Interim Joint Committee on Health and Welfare


Minutes of the<MeetNo1> 2nd Meeting

of the 2011 Interim


<MeetMDY1> August 17, 2011


Call to Order and Roll Call

The<MeetNo2> 2nd meeting of the Interim Joint Committee on Health and Welfare was held on<Day> Wednesday,<MeetMDY2> August 17, 2011, at<MeetTime> 1:00 PM, in<Room> Room 129 of the Capitol Annex. Representative Tom Burch, Co-Chair, called the meeting to order at 1:10 p.m., and the secretary called the roll.


Present were:


Members:<Members> Senator Julie Denton, Co-Chair; Representative Tom Burch, Co-Chair; Senators Joe Bowen, Perry B. Clark, David Givens, Denise Harper Angel, Dennis Parrett, Joey Pendleton, and Jack Westwood; Representatives Julie Raque Adams, Bob M. DeWeese, Kelly Flood, Brent Housman, Joni L. Jenkins, Mary Lou Marzian, Darryl T. Owens, Ruth Ann Palumbo, Susan Westrom, and Addia Wuchner.


Guest Legislator: Representative Mike Nemes.


Guests: Dr. James Ramsey, President, University of Louisville; Dr. Jim Taylor, CEO, University Medical Center, University of Louisville; David Laird, President and CEO, Louis Waterman, and Lou Ann Atlas, Jewish Hospital & St. Mary’s HealthCare; Jennifer Elliott, legal counsel, University of Louisville; Dr. Dan Varga, CMO, and Paul Edgett, Senior Executive, and Maria Alagia Cull, St. Joseph Hospital/Catholic Health Initiatives; Dr. Sharmila Makhija, MBA, Chair, Department of Obstetrics, Gynecology, and Women’s Health, University of Louisville School of Medicine; Jodi Mitchell, Kentucky Voices for Health; Betsy Janes and Amelia Priest, American Lung Association; Kathy Bryan; Nathan Goldman and Sharon Eli Mercer, Kentucky Board of Nursing; John M. Johnstone, MD; Patricia L. Horvat, RN; Steve B. Fisher, Dwain Harris, Kentucky Rural Health Association; Dewey Parker, National Nurses Unite; Bill Doll, Kentucky Medical Association; Rob Jones, Community Action Kentucky; Kathy and Dennis Nafus, Smokefree Kentucky; Eric T. Clark, Kentucky Association of Health Care Facilities; Donald Moore; Paula Lewis; Betsy Farley; Sarah S. Nicholson, Kentucky Hospital Association; Amelia Adams, ACLU, RCRF; Russell Palk and Greg Gwinnett, Medimmune; Honi Goldman; An Hayes, Kentucky Equal Justice Center; Carol Raskin; and Anne Joseph, Covering Kentucky Kids and Families.


LRC Staff: DeeAnn Mansfield, Miriam Fordham, Ben Payne, Jonathan Scott, Gina Rigsby, and Cindy Smith.


Consideration of Referred Administrative Regulations

The following administrative regulations on the agenda for consideration were 201 KAR 20:056 – establishes the requirements for licensure, renewal, and reinstatement, programs, and recognition of a national certifying organization; 201 KAR 20:062 – establishes Advanced Practice Registered Nurse (APRN) programs of nursing standards; 201 KAR 20:070 – establishes the requirements for the licensure of nurses by examination prescribed by the Kentucky Board of Nursing (KBN); 201 KAR 20:110 – establishes the requirements for licensure by endorsement and establishes the requirements for a temporary work permit for an applicant to practice nursing while the application for a license is being processed; 201 KAR 20:215 – establishes the fees, procedures, and requirements for continuing competency for nurses; 201 KAR 20:225 – establishes procedures by the KBN for reinstatement of a license that has lapsed or has been subject to disciplinary action; 201 KAR 20:240 – establishes fees by the KBN for licensure, examination, renewal, reinstatement, and continuing education; 201 KAR 20:310 – establishes standards for faculty of programs of nursing which prepare graduates for licensure as registered nurses or practical nurses; 201 KAR 20:411 – establishes the requirements relating to a sexual assault nurse examiner course and the credentials of a sexual assault nurse examiner; 201 KAR 20:470 – establishes the requirements for dialysis technician training programs and for credentialing dialysis technicians; 902 KAR 8:160 – establishes minimum administrative and operational requirements for Kentucky’s local health departments; 902 KAR 8:165 – establishes minimum accounting and auditing requirements for Kentucky’s local health departments; and 902 KAR 8:170 – establishes minimum fiscal and financial management requirements for Kentucky’s county and district local health departments and for all other classes of local health departments, except if a specific Kentucky Revised Statute requires a more stringent minimum requirement. A motion to adopt all of the administrative regulations except 201 KAR 20:470 was made by Senator Denton, seconded by Representative Burch, and adopted by voice vote. A motion to adopt the amendment for 201 KAR 20:470 was made by Senator Denton, seconded by Representative Burch, and adopted by voice vote. A motion to adopt 201 KAR 20:470 as amended was made by Senator Denton, seconded by Representative Burch, and adopted by voice vote. A motion to approve all the administrative regulations but 201 KAR 20:470 was made by Representative Marzian, seconded by Representative Flood, and approved by voice vote. A motion to approve 201 KAR 20:470 as amended was made by Representative Marzian, seconded by Representative Palumbo, and approved by voice vote. A motion to approve the administrative regulations as amended was made by Representative Marzian, seconded by Representative Palumbo, and approved by voice vote. Nathan Goldman, General Counsel, Kentucky Board of Nursing, was present to answer questions.


