Progress 2007 Economic review & forecast

Tense KU-St. Luke’s deal put to ‘guiding principles’

April 21, 2007


A history of KU-St. Luke's negotiations

1998: Kansas University Medical Center and Kansas University Hospital separate, with the goal of bringing the hospital into better financial health and letting it compete with other Kansas City hospitals.

2005: A task force commissioned by a Kansas City philanthropic foundation begins work on a report that eventually calls for collaboration between KUMC and other Kansas City hospitals, including St. Luke's.

November 2006: KU Hospital offers $400 million in support for the medical center over 10 years, on the condition that Saint Luke's is excluded as a site of KU's medical resident programs. The offer is eventually rejected.December 2006: Kansas Board of Regents member Dick Bond says the regents know "practically nothing" about the ongoing negotiations and says, "We're not going to micromanage."

February 2007: At a governor's summit in Kansas City, Mo., Kansas City businessman Irv Hockaday announces that KU and Saint Luke's have signed a letter of intent to strike a deal by March 31. The deal would allow Saint Luke's to market itself as "a major teaching and research hospital" of KU and include medical residents going to Saint Luke's.

March 2007: The Kansas Board of Regents get more involved in the issue, giving the school a March 2 deadline to answer questions about the affiliation. Meanwhile, a law advances in the Kansas Legislature that would remove the medical center's state funding if it reached an agreement that doesn't satisfy a majority of the KU Hospital board.

For decades, the school where Kansas University students learned to be doctors and the hospital where they practiced were one and the same.

But Kansas University Medical Center and KU Hospital split in 1998, and in the past year, the difference between the two institutions has come into clear focus for the public to view. The year has been filled with tense negotiations about the relationship the hospital and school should have in the next decade, and about a controversial plan by the school to branch out and form a relationship with a second hospital in Kansas City, Mo. - St. Luke's.

Given KU Hospital's dramatic turnaround in the past decade - from near-bankruptcy to a financially viable hospital with high patient-satisfaction rates - Medical Center leaders have criticized the hospital's leadership for not investing enough back into the medical school enterprise. They also say a new relationship with St. Luke's will help broaden KU's reach in the community and bolster plans to make KU a nationally recognized comprehensive cancer center.

"I think overall the long-term benefits of the affiliation are much greater than any potential short-term risks," said K. Allen Greiner, a faculty member in family medicine.

Dissension among leaders

But KU Hospital leaders have said they were kept in the dark about KU's plans to make a deal with St. Luke's, which is a direct competitor of KU Hospital. They feared a KU-St. Luke's alignment would put them at a competitive disadvantage and that key faculty would be enticed to jump ship and take their services to St. Luke's for higher pay.

"We'll be diluting the quality of our training programs," said William Reed, head of the department of cardiovascular diseases at KU Hospital. "It makes no sense except that St. Luke's comes out on top."

The momentum for a KU-St. Luke's deal comes largely from a group of Kansas City corporations and donors - including Hallmark, Sprint and three anonymous benefactors - who have pledged $150 million to support KU's medical school if the deal goes through.

Amid the controversy, KU Hospital President and CEO Irene Cumming announced in March that she would resign to take a job as head of an Illinois-based organization of academic medical centers. KU Hospital's board voted on Bob Page, a member of her leadership team in recent years, to succeed her, despite the sentiment by some, including Barbara Atkinson, Medical Center executive vice chancellor, that the job should be filled only after a national search.

Legislative role

A key turn of events came in early April, when the Kansas Legislature passed a budget for the coming year including a proviso supported by the Republican leadership that gives KU Hospital's board veto power over the proposed KU-St. Luke's deal. The language stayed in the bill despite some lawmakers' claims that the Legislature was meddling in delicate negotiations.

"The Legislature has overstepped its bounds," Sen. Barbara Allen, R-Overland Park, said at the time.

In coming months, both KU Hospital and St. Luke's are expected to finalize their agreements with the Medical Center. KU Hospital has set a deadline of May 31 to finish its agreement with the school, and St. Luke's has set its deadline for the end of June. Although they've made progress in recent weeks, sticking points remain, such as the type of language St. Luke's will be able to use to promote itself if it aligns with KU.

Moving forward

After weeks of negotiation, KU and KU Hospital agreed on the following "guiding principles" for their future relationship:

¢ KU Hospital will boost its support for the medical school from $30 million this year to $42.5 million next year, with the amount expected to grow in coming years based on a formula. The money will be used to boost faculty salaries and to add 39.5 medical residents.

¢ Kansas University Physicians Inc., the group of 350 KU medical professors who staff the outpatient clinics at the hospital, will be removed from the exclusive control of the School of Medicine. That will give the hospital a say for the first time in how the clinics are run and could lead to a more streamlined experience for patients.

"Right now we have different billing systems, different accounting platforms," said Kirk Benson, president of the doctors' group. "How patients move through a clinic and then access the hospital for lab and X-ray services, it's not as coordinated as it could be."

¢ The school and hospital will work together to build a new medical office building starting in 2008.

¢ The school will be able to start an affiliation with St. Luke's, but with restrictions. For example, heads of KU's academic departments won't be allowed to migrate to Saint Luke's. A subject still under negotiation is that KU Hospital doesn't want St. Luke's to be able to call itself an "academic" partner of the Medical Center.

St. Luke's says its affiliation may include training KU medical fellows in endocrinology, geriatrics, nephrology, palliative care, advanced cardiology research, stroke, maternal/fetal medicine and subspecialty anesthesiology. KU residency programs could include neurology, neurosurgery, otolaryngology, physical medicine and rehabilitation, plastic surgery and urology.


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