University of Kansas Health System and private partner to acquire Topeka hospital

The University of Kansas Health System announced Thursday it had reached a deal to partner with a private hospital system based in Nashville to purchase St. Francis Hospital in Topeka.

KU Health and Ardent Health Services will form a “joint venture company” to share governance of St. Francis. The two have committed to pour $50 million in capital into the 378-bed hospital after they acquire it from Colorado-based SCL Health.

St. Francis has been for sale for about a year and was at risk of closing. The announcement from KU Health says the deal will allow “substantially all” of St. Francis’ 1,600 employees to keep their jobs.

Jackie Hyland, the chief medical officer at St. Francis, said KU Health System and Ardent taking control of the hospital was “the absolute best thing that could have happened in this situation” and a major relief for the workers.

“They have been absolutely amazing, but I think scared,” Hyland said.

The field of buyers also included St. Francis’ local competitor, Stormont Vail Health, and California-based Prime Healthcare Services. Prime Healthcare, another private hospital chain, purchased two other failing Kansas hospitals from SCL Health in 2013: Providence Medical Center in Kansas City, Kan., and St. John Hospital in Leavenworth.

“We are grateful our proposal was seen as the most positive path forward for St. Francis,” said Bob Page, the president and CEO of KU Health. “By marrying our resources as an academic medical center and Ardent’s operational expertise, we secure the long-term sustainability of St. Francis Health.”

At a news conference Thursday, hospital officials said the plan is to operate St. Francis as a for-profit. Both sides will now begin working to finalize the deal and get regulatory approval.

“This thing is going so fast,” Page said. “As the governor said, two weeks ago the conversation was, we’re closing St. Francis. Two weeks later, we’re not closing St. Francis.”

The deal to acquire St. Francis developed after news of the facility’s impending closure spurred new debate in Topeka about Medicaid expansion under the Affordable Care Act, or “Obamacare.” Advocates of expansion said it would have helped reduce uncompensated care at St. Francis, while generally acknowledging that it would not have gotten the hospital out of the red entirely.

Gov. Sam Brownback, a Republican and staunch Medicaid expansion opponent, took a personal role in recruiting buyers to keep St Francis from closing. SCL Health President and CEO Mike Slubowski said that was key to getting a deal that will set up St. Francis for long-term success.

“Both The University of Kansas Health System and Ardent have reputations for delivering quality health care services and also have the assets and experience needed to support St. Francis and its physicians so they can continue to provide compassionate, quality care to their communities,” Slubowski said.

For KU Health, the deal is the latest in a series of recent expansions that include new clinics throughout the Kansas City metro area and an agreement that gave the University of Kansas Hospital Authority Board control of Hays Medical Center.

The partnership with Ardent Health is different in that the two entities will share control through a joint venture board of directors staffed by equal numbers from each side. That board will then establish a local board of trustees for the hospital in Topeka.

Ardent Health completed an acquisition of LHP Hospital Group last month that made it the second largest private for-profit hospital operator in the United States.

The company has 20 hospitals in six states, with 5,000 doctors and 18,000 employees. It has six other joint venture partnerships with non-profit health systems like KU.

Ardent Health president and CEO David Vandewater said the company intends to maintain local leadership of St. Francis, while providing resources and new investment in the hospital.

The sale of St. Francis is part of a national trend toward consolidation of the hospital industry. Hospital mergers and acquisitions rose 6 percent in the first half of last year over the same period the year before.

Hospital systems are trying to adjust to new payment models and cut administrative costs, but the chairwoman of the Federal Trade Commission said last year that hospital consolidation is one of the things that is driving up costs within the health care system by creating regional monopolies.

This story was originally published May 4, 2017 at 11:47 AM with the headline "University of Kansas Health System and private partner to acquire Topeka hospital."