Inside Report: Privatization plan worries lawmakers

State Rep. Kenny Havard believes he could have prevented the shock and awe surrounding the federal rejection of the Jindal administration’s financing plans for LSU hospitals.

The U.S. Centers for Medicare and Medicaid Services — or CMS, for short — refused to accept the funding mechanics of six privatization deals, including arrangements involving health care for the poor and uninsured in New Orleans, Lafayette and Houma.

Among the problems: The Jindal administration accepted advance lease payments from private hospitals to help balance the state’s operating budget.

The rejection didn’t come as a sudden thunderbolt from a bright blue sky. The rumblings echoed for weeks at the State Capitol. The Jindal administration downplayed the noise, attributing it to the normal drone of government bureaucracy at work.

Gov. Bobby Jindal was so certain that his structure for dismantling the state’s charity hospital system and shifting patients to private hospital providers would work that he didn’t wait for the federal government’s OK. He kept details close to the vest, handing the LSU Board of Supervisors dozens of blank pages on the Shreveport-Monroe hospital agreement. Then he set his idea into motion.

Now that the proposal has met with the federal government’s disapproval, legislators are worried. State Treasurer John Kennedy is worried. The Jindal administration, meanwhile, is focused on finding a resolution before the financial impact hits in fall 2015 — all the time assuring legislators that the state is on sound legal footing.

Havard, R-St. Francisville, introduced legislation last year that would require more oversight of privatization contracts, including drawing the legislative auditor’s eye to big-dollar proposals. The administration opposed the bill, which died in a Senate committee.

“It would have possibly prevented the situation we are currently in with CMS rejecting the hospital deals,” he said, arguing that transparency is needed.

Havard is back again this year with his proposal. The House Appropriations Committee recently debated House Bill 128. Again, the Jindal administration opposed the legislation. The legislative auditor estimated each privatization contract would cost him $31,500 to review under the bill’s guidelines.

“This is not about stopping privatization. … As a conservative, I believe in the free-market principles, and I believe in smaller government,” Havard told committee members, who squirmed uncomfortably at the bill’s price tag.

Havard said the state cannot afford multimillion-dollar hiccups when privatizations fail to work as promised.

The Jindal administration countered that the cost of standing up an office just to do the background checks required by the bill would cost $700,000. “It’s going to be expensive,” said Liz Murrill, executive counsel for the Division of Administration.

The bill advanced, but its ultimate fate is unclear. Committee members advised Havard to work with the Jindal administration.

“They have not offered anything. There is nothing about the bill they can live with,” Havard complained Wednesday.

At the same time, Kennedy is making noise about $70 million he freed up for higher education last month at the division’s request. He shuffled around dollars to keep public colleges and universities afloat until needed funds materialize later in the fiscal year. Those funds need to show up so that the treasury seeds can be repaid.

Kennedy fired off a letter to Commissioner of Administration Kristy Nichols, the governor’s chief budget adviser, asking how the seeds will be repaid. He thanked her in advance for her prompt attention.

Once again, the Jindal administration contends there is no reason to worry.

“The CMS decision has no effect on our ability to repay the seed requests. The decision has no legal basis. We are appealing and submitting new state plan amendments, and there will be no interruption in services. The partnerships will continue expanding access to health care and reducing patient wait times across the state,” Nichols said in a prepared statement.

Michelle Millhollon covers the state budget and the Governor’s Office for The Advocate Capitol news bureau. Her email address is mmillhollon@theadvocate.com.