Report: Hospitals will take hit
Credit analyst says cuts in LSU system to change who gets patients
Jindal administration cuts to the LSU hospital system will have a negative financial impact on private hospitals in Baton Rouge, Lafayette and elsewhere because they would get more indigent patients, according to a new Moody’s Weekly Credit Outlook report.
Louisiana’s health chief disputed Moody’s conclusion. “It doesn’t look like they have done a lot of their homework,” state Department of Health and Hospitals Secretary Bruce Greenstein said Monday.
The report addresses LSU Health Care Services Division’s plans to lay off employees, reduce the number of hospital beds and discontinue some medical services as it implements a $29 million cut precipitated by Gov. Bobby Jindal’s midyear budget cuts.
“With these changes, many Medicaid dependent, uninsured patients that formerly used services provided through LSU’s public hospital system are likely to seek care at non-governmental facilities, including private not-for-profit (NFP) hospitals,” the report by a Moody’s Investment Services analyst states.
Adding new indigent patients at private NFP hospitals could hurt their ability for lower-cost borrowing because government reimbursement for Medicaid and indigent care patients does not fully cover the cost of patient care. “Hence, it will have a negative impact on non-governmental facilities hospitals’ profitability and debt service coverage,” the report from the bond rating firm concludes.
Among the hospitals on Moody’s list of “NFP Hospitals With Most at Stake in Proposed Budget Cuts” are Our Lady of the Lake Regional Medical Center, Ochsner Medical Center and Woman’s Hospital, all in Baton Rouge.
Also on the list are Terrebonne General Medical Center, in Houma; Our Lady of Lourdes and Lafayette General Medical Center, both in Lafayette; Christus-St. Patrick Hospital, in Lake Charles; and Ochsner Clinic Foundation and Touro Infirmary, both in New Orleans.
Moody’s added that the exact financial impact on the NFP hospitals cited “is difficult to quantify.”
Our Lady of the Lake Chief Executive Officer Scott Wester said Moody’s is probably looking at the Lake having the largest emergency room in the region. “That’s how people will access care, who don’t have the ability to access care through an insurance card,” Wester said. And he said the emergency room is an expensive way to get medical care.
Wester said the Lake will have to make adjustments just as it does every year with changes in Medicaid, Medicare and private insurance.
Greenstein said that private not-for-profit hospitals have a legal obligation to care for the indigent and get tax breaks as a result. He said NFPs have had a fairly low number of uninsured patients through the years because of reliance on LSU hospitals providing uninsured care.
“There’s a responsibility with that (tax) benefit,” Greenstein said.
Greenstein called the LSU cuts “efficiencies” required because the LSU hospitals in south Louisiana were running over budgeted amounts. LSU claims it has generated extra money as it provides services but the dollars are being moved to prevent DHH program cuts.
“We don’t know what cuts in the LSU System will look like,” said Greenstein, noting that LSU has not released a specific budget reduction plan as yet.
“All of this is speculation,” he said. “I suspect that Moody’s is unable to do a proper analysis because they don’t have all the information.”
Louisiana Hospital Association president John Matessino said there will be some impact on hospital finances because of more free-care patients and potential increased use of private hospital emergency rooms. “It certainly is not a good thing. It certainly messes up the equilibrium of care,” he said.
Matessino said a recent hospital survey indicated that 78 percent of the in-patient Medicaid services are done in private hospitals. The greatest impact on hospitals will be any resulting influx of uninsured patients, he said.
Some of the hospitals could fare better than others because of “their larger size and diversification in location, organizations such as The Franciscan Missionaries of Our Lady Health System and Ochsner Clinic Foundation,” according to the Moody’s report.
In addition, the Moody’s report states that the Lake and Woman’s could be helped by agreements with LSU to absorb the majority of in-patients at higher reimbursement rates as a result of the planned closure of LSU’s Earl K. Long Medical Center in Baton Rouge.
“Conversely, the Touro Infirmary and Terrebonne General are hospitals that do not have the luxury of size or prior reimbursement agreements. The credit impact on these hospitals will depend upon the degree of changes at the safety net hospitals and the volume of incoming new Medicaid and uninsured patients,” Moody’s report said.