president and chief executive, effective July 14. Chuck Neumann, the interim president of University of Louisville Hospital, will become interim president and chief executive of KentuckyOne Health. Neumann previously had said he would leave the interim role with the university hospital when University Medical Center assumes management of the university hospital and the cancer center. Brinkley will work with Neumann in an advisory capacity through mid-September.

Brinkley has led KentuckyOne since it was created by the 2012 merger of Jewish Hospital & St. Mary's HealthCare of Louisville and Saint Joseph Health System of Lexington, Ky. Englewood, Colo.-based Catholic Health Initiatives had been a sponsor of both legacy systems, and became the sponsor of the merged organization. Jewish Hospital HealthCare Services had been a sponsor in the Jewish Hospital & St. Mary's HealthCare organization and, with the merger, it became a minority sponsor under the moniker Jewish Heritage Fund for Excellence. Catholic Health Initiatives' public juridic person, Catholic Health Care Federation, sponsors the Catholic facilities within KentuckyOne.

KentuckyOne had sought to merge with the University of Louisville Hospital at the time of the Jewish Hospital & St. Mary's — Saint Joseph combination, but then-Gov. Steve Beshear rejected that three-way merger. In March 2013, KentuckyOne entered into the joint operating agreement that gave it oversight of day-to-day operations of the university hospital and the cancer center. The university hospital is an academic medical center providing quaternary and tertiary care.

KentuckyOne said in a May 12 release that it is undertaking its broader restructuring effort to better position itself to improve care and to invest in "opportunities for growth."

Brinkley said in the release that the system had encountered significant challenges in achieving its vision and that great change and uncertainty in the health care industry had strained the system's financial health. Reimbursement rates didn't always cover highly complex care and the system had limited access to financial capital. She said: "change is needed to allow ongoing support for health and wellness in Kentucky."

KentuckyOne's David McArthur, senior manager of media relations, said in mid-May the system is working with Morgan Stanley to identify and begin discussions with potential bidders for the hospitals it will divest. As Catholic Health World went to press, there were not yet bidders. The timeline for the deal will be based on market response, according to McArthur.

He said, "While we are unable to invest in all communities (where) we currently operate, the opportunities for ownership should be very attractive to another health provider with the financial resources to make investments and leverage the top talent and expertise of employees and physicians to be even more successful."

McArthur said "all viable options will be explored, as long as they position the facilities for future success and ensure continuity of care." That may mean negotiating with multiple bidders and/or with prospective buyers who would discontinue the Catholic identity of the Catholic facilities KentuckyOne is divesting, he said.

All but one of the facilities KentuckyOne marked for sale are legacy Jewish Hospital & St. Mary's facilities. Saint Joseph Martin of Martin, Ky., is a legacy Saint Joseph Health System site. Two of the nine facilities under consideration for divestiture are Catholic: Saint Joseph Martin and Sts. Mary & Elizabeth Hospital of Louisville.

Archbishop Joseph Kurtz of Louisville issued a statement on the restructuring in which he acknowledged "the very difficult environment in which health care providers operate at this time." Bishop Kurtz expressed gratitude for KentuckyOne's service to patients and commitment to care for the poor and marginalized. "My prayers are with KentuckyOne Health and the hospitals and providers who will be in transition," he wrote.

According to information from McArthur, KentuckyOne currently employs 12,000. It will employ 5,000 people after divestiture. (This count excludes the approximately 2,500 people who will transition to University Medical Center employment July 1.) Currently, KentuckyOne includes about 2,300 acute care beds. It will have about 1,000 after divestiture.

Brinkley indicated that maintaining high-quality care is a main priority during the restructuring, as is minimizing disruption for employees and physicians. In a May 12 message announcing the restructuring to employees, Brinkley said the system will hold town hall meetings to address employees' questions and will provide employees and doctors with ongoing updates on the progress of the divestitures and restructuring.

The KentuckyOne restructuring comes as the system's parent Catholic Health Initiatives moves forward with a potential alignment with San Francisco-based Dignity Health, announced in October. KentuckyOne's McArthur said KentuckyOne's evolution "is unrelated to the ongoing discussions between CHI and Dignity."

» View a video from KentuckyOne for key points on the restructuring

KentuckyOne facilities marked for retention or divestiture

Facilities and assets to remain part of KentuckyOne

  • Flaget Memorial Hospital, Bardstown, with 40 acute care beds and 12 skilled nursing beds
  • Our Lady of Peace, Louisville, a psychiatric hospital with inpatient and outpatient services. It has 396 beds.
  • Saint Joseph Berea, Berea, a 25-bed critical access hospital
  • Saint Joseph East, Lexington, a 174-bed community hospital
  • Women's Hospital Saint Joseph East, Lexington
  • Saint Joseph Hospital, Lexington, a 433-bed tertiary medical center
  • Saint Joseph Jessamine, Nicholasville, an ambulatory care center
  • Saint Joseph London, London, a 120-bed facility
  • Saint Joseph Mount Sterling, Mount Sterling, a 42-bed community hospital
  • Continuing Care Hospital at Saint Joseph East and Saint Joseph Hospital, 45 long-term acute beds
  • KentuckyOne Health Partners clinically integrated network, based in Louisville
  • KentuckyOne Health Medical Group provider practices in central and eastern Kentucky and Bardstown

Facilities and medical group marked for divestiture

  • Frazier Rehab Institute, Louisville, providing inpatient and outpatient rehabilitation, with 135 beds and 25 outpatient locations
  • Jewish Hospital, Louisville, a 462-bed tertiary care facility
  • Jewish Hospital Shelbyville, Shelbyville, a 70-bed hospital
  • Medical Center Jewish East, Louisville, an outpatient facility
  • Medical Center Jewish Northeast, Louisville, an outpatient facility
  • Medical Center Jewish South, Shepherdsville, an outpatient facility
  • Medical Center Jewish Southwest, Louisville, an outpatient facility
  • Saint Joseph Martin, Martin, a 25-bed critical access hospital
  • Sts. Mary & Elizabeth Hospital, Louisville, a 298-bed hospital
  • KentuckyOne Health Medical Group provider practices in Louisville and Martin

 

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