Legislative Hearing on the FFY 2012-2013 Community Services Block Grant

A motion to accept the block grant was made by Representative Westrom, seconded by Representative Marzian, and accepted by voice vote.


Legislative Hearing on the Executive Order 2011-353, relating to Reorganization of the Cabinet for Health and Family Services

            A motion to accept the executive order was made by Representative Palumbo, seconded by Representative Marzian, and accepted by voice vote. Eric Friendlander, Deputy Secretary, Cabinet for Health and Family Services was present to answer questions.


Pending Merger of the University of Louisville Hospital, Jewish Hospital and St. Mary’s HealthCare, and Saint Joseph Healthcare System

Dr. James Ramsey, President of the University of Louisville, stated that the three entities that will potentially merge are Jewish Hospital & St. Mary’s HealthCare (JHSMH), Saint Joseph Health System (JSHS), and University Medical Center (UMC). The University of Louisville was a private school until 1970 when it joined the state’s higher education system. In 1997, the General Assembly enacted the postsecondary education reform act legislation that redefined the university. Statutorily, the University of Louisville is to be a premier nationally recognized research university and work to improve healthcare in Kentucky. The merger would allow the University of Louisville to continue to achieve these goals. During the past 11 years, the university has experienced 11 budget cuts.


The university developed seven strategies to achieve the 1997 legislative mandates: 1) continue re-engineering processes and expense management; 2) improve balance sheet management, with an emphasis on converting underperforming assets; 3) increase contract research and commercialization income; 4) create private sector partnerships; 5) enhance fund raising; 6) expand the research mission through innovative financing tools like the tax increment financing plan; and increase clinical income to support education and research. Generating clinical income is critical to supporting the teaching and research mission of the university. The University of Louisville School of Medicine has a budget of $351 million; $28 million is state appropriation. While the merger is critical to the university achieving the legislative mandates, neither the university nor the School of Medicine will merge with the other entities, just the University Medical Center/James Graham Brown Cancer Center.


In 1983, the University Hospital opened and operated for ten years by Humana, a for-profit entity. In 2008, a 17-member community-based board was created to govern UMC. In 2008, UMC created a five-year strategic and financial plan. The results of the strategic plan and financial analysis were UMC could not continue to meet the mandate to cover the 21 percent uninsured population and/or would have to decrease academic support provided to the U of L School of Medicine. Services at UMC for women’s health, trauma, cancer, and stroke consumed the 320 beds. UMC lost revenue because services for heart treatment, surgeries, and solid organ transplants were provided at other community medical centers. UMC had the option of continuing to operate as usual, but could not borrow more money to raise more capital. UMC entered into discussions with Norton Healthcare and Jewish Hospital to collaborate on specific services without actually merging the entities. A private company agreed to buy Jewish and continue the collaboration of services with UMC, but U of L would have to give up its academic control. The university would not give up its academic control. Saint Joseph Healthcare heard about the proposed merger between UMC and JHSMH and wanted to be a part of the collaboration. U of L looked at St. Joseph’s value and vision statement and agreed it would be a meaningful partnership in providing for the health care needs of Kentucky. St. Joseph has hospitals in London, Mt. Sterling, Berea, Martin, Nicholasville, Bardstown, and two in Lexington.


