The University of Louisville board of trustees voted on Wednesday to finalize the transition of University Hospital from the management of KentuckyOne Health at the end of June, authorizing new academic affiliation and lease agreements with University Medical Center, the UofL-affiliated nonprofit that operated the state-owned hospital from 1996 to 2013.

UofL and KentuckyOne announced their intention to end the four-year old joint operating agreement in December, following a series of rocky months in which each side traded barbs in the media. A state investigation that summer showed staffing shortages at UofL Hospital were compromising patient safety and care and the university demanded $46 million in back payments from KentuckyOne. The health system countered by questioning UofL’s commitment to their operating agreement and its transparency regarding how KentuckyOne’s $524 million in financial contributions had been invested.

The newly amended academic affiliation agreement removes KentuckyOne Health as a party and limits the scope of UMC’s affiliation to UofL Hospital, with the length of this agreement shortened to a term of two years, with three one-year renewal options. UofL Hospital maintains its designation as the university’s principal adult teaching hospital, while UofL’s existing clinical and academic programs with other teaching hospitals — such as Norton Healthcare, Jewish Hospital, Frazier Rehab Institute and the Robley Rex Veterans Affairs Medical Center — are grandfathered.

The amended academic affiliation agreement also maintains the current financial commitments to the university for the salary and benefits of residents, the clinical services provided by university faculty at UofL Hospital and academic mission support for the Health Sciences Center. The recommendation voted on by the trustees stated that the total annual financial commitment by UMC to UofL and Uofl Physicians Inc. is approximately $70 million.

UofL Hospital’s lease to UMC will also be shortened to the same two-year term as the academic affiliation agreement, but maintain the current financial terms. An executive summary of the amended agreements given to the trustees showed that the lease of the state-owned UofL Hospital would be $7 million in the 2018 fiscal year, as opposed to $7.8 million in the current fiscal year.

UofL’s interim president, Greg Postel, had offered the same recommendation to the trustees at their meeting two weeks ago, but board chairman J. David Grissom said that trustees should have additional time to review the terms, as part of the university’s troubles in recent years had stemmed from board members voting for items they did not fully understand.

In May, the financially challenged KentuckyOne announced that it would attempt to sell off Jewish Hospital and its other Louisville facilities, calling it an “evolution of its structure for care” in the state, as the nonprofit health system would now focus on a “smaller footprint centered in central and eastern Kentucky.”

In April, Postel announced to trustees that he was considering separating the clinical enterprise of its medical center from the university — following a recent step taken by Vanderbilt University — with a goal of increasing revenue at UofL Hospital and decreasing the university’s exposure to financial risk, while preserving educational and research collaborations. Postel recently said that UofL Hospital is financially sustainable, but proposed legislation in Congress to repeal and replace the Affordable Care Act is creating uncertainty, as the hospital is greatly reliant on patients covered by Medicaid.

Trustees alter process of searching for a new permanent UofL president

At Wednesday’ board meeting, the trustees also approved a resolution to dissolve the two subcommittees tasked with searching for a new permanent president of the university, which will now be handled by the entire body of the trustees. The resolution stated that this move was required to “enhance the efficiency of the search process,” and authorized Grissom to issue an RFP for an executive search firm to assist in identifying and recruiting outside candidates for the position.

After the meeting, Grissom said that the search committees first formed in January had not yet met, saying that he had made a mistake in setting up an inefficient process with too many non-trustees and is now taking a corrective step.

“I erred on the side of being too inclusive and I found that the group was just a little too large and unwieldy,” said Grissom. “So, we’ve sort of reversed course and made it limited just to the members of the board. We will consult with members of the community, similar to the four or five outside people that we had asked to serve. We will do that as we narrow down to two or three candidates.”

Grissom said there should be no concern about the lack of non-trustees involved in the initial search process, noting that the faculty, students and staff each have a representative on the board. He added that “there will be a very comprehensive outreach program to touch all of the important constituencies of the college community – whether it’s faculty, students, alumni, community leaders. So I don’t think there should be any concern about the openness of it.”

Faculty representative Enid Trucios-Haynes declined to comment to IL after the meeting about the change in the presidential search process.

Grissom said that the new RFP for a search firm was expected to go out by the end of this week or early next week.

New audit committee formed to follow up on examination of UofL Foundation

The trustees also voted to create an audit committee on Wednesday, which university spokesman John Karman said would focus on the forensic audit report conducted on the UofL Foundation by Chicago-based firm Alvarez & Marsal. The four-member committee will be chaired by trustee Diane Medley, who is also the chair of the foundation’s board of directors.

The creation of this committee comes two weeks after the trustees voted to authorize the payment of an additional $200,000 to Alvarez & Marsal, which Grissom said was requested by university counsel to further refine the information in the audit and discover additional information. That same week, the board of the UofL Foundation created a committee dedicated to further investigating the information within the Alvarez & Marsal report and coming up with recommended actions to take, which could include litigation.