Center for Open Government: Unpacking the UofL Health loan repayment announcement
Likely lost in yesterday’s slew of University of Louisville breaking news was a release from the Governor’s Office headlined "UofL Health to Expedite Repayment of $35 million State Loan, Citing Positive Financial Performance.”
The first paragraph of the release stated:
A $35 million, partially forgivable loan issued to the University of Louisville Health by the Kentucky General Assembly in 2020 now has an accelerated repayment schedule in response to positive financial performance, Gov. Andy Beshear announced today.
Anyone reading the headline and that paragraph could be forgiven for thinking UofL Health’s intention was to repay the full loan amount. It isn’t revealed until the announcement’s sixth paragraph that “other details of the loan agreement remain unchanged, including the ability to forgive up to 50% of each annual loan payment.”
We wrote in a recent post, “Accelerated repayment of the loan would make a strong impression with taxpayers, especially if UofL Health agreed to repay the entire $35 million. We’re not counting on it but would be the first to applaud the University’s leadership if they decide to take that bold step.”
We believe it’s safe to assume that UofL Health’s intention is to only repay half the loan on this new accelerated schedule and still planning on $17.5 million to be forgiven by Frankfort. Loan forgiveness remains conditioned on UofL Health meeting either of two options:
Retain 5,880 full-time, Kentucky resident jobs being paid an average hourly wage, excluding benefits, of at least $35; or
Meet both of the the following requirements in Medically Underserved Areas (MUA): Continue operating existing facilities and open at least one additional facility within the MUA or in close proximity to serve the MUA, and increase the total number of UofL Health and its affiliates family medicine access points providing health care services from 10 to 14 in the MUA.
Last year, the Center for Open Government acquired documents through Kentucky’s open records statutes that indicated UofL Health drafted these conditions and provided them to the Cabinet for Economic Development to incorporate into their term sheet (which the Cabinet did).
In addition, the Governor’s Office said “UofL Health continues to report a positive financial performance, ending fiscal year 2021 with a net income of $96.5 million.”
Something to note: UofL Health identified $88.1 million in CARES Act funding as “federal grants” on their annual consolidated statement. Jewish Hospital lost $11.1 million during the first six months of last fiscal year. Sometime after the beginning of the calendar year UofL Health allocated $19.4 million of CARES Act funds to prop up Jewish - at least on paper. Bottom line, we’re skeptical of the suggestion the financial turnaround has been as dramatic as presented.
Lastly, the Governor’s Office release touts the investments “for critical upgrades and equipment needs at the acquired facilities.” The Center for Open Government has published a complete list of how the taxpayer funds were spent.
The Bluegrass Institute opposed the KEDFA loan, arguing that UofL Health, a billion-dollar health care organization, was capable of securing private sector financing to handle the acquisition. Documents obtained by the Center for Open Government provide evidence to support that argument. (Link, link and link)
In June 2019, UofL President Neeli Bendapudi said acquiring Jewish Hospital without a partner was too big of a risk for the University of Louisville to undertake. UofL then embarked on a lobbying campaign in Frankfort to secure a taxpayer-backed loan to support their eventual purchase of the hospital.
The $35 million loan to UofL Health is financed through bonded debt. The debt service for the loan costs taxpayers $3.07 million annually.