The vision statement of the merged entities states “We are the premier, integrated comprehensive health system in the Commonwealth known for efficiently providing the highest quality care and service close to home; reducing the incidence of disease; and eliminating inequities in access throughout the communities we serve. With unmatched geographic reach, we are differentiated by our faith based and academic heritage, developing the best next generation of healthcare professionals, and for being the fastest in translating research from bench to bedside. Because we are the most vital nationally recognized health system, we are the go-to organization for any major health policy initiatives in the State.” The merger is first and foremost about better health care for Kentucky. It is also a financial transaction that that would maintain the current clinical support received from UMC, JHSMH, Kosair Children’s Hospital, and Norton.


The university academic medical center would receive $200 million and $120 million would go toward community and statewide program support totaling $320 million. An additional $100 million will be invested in electronic management records and information technology. UMC’s payor mix is unsustainable at 21 percent. U of L does not have the resources to invest in facilities and equipment or maintain technology needed for neurosurgery, the trauma center, and other services. If the merger does not take place, UMC will not be able to compete in the marketplace.


The merged entity will be a 501(c)(3) not-for-profit organization. It will be governed by an 18-member community board, with 17 members from Kentucky, 10 from Louisville. A standing committee of the board with fiduciary responsibility over the merged entity is the Academic Medical Center Committee will consist of 11 individuals, seven appointed by the University of Louisville. The merged entity will be governed by a community board consisting of 18 individual with 17 from Kentucky. The Academic Medical Center will consist of UMC/James Graham Brown Cancer Center, Jewish’s downtown hospital, and Frasier Rehabilitation. The current University of Louisville academic affiliation agreements are with the UMC, Norton Healthcare, Louisville Veterans Administration Medical Center, Jewish Hospital & St. Mary’s HealthCare, Baptist Health, Kosair Children’s Hospital, and Trover Clinic. The future University of Louisville academic affiliation agreements will be with the merged entity, Norton Healthcare, Kosair Children’s Hospital, Louisville VA Medical Center, Baptist Health, and Trover Clinic. The academic affiliation agreements are used to protect the university and define what happens if the terms and conditions of merger are not satisfied and the merger has to be dissolved.


Paul Edgett, Senior Executive, St. Joseph & St. Mary’s HealthCare, stated that the majority of its hospitals are located within rural communities. There is a great mix of rural and urban hospitals providing outstanding quality of care for everyone with special emphasis on the poor. One program that helps residents in the community with counseling services, education, and nutrition is the Appalachian Outreach Program. The program reached 14,000 people in 2010. CHI has given 34 grants totaling $5 million for childhood obesity, domestic violence, and teen pregnancy. CHI is committed to increasing access to care, expanding services, enhancing clinical quality, and preparing providers for the future. In the past six years, including the $320 million investment, CHI has invested nearly $1 billion in Kentucky health care. CHI headquarters are located in Denver, Colorado, and its largest office is located in Erlanger, Kentucky. Serving patients unable to pay is the hallmark of each merging entity’s mission.


David Laird, President and CEO, Jewish Hospital & St. Mary’s HealthCare, stated that it merged with CHI five years ago and began to work with them once it merged the Caritas Health System. Fifty years ago, Jewish started working with the university with its residency and solid organ transplant programs. Even though there are different cultures being merged, there is a mutual respect for working together.


Dr. Jim Taylor, CEO, University Medical Center, stated that community benefit is a concept for not-for-profit hospitals where a calculation is made each year that tries to demonstrate the benefit for the community in return for a tax-exempt status. The combined community benefit in 2009 among the UMC, JHSMH, and SJHS was $270 million. Of the $270 million, $150 million is UMC with $75 million being charity. Without financial viability, care to the indigent population will not be able to continue.


