Tuesday, June 13, 2017

Is the KentuckyOne Health Experience a Road Map for Kitsap County?

In Louisville, Kentucky, Jewish Hospital is a 342-bed facility similar in size and scope to Harrison Memorial Hospital.  It had knowledgeable physicians, engaged staff, a bustling emergency room, and solid patient care ratings.  Due to health care reforms, Jewish Hospital, St. Mary’s Healthcare, and St. Josephs Healthcare (JHSMH) merged into one organization, KentuckyOne Health (KOH).  To expand services further, a joint operating agreement between the University of Louisville Hospital, a private Cancer Center, and KOH was inked in 2013.   University leaders supported this arrangement because the parent company of KOH agreed to invest over $500 million in the U of L facility. 

Unfortunately, due to unpredicted financial woes in 2014, KOH laid off 500 employees and left 200 open positions unfilled to yield $218 million in savings.  Many physicians were concerned that “virtually all of the experienced nurses” were preferentially terminated.  KOH contemplated closing one of their hospitals, ultimately shuttering an emergency room instead.  Despite these measures, KOH registered an operating loss of $69 million. 

An executive team was assembled to focus on revenue growth and expense reduction.  Vacant land was purchased nearby for “a new facility to meet the evolving needs of the community.”  Does this story sound familiar? It should.  The parent company of KOH is Catholic Health Initiatives (CHI), the same organization that entered our community a few years ago. 

Greg Postel, MD, U of L’s Vice President, warned KOH CEO Ruth Brinkley by letter “the number and quality of nursing staff has severely declined” since affiliation.  He alleged these deficiencies damaged the U of L Hospital reputation and physicians were leaving due to “unsafe working conditions” for staff.  He accused CHI of breaching the fiduciary obligations in the operating agreement, being $46 million in arrears. 

A complaint filed by the Vice-chair of Surgery, Dr. J. David Richardson asserted a decline in morale and inadequate staffing was compromising patient safety.  “Patients are being held in the ER until enough nurses are available,” he wrote. In an interview with the Courier-Journal, Dr. Richardson thought the best resolution would be to “unwind” the joint operating agreement.  “They [KOH] are destroying the hospital,” Richardson said.  The following month, a state inspection confirmed nursing deficiencies had undeniably endangered patients. 

In December 2016, KOH and U of L Hospital terminated their agreement, releasing management of the U of L Hospital and the cancer center effective July 1.  CHI anticipates $272 million in losses from this dissolution.  

Last fall, CHI began merger talks with Dignity Health, a company facing financial difficulties of its own with an operating loss in 2016 of $63 million across 39 hospitals.   The same year, CHI operating losses were almost $500 million amongst 103 hospitals.  Both organizations already carry higher than average debt loads, though with complementary markets, merging might be advantageous.

Interested in affiliation, CHI implemented a “turnaround plan,” to bolster their negotiating position.  However, 2 of CHI’s 11 “multi-hospital hubs,” the Louisville and Houston markets, are failing, necessitating relief from profitable markets like Ohio and the Pacific Northwest group.  KOH eliminated 250 non-clinical positions in the interest of fiscal health last month. 

The most alarming actions by KentuckyOne Health is the termination of 25 professional service agreements of their employed physicians without justification.  These are the very same physicians who sold their private practices to KOH just 5 years ago.  Dr. Richard Holt, a spine surgeon, was affiliated with Jewish Hospital while practicing independently.  He sold his practice to relieve the overwhelming administrative burden and was satisfied working at the hospital-based clinic, meeting productivity goals.   Surprised by sudden dismissal, his last day is July 31.  Sadly, he will retire because at 69, he is no longer willing or able to launch a private practice from scratch.

After five years under the management of CHI, Jewish Hospital is being placed on the auction block, to “slim down” operations.  After divesting of almost every hospital acquired over the last 5 years, they will concentrate on “opportunities for growth” elsewhere.  KentuckyOne Health may be the red-headed stepchild, though we should not forget Jewish Hospital was a thriving community hospital before their ill-fated merger. 

The Pacific Northwest hospital group may be considered the “golden child” for now, but what happens if profit margins decline and further cutting costs is not feasible? The Jewish Hospital merger experience should serve as a cautionary tale for Kitsap County.   Will our beloved community hospital be sold off five years from now or can we escape the same fate by devising a viable alternative for healthcare in our community?    

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