The University of Louisville pulled off a last-ditch effort to save Jewish Hospital by forging a deal to buy the struggling facility just two months after its earlier attempt failed.

U of L President Neeli Bendapudi, who announced the deal Wednesday morning, said Jewish Hospital was going to close within a few months unless the university stepped up.

If the new deal closes as planned on Nov. 1, it will bring an end to months of uncertainty for the hospital, its patients and its employees.

"Let me put it very simply," she said. "Jewish Hospital is just too important to this community for us not to act."

Although Jewish has been losing money for years, and taking responsibility for running it entails a significant degree of risk, Bendapudi said there are upsides, too. Adding Jewish and other KentuckyOne assets to U of L Health, which already oversees the university hospital, would turn it into a "$1.5 billion enterprise with no debt."

"We see tremendous opportunity," she said in an interview earlier this week.

Jewish has been for sale for more than two years, along with other local KentuckyOne facilities based in Louisville. A New York-based hedge fund spent a long time negotiating a potential deal, but doubts about Jewish's future emerged publicly last year as months dragged on without a sale.

U of L tried and failed this year to find a partner to provide the financing it needed to buy Jewish and KentuckyOne's other local facilities and ultimately withdrew from sale negotiations in June.

However, Bendapudi indicated this week that U of L kept searching for another solution. She didn't want the city to lose a major employer and health care provider and also worried the hospital's closure would put the university's research initiatives at risk.

More:What to know about University of Louisville's play to buy Jewish Hospital

"We never really gave up because I was very concerned about the community," she said. "A hospital of this size closing is not an everyday occurrence."

Two recent developments propelled U of L's months-long effort to find a feasible way to acquire these facilities: The unexpected announcement last month that Jewish's heart transplant program would be suspended, plus the university's discovery soon after that the hospital's closure was imminent, according to Bendapudi.

With a renewed sense of urgency, university and state officials spent the past few weeks working out a way to give the university the financial backing it needed to make such a massive acquisition on its own (and to take on the risks inherent in accepting responsibility for trying to improve Jewish Hospital's precarious financial situation).

Bendapudi received the unanimous blessing of the U of L board of trustees Wednesday for the new plan she spearheaded, clearing the way for the university to finalize an agreement with KentuckyOne Health and its parent organization, CommonSpirit Health, to buy Jewish as well as other local operations, including Our Lady of Peace Hospital.

The state is slated to back the deal by loaning U of L $50 million. That funding will require the state legislature's approval, but it already has the support of Gov. Matt Bevin and the GOP leaders of the Kentucky Senate and House of Representatives.

The governor appeared alongside Bendapudi Wednesday to vouch for the university's decision to buy Jewish and other KentuckyOne facilities.

"United we stand, divided we fall — that's what this is about," Bevin said. "This is a risk ... but you know what, I'm a big believer in calculated risk, and this is a highly calculated risk."

Also:Jewish Hospital will suspend heart transplant program

For subscribers:Patient's heart is 'really broken' after Jewish halts heart transplants

Here's how the tentative deal with KentuckyOne is slated to work, according to information provided by the university and Bendapudi:

The university will acquire Jewish Hospital (including its outpatient care center); the Frazier Rehab and Neuroscience Center; Sts. Mary and Elizabeth Hospital; Jewish Hospital Shelbyville; Our Lady of Peace Hospital; four outpatient medical centers (Jewish East, South, Southwest and Northeast); and Jewish's visitor and employee parking garages.

U of L (or its assignee/affiliate) will pay about $10 million to acquire these assets.

The sellers, which include KentuckyOne and certain affiliates, are expected to provide $76.4 million in "net working capital," including accounts receivable.

The $10 million purchase price U of L pays may be adjusted if the sellers provide more or less than the estimated $76.4 million in capital.

Additionally, CommonSpirit will cancel two promissory notes totaling $19.7 million, which a U of L affiliate still owes the firm. (Bendapudi indicated the debt is related to KentuckyOne's former management of U of L Hospital, which fully came back under university oversight in mid-2017.)

The goal is to close the deal on November 1.

When the deal closes, the Jewish Hospital and St. Mary's Healthcare Foundation ⁠— which Bendapudi said is controlled by CommonSpirit ⁠— will pay U of L $40 million in quarterly installments of $2.5 million. That money will go toward running the operations the university is purchasing.

