Deals to lease LSU hospitals in works

The Jindal administration is working behind the scenes on deals involving the potential lease of some LSU hospitals in south Louisiana to private interests as a way to fill a health care budget hole.

Among them are hospitals in Lafayette and New Orleans, which like other LSU facilities are facing employee layoffs and service reductions because of a congressionally approved reduction in federal Medicaid funding support.

“LSU is incredibly occupied, considering several lease options across HCSD,” LSU System Executive Vice President Frank Opelka said. HCSD, or the Health Care Services Division, is the LSU umbrella agency that oversees the operations of seven of LSU’s 10 public hospitals.

“We are optimistic that individual leases in each community with separate partners will be considered for implementation near or at the end of this fiscal year in several HCSD facilities,” Opelka said.

Opelka said the negotiations are complex and he could not talk about potential lessors.

The lease agreements are being discussed as LSU tries to come up with the dollars to close a $328 million or better hole in the budget of its 10 public hospital system.

A reduction in the federal funding contribution led to an $800 million-plus Medicaid funding hole in the budget year that began July 1.

The Jindal administration has announced plans to handle some of the $500 million budget cuts of it through LSU hospital system and state Department of Health and Hospitals budget cuts. The remainder the administration hopes to convince the legislature to close with the use of surplus funds.

LSU previously announced $94.9 million in cuts across the seven hospitals, that included up to 1,500 employee layoffs and service cuts. The administration is counting on another $135.6 million from public-private partnerships involving the south Louisiana hospitals, according to documents released by the state Department of Health and Hospitals.

The seven HCSD hospitals are located in Baton Rouge, Lafayette, New Orleans, Houma, Bogalusa, Independence and Lake Charles.

The funding gaps at three other LSU hospitals in north Louisiana — Shreveport, Monroe and Pineville — is being handled separately.

A private LSU foundation is spearheading efforts to identify private partners for the operations of those hospitals.

Senate Health and Welfare Committee chairman David Heitmeier said the lease agreements are part of a multi-pronged plan that also includes financial enticements for private entities that want to take over traditional public hospital business.

The plan includes higher reimbursement rates for services and funding for uninsured care provided through what is known as the federal “Upper Payment Limit” program.

“They are taking a private enterprise and asking them to lease the facility. That lease payment becomes a part of the state general fund, and then they can use that for a (federal) match,” said Heitmeier, D-New Orleans. “That’s the structure we have been trying to do. We need the dollars for match.”

With the “new” state dollars from lease payments, more federal funds could be attracted eliminating the need for some cuts.

Heitmeier said using lease payments would initially bridge the funding gap until the private entities take over more of traditional public hospital patient business.

State Rep. Cameron Henry, R-New Orleans, said the plan of using up front lease payments to close a budget hole appears to be one of using one-time money for re-occurring expenditures. “It’s the same general philosophy they used all last year of finding one-time money from sales or leases, or doing whatever we can instead of looking at budget reform,” he said.

“It feeds the flames of the anger everyone has about doing this kind of stuff,” said Henry, a Jindal fiscal critic who was recently ousted as vice chairman of the House Appropriations Committee.

Opelka, who is spearheading the LSU effort, has declined to discuss specifics of what hospitals are involved and with whom negotiations are taking place.

However, Opelka did note Lafayette General Medical Center has expressed formal interest in a partnership with the University Medical Center in Lafayette.

Another LSU health care executive has mentioned lease possibilities to legislators recently.

“I do think we are very close to a relationship, a lease of the Interim Hospital and ultimately the new UMC hospital to another hospital in New Orleans,” LSU Health Sciences Center New Orleans Chancellor Dr. Larry Hollier said.

The Interim Hospital is LSU’s public hospital in New Orleans. “The new UMC” which Hollier referred to is the LSU-aligned $1.2 billion academic medical center complex under construction in New Orleans. Plans call for it to be managed by a private entity.

The chairman of the medical center board, Bobby Yarborough, declined to answer specific questions about potential lease discussions. “It’s a work in progress you might say,” said Yarborough, a Jindal appointee to the LSU Board of Supervisors.

LSU System general counsel Shelby McKenzie declined comment on whether a competitive process would be required when it comes to agreements involving leasing of public property.

“It is not wise or appropriate for me, as legal counsel for LSU, to give an advisory legal opinion on any issue to anyone other than LSU,” McKenzie said.