Norton Healthcare, University of Louisville Talks on Kosair Children’s Hospital Breakdown

Remember the dispute between the University of Louisville and Norton Healthcare over the operation of Kosair Children’s Hospital? 

It appears the matter is going court.

A quick refresher: Norton runs Kosair Children’s Hospital, but the state owns the land in downtown Louisville where the hospital sits. The lease for the land indicates that it must be used for the benefit of the commonwealth and UofL. Well, Norton announced in August that it’d reached a deal to partner in operating Kosair Children’s and Lexington’s Kentucky Children’s Hospital with the latter’s operator, University of Kentucky HealthCare.

UofL officials immediately blasted that idea. Arguing and litigation followed. 

For months, the belief was that the two sides were negotiating. On Friday, however, UofL alleged that Norton Healthcare was “walking away” from the talks on an updated agreement between Kosair Children’s operator (Norton Healthcare) and its academic affiliate (UofL).

Now, UofL officials said litigation surrounding the dispute will resume and will include a claim that Norton is breaching its contract.

The Disagreement

The big point of disagreement appears to that lease. 

In a letter to employees, Norton executives said they want amendments to lease. But UofL officials claim that Norton is attempting to get a lease on the land that doesn’t protect the university’s interest. 

“The land lease specifically reads that Norton can build and operate a pediatric teaching hospital for the benefit for the children of the commonwealth and the University of Louisville,” said David Dunn, executive vice president of U of L’s Health Affairs. 

Dunn said  that Norton gets certain benefits for housing a teaching hospital as part of its health system.

“All we’re asking for is that those funds and other funds like those be used to support the academic mission of the department of pediatrics in the school of medicine at the U of L,” he said.

In a letter to hospital staff sent Friday, Norton executives said they’ve been unable to reach an agreement with UofL—but they don’t plan on going anywhere.

Despite our best efforts, the two organizations have not been able to reach common ground on an updated affiliation agreement for pediatrics or a proposal to state officials regarding an amendment to the 149-year land lease Norton Healthcare has with the Commonwealth of Kentucky, ending in 2130. It was this land lease that U of L used as the basis for their notice of default, which could lead to the eviction of Norton Healthcare from its Kosair Children’s Hospital building.

Accordingly, we have opted to continue to operate under our 2008 academic affiliation agreement, which automatically renews on an annual basis and is supported with over 135 individual agreements. Hopefully, when the time is right, we can renew our discussions about an updated academic affiliation agreement. We intend to continue to invest in clinical services and academic support for Kosair Children’s Hospital and U of L Pediatrics, as we have in the past, and in fact we have provided the University with contracts for incremental funding in the amount of $6.6 million, bringing a total annual support for pediatric services of $27.9 million.

“The great care and great service Louisville’s children have always received continues to be offered every day at Kosair Children’s Hospital,” Norton spokesman Thomas Johnson said.

In the letter, Norton executives said they proposed a 20-year agreement and a commitment of more than $830 million; UofL would remain the primary academic partner and be involved in Norton’s “evolving statewide pediatric partnership activities.” And Norton wouldn’t do anything that put at risk UofL’s accreditation for pediatric programs.

How It Unfolded

In their statement, UofL officials claim they and Norton were close to an agreement, as recently as Friday. A meeting was scheduled for this past Tuesday between Stephen Williams, Norton’s president and chief executive, and David Dunn, UofL’s executive vice president for health affairs.

Louisville got a pretty decent amount of snow Tuesday, and Norton officials told UofL officials that they couldn’t make it to the meeting, according to a letter provided by UofL. The letter further claims that UofL made several attempts to reschedule and that Williams in the past week backed away from negotiations.

Earlier this week, UofL officials said they asked for a meeting with Norton officials, Gov. Steve Beshear and Attorney General Jack Conway, who had been drawn into the dispute.  UofL said Norton rejected that offer. And so this is where the matter stands.

A spokeswoman for Conway said: “Attorney General Conway believes it is in the best interest of Kentucky kids to have the parties resume negotiations and finalize the agreement.”

Here’s UofL’s statement:

On Wednesday, the University of Louisville suggested to Norton Healthcare that both organizations meet face-to-face with the Governor and Attorney General to hammer out a fair agreement that’s in the best interests of Norton, the University of Louisville and, most importantly, the children who are served by Kosair Children’s Hospital. Norton has rejected this offer. UofL’s invitation came after Norton on Tuesday walked away from the negotiating table for the second time in less than a week.

In addition to seeking an impartial voice in negotiations, it is imperative to include state officials in the discussions because the property on which Kosair Children’s Hospital sits is owned by the taxpayers of Kentucky.

Last Friday, we made major strides toward a new agreement for the future operation of Kosair Children’s Hospital and had scheduled a face-to-face meeting with Norton on Tuesday morning to work out a definitive agreement. This progress led us to believe that an agreement was imminent which is why we were shocked to learn again that Norton was walking away from the negotiating table with the University of Louisville.

While nearly all of the primary business issues have been agreed to by both parties, Norton continues to press UofL for amendments to the taxpayer owned state land lease for Kosair Children’s Hospital—absent input from the Commonwealth of Kentucky—that could put our Pediatric Department in extreme jeopardy. This is and will remain unacceptable to UofL.

Further, we discussed with Norton last Friday the need to build in mutual protections related to the proposed land lease amendment. It was patent that in the case of Norton’s requested sequential litigation concerning potential breaches of the land lease, that UofL would need financial protections, as we had previously discussed and agreed upon. And, UofL made it very clear to Norton the need to involve the Commonwealth in any and all discussions relating to amending the land lease. This is taxpayer owned property and the taxpayer should be represented in any such decisions.

It is clear that Norton is significantly deviating from what was agreed upon, clearly attempting to obtain a land lease amendment absent protections for the UofL.

By declining our offer and their recent communications, Norton is clearly indicating they are once again refusing to negotiate in good faith, in fact being unwilling to negotiate at all. Unfortunately, Norton’s actions are forcing a resumption of the legal process, which will include a counterclaim that formalizes Norton’s breach of contract with UofL.

The consequences of Norton’s actions run far deeper than pediatrics, threatening the very existence of all of UofL’s educational and training programs at the Health Sciences Center.

For nearly 30 years, the City of Louisville has had a tradition of providing excellent care to children in a centrally-located, downtown facility. Walking away from these talks leaves us to wonder if Norton is attempting to move the safety-net services provided to the community’s poorest, sickest children away from Kosair Children’s Hospital to a far less convenient, but more profitable area.

To be clear, UofL remains committed to forging a long-term agreement with Norton for providing care at Kosair Children’s Hospital. We are extremely disappointed with the actions of Norton officials because our sole purpose throughout this long negotiation process has been continuing to provide the best possible care to children today and into the future.

Here’s Norton’s letter to employees:

Attorney’s letter:

Letter of January 24 Re_ Tolling Agreement (1)

Devin Katayama

Devin Katayama host middays for WFPL and reports on education and other Louisville issues.

@DevinWFPL

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