Dr. Dan Varga, CMO, St. Joseph Healthcare System, stated that the most important component of the clinical aspect of the merger is the sanctity of the doctor-patient relationship, as it exists today, remains unchanged. The agreements ensure the physician will be able to discuss with patients the full array of clinical options to inform their decision making regardless of where services are provided. Agreements protect academic freedom of the University of Louisville School of Medicine and its faculty and do not limit content curriculum or location of university classes, or the fields of research the university faculty can pursue. All institutions that are part of the merger will continue to provide care and expand access to everyone regardless of their ability to pay. All hospitals will continue to provide inpatient care as it does today, consistent with its missions and non-profit status. University of Louisville clinics not part of the merger will continue providing services the same as always. Physicians will continue to inform patients and families of all options available, including palliative care, terminal sedation, and Hospice care. All hospitals will abide by KRS 311.621-311.633 relating to end-of-life care. All advance directives and organ donations can be honored consistent with the Catholic Ethical and Religious Directives (ERDs) with rare exceptions.


Dr. Sharmila Makhija, Chair, Department of Obstetrics, Gynecology, and Women’s Care, University of Louisville, stated that miscarriage management, ectopic pregnancy, medically indicated abortion, and emergency contraception of alleged victim of rape will be provided consistent with ERDs. Elective abortion is not currently performed at the University Hospital and will not change after the merger. Family planning, vasectomies, and in vitro fertilization will continue as office procedures. Tubal ligation as a sole procedure or a vaginal delivery and tubal ligation will both be performed in a hospital setting outside of the merged entity. A cesarean delivery and tubal ligation performed at one time under anesthesia will be performed in a hospital setting outside of the merged entity. KRS 212.347 requires 24 hours written informed consent before a tubal ligation is performed.


Dr. Makhija answered Senator Pendleton’s question by saying that there would be no change in current practice concerning a woman who wants a tubal ligation after a cesarean or vaginal delivery.


Dr. Makhija answered questions by Representative Owens by saying the location of the elective services would be outside the merged entity. The doctor and the patient would decide which outside hospital would perform the procedure. When a patient is in an acute situation, the patient is always put first, and will be treated at the hospital she goes to for treatment. The life of the mother always takes priority over the life of her unborn child.


Dr. Ramsey answered a question by Representative Owens by saying that UMC is a separate 501(c)(3) and is not owned by the University of Louisville. The university appoints eight of the 17 members of UMC’s board. Dr. Taylor said that there are also five ex-officio members and in committee or board meetings, the majority of board members voting are non-university appointed or non-university affiliated.


Dr. Taylor answered a question by Representative Owens by saying the human resources benefits component of the merged entities is not finished so it is unknown if the coverage for reproductive services, including vasectomies and tubal ligations, and prescriptions for birth control pills would be available for employees of the merged entity. There is an attempt to bring three entities together in a way that is as equitable as possible.


Mr. Edgett answered a question by Senator Denton by saying that the $200 million from CHI would focus on advancing academic and research activities at UMC. CHI will be investing in the expansion in addition to new services, the recruitment and retention of new physicians, and bringing programs and services into the community. Commitment to providing services closer to home in the rural communities, not just urban areas only, will better improve health prevention and health status. Dr. Ramsey said that no specific decisions have been made about how use the $200 million that CHI will invest at the UMC, but the new governing board will be involved in the process to decide how the funds will be allocated.


Dr. Laird answered a question by Senator Denton by saying that it is the intention to allow doctors to do their residencies at all CHI affiliated hospitals throughout the state. One of the hopes of the merged entity is to address the physician shortage in Kentucky. The entities are not bringing the merger together to create a cartel to negotiate and extract good high value out of the payors. Dr. Varga answered a question by Senator Denton by saying that a critical component identified with the merger is an opportunity to reduce costs of care and operating the system. If the demand for indigent care or uncompensated care continues, there will be more capacity from a financial standpoint to address the need for more services. Dr. Ramsey answered a question by Senator Denton by saying that the Academic Medical Center will be defined at the University of Louisville Hospital/James Graham Brown Cancer Center, Frasier Rehabilitation, and the downtown Jewish Hospital. The two east-end locations would be included.


Ms. Elliott answered a question by Senator Bowen by saying that it was very important in the negotiations that the medical school would be protected if the merger dissolved. Depending on the circumstances, the university has the ability to buy back the UMC/JGBCC as well as the current Jewish Hospital and Frasier Rehabilitation.


