Jewish Hospital emergency room

The emergency room at Jewish Hospital in downtown Louisville.

LOUISVILLE, Ky. (WDRB) – The parent company of KentuckyOne Health came within hours last week of canceling its longstanding financial support of the University of Louisville’s medical school in frustration over the lack of a deal to sell Jewish Hospital and other Louisville healthcare properties to the university, according to public records obtained by WDRB.

About five hours before a midnight deadline on May 31, KentuckyOne Health parent company CommonSpirit Health agreed not to follow through with a threat to end the roughly $2 million per month in support it provides to the university.

The support is called for in agreements that allow for U of L faculty doctors and residents treating patients and performing surgeries at Jewish Hospital and the adjacent Frazier Rehabilitation Institute.

But CommonSpirit gave only a two-week reprieve to those agreements, and now another deadline looms: Friday, June 14.

A spokeswoman for KentuckyOne Health indicated that the deadline could be extended again as the organizations continue their talks.

"We are working diligently to complete a transaction and we do not anticipate that the academic affiliation agreement will expire," said KentuckyOne Health's Lannette R. VanderToll in an email Friday.

KentuckyOne Health has been trying to sell financially struggling Jewish Hospital and its other Louisville-area healthcare facilities since early 2017.

After another deal failed, U of L entered the picture at the end of 2018 and is now the most likely buyer of the KentuckyOne assets. But the university needs a “partner” to help it finance the deal and provide capital to upgrade the facilities, as well as to help operate them.

U of L officials have been tight-lipped about the progress of the talks. Spokesman John Karman confirmed Friday the university is still trying to strike deals with a partner and simultaneously with CommonSpirit.

Last week’s reprieve came after KentuckyOne Health threatened to pull the funding associated with its academic affiliation and master service agreements, which provide support for faculty doctors and medical residents who work at Jewish Hospital and Frazier Rehab.

CommonSpirit was apparently using the funding to pressure U of L to agree to a purchase of the KentuckyOne assets.

“(D)espite significant efforts by both parties, we do not see a clear or achievable path to finalize and sign an agreement by May 31,” Mark Parrington, vice president of strategic transactions for CommonSpirit Health, wrote in a May 21 letter to U of L President Neeli Bendapudi.

But Parrington relented shortly before 7 pm on May 31, agreeing by email to extend the support agreements through June 14.

Parrington’s email cited “respect for the Governor’s office,” suggesting someone from Gov. Matt Bevin’s office intervened on U of L’s behalf last week. He also indicated that U of L received proposals for partnerships on May 31.

Bevin spokeswoman Elizabeth Kuhn said in email: "Governor Bevin and his administration are focused each day on doing what is best for the citizens of Kentucky. This involves, at times, assisting when needed to accomplish positive outcomes for the Commonwealth."

Cain Brothers, an investment bank that works on healthcare deals, is in charge of finding a partner for the KentuckyOne takeover through a contract with University Medical Center, the U of L corporation that runs University Hospital and the James Graham Brown Cancer Center.

One possibility is to combine Jewish and the other KentuckyOne assets with University Hospital and the U of L cancer center, which would form a system with $1.5 billion in annual revenues.

Here is the letter Parrington sent Bendapudi on May 21:   

Reach reporter Chris Otts at 502-585-0822, cotts@wdrb.com, on Twitter or on Facebook. Copyright 2019 WDRB News. All rights reserved.

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Chris Otts reports for WDRB.com about business and economic topics, higher education and local / state government. He joined WDRB News in 2013 after seven years with The Courier-Journal. Got a tip? Chris is at 502-585-0822 and cotts@wdrb.com.