The financially troubled 378-bed Topeka hospital will be renamed The University of Kansas Health System St. Francis Campus. The new for-profit/not-for-profit joint venture pledges $50 million in investments, local control.
The University of Kansas Health System and Ardent Health Services have completed the joint venture purchase of St. Francis Health in Topeka, and its 15 medical clinics.
Ardent will own a 75% stake in the health system and manage day-to-day operations. The University of Kansas Health System will provide clinical and financial resources.
Ardent CEO and President David T. Vandewater spoke with HealthLeaders Media about the St. Francis acquisition, which is Ardent’s first property in Kansas, and its first joint venture with UKHS. The following is a lightly edited transcript.
HLM: How long have you been working with the University of Kansas Health System?
Vandewater: It started some time ago with a predecessor company, LHP Hospital Group in Texas, which we acquired in March. They had established a relationship with the University of Kansas Health System to try to buy some hospitals in the Kansas City market some time ago. That did not work out for them but they developed a relationship. When we acquired LHP we used the relationship they had with our Chief Development Officer Dan Moen and that put us in a position to create this partnership.
HLM: What attracted you to this joint venture with UKHS?
Vandewater: We had looked at Topeka in September 2016 and decided it was something we would like to own, but because we didn’t own anything else in the state we felt it was important to have a partner in the process. No. 1, we liked the hospital. No. 2, we needed to find a partner.
At the time, UK was working on something else and they didn’t feel they had the capacity to do that. We got another call from the folks at SCL Health, and the governor’s office. The folks at UK health system felt they had the capacity to do it and having us as a partner made it easier for them to participate. Everything just worked out. It’s more a case of timing than anything else.
HLM: What attracted you to St. Francis Health?
Vandewater: No. 1 we liked the facility and the asset. It’s an attractive hospital. It has a substantial service line and capabilities within the organization. It is a sophisticated facility. We felt that between Ardent and UK we could bring some additional sophistication; both through the medical staff capabilities that would be provided, as well as understanding how to operate hospitals in communities such as Topeka.
HLM: How is the joint venture structured?
Vandewater: The University of Kansas has a 50/50 split in governance. Their ownership is 25% and they named the chairman of the board, and that is Bob Page, who is the CEO for the University of Kansas Health System.
HLM: You’ve pledged $50 million in investments. When and where will those investments be made?
Vandewater: It will be over three years. It will be inclusive of the capital improvements needed to expand service lines. We’ve been a guest in St. Francis for the past five months doing due diligence. We haven’t really had the opportunity to operate it. We will continue to have discussions with the medical staff, with the employees, and we will figure out the best way to distribute the $50 million. In addition to that, physician recruitment and service line expansion will be where we will devote the capital.
HLM: Why do you think your offer was chosen by SCL Health, rather than other bidders?
Vandewater: The model that we put together with having the University of Kansas Health System as part of it, that was a key ingredient with regards to their decision about the future. Interestingly, UKHS is a remarkable story. If you go back to 1997 they went through a similar experience to what St. Francis is going through now and they came out on the other end of that and made incredible recovery. Everyone understands the significance of UKHS to the health of the state.
HLM: Did you have any reservations about investing in Kansas, given the state’s budgetary problems, and opposition to Medicaid expansion?
Vandewater: This is more the norm than the exception. We’re seeing it everywhere. If we came to the conclusion that we could not operate in states that were having challenges with regards to being able to take care of patients and pay for it from the state budget, we wouldn’t be able to go anywhere.
HLM: How will you work around the state’s refusal to expand Medicaid?
Vandewater: We will take care of the patients who come through our doors. But, our goal is to use the brand of UKHS to attract patients beyond Medicare and Medicaid. We believe the more sophisticated services we bring in, the more sophisticated physicians who are participating with us through the UK physician group will provide us with an opportunity to get more market share to use our facility.
HLM: Your press release describes St. Francis as “near closure.” What will you do differently to make it prosper?
Vandewater: First of all, we will put a lot more local leadership so they can run it from Topeka. We believe local leadership will do a number of things with regard to insuring that we keep our ears to the ground with regard to what the people of Topeka need. Again, the board that we put together is going to be more sensitive to the Topeka marketplace than the previous owner. There are some opportunities where we can demonstrate through the skill sets we’ve developed over the years with regards to how we operate facilities.
HLM: Have you named your C Suite yet?
Vandewater: We have a CFO and our CNO and our CMO, but we do not have a CEO yet.
HLM: Will your CEO be from UK or Ardent?
Vandewater: Probably not. We have people who we are talking to that we have had longstanding relationships with who we anticipate would be eager to join us.
HLM: How will care delivery change for patients in Topeka under this new ownership?
Vandewater: Going forward, I don’t think initially they are going to see a lot of difference. Our goal is to improve the quality of the services within the organizations and for our employees and associates to be very service oriented. If we do that, everything else is going to take care of itself.
John Commins is the news editor for HealthLeaders.