Ms. Elliott answered a question by Representative Housman by saying that when the consolidation agreement was signed, the expectation was there would be a nine to twelve month process for both the Federal Trade Commission (FTC) to review the merger as well as the IRS to approve the non-profit tax status of the merged entity, administrative regulations would be filed with the Cabinet for Health Family Services (CHFS). The definitive agreement was signed in June 2011. Discussions are in progress with the Governor’s Office, CHFS, and the Attorney General’s Office who all have to sign off on the transaction. Dr. Taylor answered Representative Housman by saying that there came a time contractually when it would be inappropriate to have discussions with another party, so Plan B discussions have been put on hold. Documents have been signed already to merge with the other entities. If approval is not granted, that will be when there will be discussions about a Plan B. Mr. Edgett stated that the merger would allow SJHS to grow and expand and have a greater influence in the Commonwealth. If the merger does not go through, SJHS would continue with its current ministry and sustain on-going operations. Dr. Laird stated that JHSMHC would continue its operations but one thing that would cause financial problems would be the IT component to integrate its entire system to share information compliant with all of the recent laws passed nationally. Mr. Edgett stated that the SJHS has been the beneficiary of $500 million capital investment for its master facility plans. The full scale of implementation in physician workforce development and clinical IT services across its system will be significant investments. The physician workforce scenario for central and eastern Kentucky will be very difficult to carry alone without the merger.


Dr. Makhija answered a question by Representative Palumbo by saying that if a woman sought treatment for a miscarriage, a uterine evacuation would be performed at UMC. Vaginal deliveries will be performed at UMC, but if a woman wanted a tubal ligation at the time of birth, she would have to deliver at another facility. Ms. Elliott answered questions by Representative Palumbo by saying that depending on the reason for the unwind, the university would have the option of cashing in its interest in the statewide network and be valued at the time of the unwind. The value of the university’s interest in the larger statewide network would be counted against the business interest and the downtown medical assets that the university would buy back. A third-party evaluation would be performed to determine the value. If the unwind was a result of the termination of the academic affiliation agreement or any breach of the agreements by the merged entity, then there would be seller financing by CHI for up to a three- to five-year period.


Mr. Edgett answered a question by Senator Harper Angel by saying that Catholic ERDs have only changed twice in the past 15 years and neither change impacted clinical practice or procedures. If there is a change to the ERDs, CHI would evaluate the impact, if any, on the activity within the organization and work with the university if it impacts the university’s ability to fulfill its academic mission and make adjustments. If the change impacts the university’s ability to fulfill its academic mission, the university would have cause to unwind. Dr. Makhija answered questions by Senator Harper Angel by saying that a patient would be allowed to take oral contraceptives, but the hospital would not dispense them to a patient. During rape counseling in the emergency room, information is offered about the pros and cons of taking oral contraceptives to prevent a pregnancy.


Dr. Makhija answered a question by Representative Marzian by saying that if there is an emergency, a woman should be taken care of based on a facility’s standard of care best clinical practices. Mr. Edgett answered a question by Representative Marzian by saying that the merged entity will be a 501(c)(3) organization with a fiduciary board that will be responsible for the governance and oversight of the organization. The bishop is not involved in governance or management of the organization. As a Catholic health system, there is a responsibility to work with the bishop to seek his approval when entering into partnerships. His role is to assure that CHI is living up to the Catholic values as a Catholic health system.


Mr. Edgett answered a question by Representative Adams by saying that the entities would come together in a more formal way to align all of efforts, investments, and resources in order to accomplish a singular vision. Currently the entities compete in various areas and provide duplicative services, but after the merger, the organization will be able to focus resources and redeploy them effectively with a stronger position and better outcome. One of the biggest upsides of the merger would be the University of Louisville being able to expand their clinical and teaching platform across the existing SJHS clinical platform which covers almost all of central and eastern Kentucky. Presently, SJHS does not have a formal relationship with the university and is in the process of developing a comprehensive position workforce plan.


Dr. Taylor answered questions by Representative Jenkins by saying there will be some jobs lost, the net will be a gain because of an increase in access and growth of services throughout the Commonwealth. A Level III Neonatal nursery is available for a baby born with complications. Depending upon the complication, the infant may be treated at UMC or transferred to Kosair, especially if a surgical procedure is needed. Dr. Makhija answered a question by Representative Jenkins by saying that oral contraceptives will be dispensed for a rape victim if that is her choice.


Dr. Makhija answered a question by Representative Wuchner by agreeing that the availability of choice of services no longer provided by the merged entity would be available and provided by the same physicians outside of the merged entity.


Representative Burch asked that the names of the 18-member board be provided to the committee.



There being no further business, the meeting was adjourned at 2:40 p.m.