Healthcare Consolidation Happens Quickly in Kentucky

Philip Betbeze, for HealthLeaders Media , December 17, 2010

Apparently, the state's hospital systems aren't waiting for new guidelines from the Federal Trade Commission to partner up in combinations that certainly would have raised antennas at the agency in the recent past. The Patient Protection and Affordable Care Act apparently has changed everything.

The Jewish-Louisville-St. Joseph merger brings together systems that control 42% of the market share in Louisville and 21.8% of the of the market share in Lexington, according to a story in the Lexington Herald-Leader. Not only does such a potential combination hold a powerful negotiating stance with state payers, but more importantly, it sends a message that system-ness, going forward, also means market share within a state or region within that state (they've only signed letters of intent to this point).

How do I come to that conclusion? Well, St. Joseph and its two locations in Lexington are currently part of Catholic Health Initiatives, a multi-state, Denver-based system that includes 73 hospitals. So they're not doing the merger primarily to gain access to capital or talent, one of many reasons hospitals have joined with larger systems in the past.

It's a market share play for Louisville to acquire Jewish, which lost money in 2009, and St. Joseph. CHI will add $300 million to the merged systems on top of contributing the assets of the two St. Joseph hospitals in Lexington, which shows why Louisville would be willing to take on those hospitals as well. When complete, the Herald-Leader says, the combined system will be within the geographic reach of two thirds of Kentuckians.

On the other side, and happening almost simultaneously, is the clinical "merger" between Louisville's Norton and UK Healthcare, based in Lexington. Though it's not a financial merger, at least not yet, the two systems will work together clinically to develop a "statewide system of care."

These events are touted as ways to improve healthcare in the state, but why now? Of course, the kicker is that now there's a financial incentive as well. Effectively, the federal government has forced these actions, for better or for worse. It's why the FTC has announced it's reforming the guidelines by which they will evaluate mergers.

The new law has forced collaborations that will provide high quality care while emphasizing efficiency and limiting duplication of services, and the FTC has gotten the message that it's to back off. These moves signal that the dance floor is apparently open, the band is tuning up, and organizations are finding dance partners…quickly.

Philip Betbeze is senior leadership editor with HealthLeaders Media.

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1 comments on "Healthcare Consolidation Happens Quickly in Kentucky"

Fred Jackson President/CEO KDMC (12/20/2010 at 9:26 AM)
I think the author better review their facts before drawing the conclusions from this article. University of Louisville Med. Ctr, financially strapped and close to bankruptcy for some time (this is their third partner affiliation in a decade, by the way, the other two failed), is merging with Jewish, also close to bankrupt for 5 years, all to be taken over by CHI. Norton and UK, not to be out done by U of L, put their clinical deal only together largely because U of L will put residents in Lexington at St. Joseph's, a CHI facility.If you know anything about the politics of U of L and UK, they dislike each other greatly. This has NOTHING TO DO WITH THE RECESSION OR OBAMCACE OR THE GOVERNMMENT.There is also a very strong question as to whether either deal will happen or ultimately work. You are drawing conclusions not based on what's happening in Kentucky. Get the facts before you print.




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