Joint Ardent/KU Health venture to improve former St. Francis facilities, add jobs through $90M in bonds

Topeka Health System — the new name of St. Francis under a joint venture with Nashville-based Ardent Health and the University of Kansas Health System — received approval for $90 million in bonds to improve buildings and add staff. Company officials announced they would take over the hospital at a news conference in May. (May 2017 file photo/The Capital-Journal)

St. Francis Health’s new owners plan to invest about $75 million in hospital improvements and add 687 jobs over 10 years, utilizing $90 million in revenue bonds.


Topeka Health System — a joint venture between Nashville-based Ardent Health and the University of Kansas Health System — received approval for the bonds from the Shawnee County Commission, which voted without comment Monday. The health-care providers announced in May they would jointly purchase St. Francis from Colorado-based SCL Health. Tyra Palmer, Ardent spokeswoman, said the joint venture has been dubbed Topeka Health System, but St. Francis health system won’t be renamed until after the acquisition is complete.

The dollars will pay for acquisition costs and a part of projected improvements averaging $7.5 million per year over 10 years, according to an analysis that highlighted benefits for Topeka and Shawnee County. Over that same time, the company expects to add about 70 to 90 new positions per year. The bonds carry no cost or risk to taxpayers but are the first step toward securing a property tax break.




Topeka Mayor Larry Wolgast said by investing $75 million over 10 years, Topeka Health System showed “a real commitment to the community.”

“It shows a commitment to growing St. Francis into a major health system,” he said. “Topeka will be stronger keeping two major hospitals here. Of course we’re always delighted about job creation, but more importantly it means Topekans will have better health care.”

Palmer clarified that the bonds are not “traditional bonds.”

“We will invest $90 million dollars in capital to save St. Francis, and in return we will receive tax abatements on certain properties equaling $22 million over 10 years,” she said.

The tax abatements and bonds will be important to stabilize the workforce and address facility and equipment needs, Palmer said. The main hospital at 1700 S.W. 7th St. has no significant structural or construction issues that need to be addressed, she added. Plans will become more specific as the partnership explores what needs to happen to turn St. Francis Health into a profitable entity.

“As community leaders, employees, patients and staff were sadly aware, the hospital was days away from closing,” Palmer said. “Wanting to ensure access to quality care close to home, we developed a proposal that would keep the doors open and patients in the community. The reality is this hospital had significant financial losses.”

Losses have been totaled $117 million in the past five years.

The sale of St. Francis retains about 1,600 jobs in Topeka. The cost and benefit analysis conducted by Pittsburg-based Municipal Consulting for the bond application concluded the hospital would employ more than 2,300 over 10 years. Those jobs would have an average salary of $66,000 in the first year and nearly $87,000 by 2028. More than 800 additional temporary construction jobs would be created over the next decade.

Topeka councilwoman Karen Hiller, whose district includes the hospital campus, said the city’s workforce was ready to supply any new demand.

“It’s a sector we’re already strong in,” Hiller said of health care. “If they’re adding jobs over 10 years, that gives us plenty of time to get our people trained and ready.”

The hospital accounts for about $400 million in economic impact for the area, said Matt Pivarnik, president and CEO of the Greater Topeka Chamber of Commerce and GO Topeka. An investment from Topeka Health System places Topeka on track to be a “health-care destination.”

“Between Stormont Vail Health and now Topeka Health, I think Topeka is in a great position to draw a lot of people from around the region for health care,” he said. “Topeka can be a lot more convenient than other cities.”

After the 50-50 Ardent and KU Health deal was announced in May, officials speculated the for-profit venture would be a small boon for Shawnee County tax coffers. More than $2 million would come into Shawnee County taxing agencies for just the main hospital building as it was switched from non-profit to for-profit status. A tax abatement would put off that revenue stream for 10 years or until the bonds are paid off.

That likely will have little impact on the city of Topeka, Wolgast said, since the tax revenue didn’t exist under St. Francis Health.

The job creation “helps offset any loss for the lack of property tax revenue,” he said.

Ardent and KU Health indicated in paperwork filed with the county they intend to seek property tax abatement on some properties included in the sale for a 10-year period. Those properties, totaling nearly $30 million over 10 years, haven’t been on the tax rolls under St. Francis, which operated as a nonprofit.

About 10 parcels included in the bond application have been on the tax rolls because they’re either vacant or unqualified. Topeka Health System requested a one-year tax abatement for 2018 worth about about $578,000, for those properties.

The bonds, which will be issued in 2018, would be payable solely from rents and revenues from Topeka Health System or any other entity that leases the property. City and county tax dollars can’t be spent on the on bond payments, said county bond counsel Bob Perry.

“There’s no debt or liability to the county,” he said.

Palmer said the THS is looking forward to executing a turnaround in the Topeka hospital.

“The University of Kansas Health System executed our own dramatic turnaround over the past few decades, and Ardent Health Services has a strong record of doing the same with facilities it works with across the country,” she said. “We made a promise to the people of Topeka, and we were prepared to keep it.”



Ardent/University of Kansas moving forward on St. Francis:

Oct. 1: Deal expected to close

$90M: Revenue bonds approved Monday

687: projected new jobs over 10 years