Deal to sell Jewish Hospital may be falling apart, raising the possibility that it might be closed, with big ramifications

KentuckyOne Health photo

The future of Louisville's Jewish Hospital is in doubt. Its owner, KentuckyOne Health, "continues to lose money after months of negotiating to sell it and other local facilities to a hedge fund, according to a doctor who has written about the local health care industry."

So reports the Louisville Courier Journal, which interviewed Dr. Peter Hasselbacher, a retired University of Louisville medical professor. "I would not be surprised for Jewish Hospital to close its doors within a matter of months," he said. "I wish the best for them, but I think the odds are stacked against them."

"Hasselbacher's concerns are shared by five other doctors and five current KentuckyOne staff members in a variety of roles, as well as a former administrator with knowledge of the negotiations," the CJ's Grace Schneider and Morgan Watkins report. "They shared information with the Courier Journal on the condition of anonymity because they aren't authorized to discuss the matter and due to their employment with or other professional ties to KentuckyOne and the university," which has an organ-transplant program at Jewish.

The CJ's sources and Hasselbacher doubt that KentuckyOne will be able to sell Jewish to BlueMountain Capital Management, a New York hedge fund that has formed a hospital-management firm with a Los Angeles billionaire. Its first acquisition, of "a failing non-profit Catholic hospital chain in California, has failed – the hospital system has filed for bankruptcy," Hasselbacher reported on his Kentucky Health Policy Institute blog on Sept. 5. He said that is "casting a very dark curtain over this potential transaction in Louisville."

The deal was expected to include Jewish's several satellites, including one in Shelbyville, and their doctors' practices; Sts. Mary & Elizabeth Hospital in southwest Louisville; and Saint Joseph Martin, a small hospital in Eastern Kentucky's Floyd County. But St. Joseph was sold to Appalachian Regional Health in June, and "Our Lady of Peace Hospital, a profitable psychiatric hospital that KentuckyOne initially intended to keep, is now part of what's on the block with BlueMountain," the newspaper reports. "But the hedge fund now wants Jewish out of the bundle, according to the longtime doctor with ties to Jewish and U of L and a local health care executive."

The CJ notes, "KentuckyOne and BlueMountain announced in December that they were entering negotiations, but have set new deadlines for closing the transaction." KentuckyOne interim president and CEO Chuck Neumann said through a spokesman that "a complex due diligence and transaction process" has delayed the deal. A BlueMountain spokesman said negotiations are continuing.

"Neumann told employees Friday that executives have no plans to close Jewish, but added that they're making contingency plans in case they can't reach an agreement," the CJ reports. University President Neeli Bendapudi told the newspaper, "We really are trying to be prepared for everything." Jewish has 462 beds, so its closure would have serious ramifications..

"The remaining downtown hospitals (University Hospital and Norton Heathcare) will be swamped if not overwhelmed," Hasselbacher wrote. "Sharing with the outlying hospitals is not likely sufficient to take up much if any of the load. University Hospital is already full. Without a landing pad for transplant, rehab, cardiology, and other specialty services historically housed at Jewish, the University will lose access to those teaching services."

KentuckyOne's Denver parent, Catholic Health Initiatives, is heavily in debt. It said 16 months ago that it would sell its Louisville properties, "in a bid to shed facilities that were losing money," the CJ notes. "KentuckyOne and BlueMountain's announcement of negotiations in December allayed fears that the health system couldn't find a buyer. But several signs point to trouble for Jewish, which needs more than $200 million in upgrades. Worse, it's received D ratings in recent years from a nonprofit health care watchdog that evaluates patient safety."

UPDATE, Sept. 24: Insider Louisville reports, "Jewish Hospital for years has been losing money and until recently had been propped up financially by the profitable University Hospital, which KentuckyOne managed. However, the University Hospital’s management — and profit — have reverted to the University of Louisville, leaving Jewish in a more precarious financial situation and its owner with greater incentives to sell it."