LOUISVILLE, Ky. (WDRB) --  KentuckyOne Health will relinquish control of University of Louisville Hospital and the James Graham Cancer Center, ending what was supposed to be a decades-long arrangement with the University of Louisville after only four years.

On July 1, some 3,000 hospital and cancer center workers will once again become employees of University Medical Center, the U of L affiliate that ran the facilities before they were turned over to KentuckyOne – a unit of Denver-based Catholic Health Initiatives -- in 2013.

The change is part of a settlement approved Tuesday by a committee of the university’s board of trustees.

The settlement resolves a number of disputes U of L officials raised in an Oct. 4 letter that accused KentuckyOne of withholding nearly $60 million owed to the hospital, cancer center and medical school under the partnership.

The university also blamed KentuckyOne for nursing shortages at the hospital that have caused “serious reputational harm to U of L” and recent executive firings that threatened the operations of the hospital and cancer center.

At the time, KentuckyOne Health said U of L had not held up its end of the bargain and questioned how the funds it had contributed were being used.

In a joint news release, the university and KentuckyOne said their decades-long academic affiliation allowing U of L doctors to practice at Jewish Hospital and the Frazier Rehab Institute (both owned by KentuckyOne) would continue.

When the hospital partnership was announced in 2012, officials said KentuckyOne would infuse about $1.4 billion into the U of L facilities over 20 years.

U of L, under the leadership of former President James Ramsey, had first sought in 2011 to merge with the organizations that would later form KentuckyOne -- Jewish Hospital & St. Mary's HealthCare and Lexington-based St. Joseph Health System.

But then-Gov. Steve Beshear rejected an outright merger in 2012 over concerns about the loss of the hospital – a state asset – to a private institution.

At the time, U of L officials said they desperately needed private investment to keep the hospital going, which led to the partnership agreement with KentuckyOne.

But that was before Kentucky expanded Medicaid under the Affordable Care Act in 2014, a move that brought millions of dollars in new revenue to University Hospital – the safety net hospital for the poor – as more lower-income obtained government-paid health insurance.     

“The economics have changed,” Dr. Gregory Postel, U of L’s interim executive vice president of health affairs, said in an interview Tuesday.

Postel said expanded Medicaid coverage has been “very helpful” for University Hospital and is the “big difference” that once again makes it sustainable for the University Medical Center to run the hospital without a private partner.

Postel and Larry Benz, chairman of U of L's Board of Trustees, said UMC will be in charge of the facilities for the foreseeable future once the split with KentuckyOne is complete.  

But Benz said Tuesday that eventually, the university could consider other arrangements. 

"We will have the flexibility ... to open up discussions and consider local and national partners," he said. "The dynamics of healthcare suggest that you always have to be open to outsourced arrangements."

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