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Bluegrass Beacon: State-backed loan for failing hospital a bad deal for taxpayers

By JIM WATERS
President, Bluegrass Institute for Public Policy Solutions

Monday, Nov. 18, 2019 — While University of Louisville officials see their purchase of the faltering Jewish Hospital and other properties as a bold move designed to buoy a too-big-to-fail health care provider which has been part of the community for a century, legislators – at least those from outside the River City – are unlikely to enthusiastically endorse an attempt to provide U of L with a $50 million taxpayer-backed loan, especially considering the way the deal went down.

U of L President Neeli Bendapudi moved ahead with a deal to purchase KentuckyOne Health’s Louisville assets, including Jewish Hospital, at the end of October based on assurances from Gov. Matt Bevin, House Speaker David Osborne, R-Prospect, and Senate President Robert Stivers, R-Manchester, that the legislature would approve the bailout loan at the beginning of the 2020 legislative session.

There’s no coincidence regarding the timing of this financial concoction.

Who wants to be portrayed during an election season as opposing a health care provider which has been part of the community for a century and provides treatment for lower-income patients, even if the hospital loses millions annually – including $30 million last year – and will need upgrades that could cost as much as a half-billion dollars?

Despite the fact that it’s a bad deal – a primary reason why CommonSpirit, KentuckyOne’s parent company, couldn’t find a buyer after two years of attempting to sell the properties – three politicians attempted to commit the entire 138-member legislature to a loan from taxpayers, half of which is already being called forgivable and none of which likely will be repaid.

Sen. Stephen Meredith, R-Leitchfield, called claims that the loan was a done deal “very premature” and said that he doesn’t think there’s sufficient legislative support for it.

Meredith, past chairman of the Kentucky Hospital Association and former CEO of Twin Lakes Regional Medical Center in Leitchfield, questions the approach of trying to drum up support for the risky loan by making a commitment even before the legislature meets, holds hearings and conducts debates.

“That’s a poor way to do it because it’s saying, ‘we’ve already committed you to this decision,’ and nobody appreciates that,” he said.

While it’s understandable how the heat of an election season can rev up the dole-out desires of politicians, it’s time to step back and slow down since much more information is needed before we’re even close to a taxpayer-backed commitment.

Meredith called for a “forensic operations’ review” of Jewish Hospital and transparency regarding the plan for turning around the facility’s operations.

“It’s been losing money for years; what’s going to change and make them profitable?” he said. “You can’t just sprinkle pixie dust on it and expect everything to change.”

Meredith added he can’t support Frankfort helping just one hospital in Louisville when more than 20% of Kentucky hospitals – including many in rural communities – are “on the verge of financial failure.”

U of L Health CEO Tom Miller was asked at a recent Louisville Forum debate on the issue if he could promise that his operation would make no further funding requests of the legislature regarding Jewish Hospital for, let’s say, “operational issues”

It’s a fair concern since such funding demands would follow the coming-back-for-more pattern of economic albatrosses like the KFC Yum! Center and KentuckyWired broadband boondoggle. Miller said he couldn’t make that commitment in his role as CEO.

How does that make you, the taxpayer, feel about the open-endedness of yet another huge investment by politicians and their bureaucratic buddies?

Why don’t Bendapudi and Miller convince the Louisville Metro Council to issue a loan?
If Louisvillians want to subsidize this risky venture, let them. And when it fails, they can hold their locally elected officials accountable.

That way, at least, taxpayers in Paducah, Pikeville and all cities in between wouldn’t be paying the freight for a bankrupt hospital in Louisville.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Read previous columns at www.bipps.org. He can be reached at jwaters@freedomkentucky.com and @bipps on Twitter.

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