In current battles between church and state about health care and health insurance, it is often the poor and uninsured who end up as unintended casualties. A recent episode in Kentucky demonstrates how this happens—and just how much is at stake.

At the end of last year, the state’s Democratic governor, Steve Beshear, rejected the merger of University of Louisville Hospital Medical Center (UMC) with Jewish Hospital, St. Mary’s Healthcare, and St. Joseph’s Healthcare, claiming that such a merger could violate the First Amendment by forcing what had been a public hospital to abide by the restrictions of a religious institution. Catholic Health Initiatives, which describes itself as “a ministry of the Catholic Church,” was to manage the new healthcare network and to own 70 percent of it. (Any health-care organization managed by a Catholic institution must adhere to the Ethical and Religious Directives on Healthcare of the United States Conference of Catholic Bishops—directives that exclude services available at some non-Catholic hospitals.)

Facing funding cutbacks and rising costs, secular health-care providers across the country have been seeking merger partners, and their best option is often to join up with a financially stronger and better-managed Catholic organization. But had the Kentucky merger gone through, it would have been the first time a publicly owned hospital in the United States merged with a Catholic health-care organization. Catholic Health Initiatives was prepared to invest as much as $580 million in the network that the merger would have created; it had also committed to investing at least $200 million in UMC right away.

Since Governor Beshear announced his decision, the board of UMC has been desperately looking for ways to continue its mission to provide health care to poor and uninsured patients without the new resources the merger would have provided—and with no new financial support from Kentucky’s state government or the city of Louisville. Indeed, both state and city officials have warned that funding for UMC is likely to decline because of dwindling tax revenue. (The state has already cut UMC’s budget by 6.5 percent.) UMC is the “safety net” hospital and primary teaching hospital for the Louisville area. According to a report by Professor David Dranove of the Kellogg School of Management at Northwestern University, “without this deal, the University of Louisville Hospital could lose access to Medicare and privately insured patients and face a dire financial future.” James Ramsey, the president of the University of Louisville, has warned that, without additional funding from the state government, the governor’s rejection of the merger could force UMC to cut both patient services and support for the university’s medical school. Non-emergency care to patients living outside the Louisville area has already been eliminated.

Kentucky is one of the unhealthiest states in the country. It ranks first in per-capita cancer deaths, first in rates of lung cancer, third in obesity rates, and ninth in heart-attack deaths. The state already has too few physicians—at least two thousand fewer than it needs—and the shortfall is projected to rise to three thousand by 2030.

Shortly after the governor confirmed his rejection of the merger on January 6, Jewish Hospital and St. Joseph’s Healthcare announced they had agreed to a smaller merger without UMC, forming a new organization called KentuckyOne. They did not rule out the possibility of a future association with UMC, but the likelihood of such an association is rapidly diminishing. The $200 million that would have gone to UMC will go instead to KentuckyOne.

Governor Beshear’s rejection came as a surprise to many. The president of the University of Louisville, James Ramsey, strongly supported the merger and had been discussing it with the governor for more than a year. The boards of UMC, Jewish Hospital, and St. Joseph’s Hospital had all given their unanimous approval to the move, and board members had vigorously defended the proposed merger in public forums. They made it clear that the merger would have required only two major changes at UMC. Contraceptives could no longer be dispensed by the hospital’s in-house pharmacy, and “tubal ligations”—a non-emergency procedure that, according to state law, must be performed at least twenty-four hours after a patient consents—could no longer be performed at the hospital. (UMC had made arrangements with nearby Baptist Hospital to perform these procedures and had created a special fund to pay for them.)

Among the forces arrayed against the merger were the state’s largest newspaper and lobbyists for “reproductive rights.” On Sunday, July 17, 2011, a lead story in the Courier-Journal by reporter Patrick Howington raised questions about the merger. On July 18 the Courier-Journal ran an editorial strongly opposing it. The editors’ tone was indignant: “How can a reputable medical school send its students into a hospital for training that sets its rules based on the rulings of Catholic bishops and the Vatican?” That evening Honi Marlene Goldman, a respected local businesswoman, began a grassroots effort to oppose the merger. She gathered five hundred signatories for an ad in the Courier-Journal. Under the words “u of l barters away women’s health,” the ad claimed that “the pending merger of University Hospital and a private health-care organization will stop vital medical procedures for many men and women in the Louisville area.” Planned Parenthood and the Louisville Women’s Caucus soon joined Goldman’s cause.

Among the leading opponents of the merger were many influential Democratic Party donors. Political insiders speculate that Governor Beshear, now in his second and last term as governor, may have his eye on a Senate seat. After the high-profile campaign against the merger, approving it would have cost the governor important political support and might even have provoked a successful primary challenge if he did run for the Senate.

There were no doubt good reasons to scrutinize a proposal for such an unprecedented merger. It was unwise, however, for Governor Beshear to reject the merger outright even as the state was planning to cut public funding for UMC. His inflexibility will not hurt Catholic Health Initiatives, but it probably will hurt the indigent and uninsured population UMC has served. As long as legal medical procedures Catholic institutions can’t provide are available somewhere else in Louisville, the governor should not stand in the way of an effort to save a hospital the state has long been neglecting. People can get contraceptives anywhere, but UMC is the only hospital in Louisville that the poor can afford. The governor needs a better reason to let it languish.