LOUISVILLE, Ky. (WDRB) -- Gov. Steve Beshear has twice denied a request from University Hospital to merge with two private hospitals.

The governor held off on announcing his decision until receiving an opinion from Kentucky Attorney General Jack Conway. Conway sat down with WDRB in the Morning Thursday and explained his reasoning for rejecting the proposed merger involving University Hospital, Catholic Health Initiatives, and St. Mary's & Elizabeth Hospital.

Conway says his biggest concern -- also expressed by the governor -- is the fact that University Hospital, a public institution, would become partially privatized if the merger went through as proposed.

"University Hospital is a public institution," Conway said. "Its Board is controlled by the University of Louisville. That's reflected in the minutes of the Board Meetings and the Board of Trustees. It's reflected basically in how they do business. It was reflected in the merger agreement in that University of Louisville got the money and ended up with regular payments from the new combined entity."

Some of the red flags Conway says he saw included transferring a state asset like University Hospital, which is a Level 1 Trauma Center as well as a teaching hospital funded by taxpayer dollars, to privately held businesses.

"The question is how do you go about that, what transparencies do you have to put in place? How do you bid it out, how do you understand the market?" Conway asked. "Because there are laws that govern how you transfer a public asset, and in this instance they didn't quite meet all of them."

Conway says there were also issues with University Hospital becoming affiliated with a religious hospital that may have caused problems with providing reproductive health services for women.  

"It's a question we really couldn't answer," Conway said. "Because at first the merger partners came out and said we'll become a Catholic hospital; then they said no, there's going to be a contract and the university won't fully be a Catholic hospital. So as a lawyer sitting back and trying to evaluate is this going to be excessive entanglement, are we running afoul of the Establishment clause of the U.S. Constitution We couldn't really answer that question because we didn't really know how it would all play out and we thought ultimately that would be for the courts."

Conway did not rule out the possibility of an expansion or merger in the future.

"I don't think University has to find a way to do it all on its own," Conway said. "If you look at the history of University Hospital, they were managed by Humana at one point, they've been managed by Columbia, so there is a way to go forward. I don't want to speculate as to whether it will be with this group that they were just negotiating with or someone else."

The bottom line is that Conway and Gov. Beshear did not feel it would be a wise decision to "completely transfer away control of a public asset that the taxpayers were involved in building in the first place."

As far as the recent discrepancies with the Quality Care and Charitable Trust (QCCT) Board not having recorded the minutes for its meetings since 2009, Conway says recent audits "came out regularly clean. It just looks like may have not done their due diligence in meeting on a regular basis as their bylaws call for."

University Hospital officials have said the merger would have provided a much-needed infusion of cash to invest in new programs and technology, but Gov. Beshear cited recent profits as evidence that the University is on solid footing.

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