The sellers agree to a five-year non-compete agreement that will restrict their ability to operate in certain Kentucky and Indiana counties. They also agree to refrain from soliciting certain key employees for two years.

Regulatory approvals for the sale must be secured, and the Catholic Church must authorize selling Sts. Mary and Elizabeth Hospital and Our Lady of Peace Hospital.

The university would not take on any debt from this planned sale, Bendapudi said, and won't assume any liabilities for the operations it's buying until the deal closes. (The board of trustees has authorized her to finalize the purchase but reserves the right to approve any material changes to the deal that would affect U of L's rights or obligations.)

Bendapudi also said two other funding sources are key parts of the university's plan to buy these facilities: The proposed $50 million loan from state government and a $10 million contribution from the Jewish Heritage Fund for Excellence, which would be provided after the sale becomes official.

The state's involvement

The long-term, $50 million loan is being arranged by the Kentucky Cabinet for Economic Development but also would require legislative approval.

Half of it would be forgivable as long as the university meets certain targets, with a 1% interest rate kicking in after the first five years.

A draft document the Courier Journal obtained also indicates that the economic development cabinet would make the loan contingent upon the legislature's approval of $50 million in additional appropriations for the cabinet and expects that would happen early next year.

"It does not eliminate all risk," Bendapudi said Monday of the proposed state loan. "As you can imagine with this, it is risky because it's a promise from the legislature that they will introduce it in their regular session in January 2020."

Kentucky House Speaker David Osborne, R-Prospect, said at Wednesday's university press conference that he has not counted votes yet in terms of ensuring enough support exists in the legislature to pass a forthcoming bill that he will personally sponsor to support the $50 million loan, but he's confident they'll get the votes they need.

However, a pair of key state senators, including Republican Senate Majority Leader Damon Thayer of Georgetown, expressed notable reservations Wednesday about the requested loan, especially given the state's massive pension debt and tight budget.

Bendapudi indicated the university is going on faith that the legislature will come through because lawmakers recognize what's at stake here.

"It's really hard to recruit companies, (and) it's really hard to keep companies if people cannot get healthcare," she said earlier this week.

She also expressed gratitude toward the Jewish Heritage Fund for Excellence's plan to contribute $10 million.

Bendapudi said that contribution and the state loan, along with the sellers' anticipated provision of around $76.4 million in net working capital and the $40 million that would come in installments through the Jewish Hospital and St. Mary's Healthcare Foundation, would constitute the funding the university needs as it takes over the responsibility of running Jewish and KentuckyOne's other local facilities.

"We will have capital costs. We'll need to put money in," she explained.

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Can U of L turn Jewish Hospital around?

Jewish has been losing money for years — with an earnings report showing a combined $29 million in losses for Jewish and St. Mary's Healthcare during the six months that ended in December 2018 alone — and it's estimated that it needs around $300 million to $500 million in upgrades.

Bendapudi acknowledged that the university will take on a big challenge by buying Jewish, and noted that she doesn't expect the financial situation to improve overnight.

"We will still lose money the first couple of years," she said, although the university will work to mitigate the losses. "This is a risk for the university. We are aware of that."

However, she pointed to her insistence since her inauguration last year as U of L's president that Louisville, as a public university, is part of the broader community and must act in ways that benefit the city and the commonwealth.

"I cannot think of a bigger need for this community," she said of Jewish's survival. "I'm hoping there is an appreciation for the fact that this (hospital) would have closed but for the university."

Keeping Jewish open is important to the university on another level, too.

The hospital plays a pivotal role in the university's academic mission, with U of L's medical school faculty and residents having provided clinical services at the hospital and the Frazier Rehab Institute for years under multimillion-dollar contracts.

Bendapudi said the university's viability and reputation as a top-notch research institution would be at risk if Jewish shut down, which is another reason why avoiding that outcome has been a top priority.

She is confident in the team the university has put together at U of L Health, including CEO Tom Miller, who previously led Quorum Health, a Tennessee-based firm with a portfolio that includes 26 hospitals in 14 states, according to its website.

Bendapudi also said the university already successfully tackled problems at U of L Hospital after it resumed control of that operation from KentuckyOne that are similar in nature to certain issues that need to be addressed at Jewish Hospital.

"It's all about execution ... Hiring good people into some key roles and then building on the strength we have," she said.

Morgan Watkins: 502-582-4502; mwatkins@courierjournal.com; Twitter: @morganwatkins26. Support strong local journalism by subscribing today: courier-journal.com/morganw.