LSU downsizing could cost $83 million more

Downsizing throughout LSU’s 10 public hospital system creates an $83 million budget shortage in its medical school programs, LSU health care executives said Friday.

Medical school funding relies on revenues from hospital operations and reductions in bed capacity and services translates into less money, LSU System Executive Vice President Dr. Frank Opelka said.

The shortage came as a surprise to members of the LSU Board of Supervisors, who recently approved a plan to cut $150 million out of operations of seven LSU hospitals in south Louisiana.

Other cuts are under way at the three hospitals in north Louisiana based on an earlier round of reductions.

The Jindal administration handed nearly $330 million in cuts to LSU hospitals after Congress ordered — after the state budget went into effect July 1 — reductions in federal support for the state’s Medicaid program, and thereby required state government to pay more of the costs.

Opelka told the LSU Board that the problem surfaced as officials worked on plans to move graduate medical education programs currently housed in the LSU hospitals to the private sector.

“When we shift this business out ... we will lose cash-flow for a time,” Opelka said.

Later, he said, “It takes three years to catch up. During that time period the cost to the (medical) schools is substantial.”

Opelka said about $53 million will be lost as a result of cutbacks at the seven LSU hospitals in the Health Care Services Division which includes those in Baton Rouge, Lafayette, New Orleans, Houma, Bogalusa, Independence and Lake Charles.

In LSU Health Care Services Division hospitals, about 250 residents — recent medical school graduates completing their training to become fully licensed — out of about 800 residents are scheduled to move to another hospital setting because of reductions in services and more heavy reliance on private hospitals to care for the poor and uninsured.

Dr. Robert Barish, chancellor of LSU Health Sciences Center in Shreveport, said another $30 million would be lost to medical school financing there. Hospitals in Monroe and Pineville are under the LSU Shreveport group.

LSU Health Sciences Center-New Orleans Chancellor Dr. Larry Hollier said medical schools in Shreveport and New Orleans rely heavily on the public hospitals for financial support.

“I do not have the revenues to cover $53 million over the next 18 months,” Hollier told the board. Hollier said efforts are under way to identify a funding source, but “I have some concern about it obviously.”

Hollier said the financial shortfall could present problems with accrediting agencies for both physician training programs and medical schools.

He said the medical school group requires $78 million to $100 million in cash reserves in the event of revenue losses.

“The $53 million gap in the next 18 months would be about half of my cash reserves. We have to find an answer to this,” Hollier said.

John George, who chairs the LSU Board’s health care-medical education committee, said the finding the revenues to pay for LSU graduate medical education, or GME, programs “is going to fall squarely on this board. It’s an $80 million to $100 million problem and it’s not going to go away.”

LSU Board member Rolfe McCollister said LSU could potentially generate revenues through the lease or sale of some of its facilities to private partners.

Opelka said leasing some of its hospitals to the private sector could be “a step to shrink the hole.”

“We are not able to make that much money to pay for GME. It’s the state’s obligation to pay for GME,” said George, referring to graduate medical education or physician training. “If we cut these hospitals this is going to fall squarely on us.”