Hospital appraisal falls short of state plan

Advocate staff photo by RUSTY COSTANZA -- The state is trying to sell the New Orleans Adolescent Hospital, shown Wednesday, for $35 million. It is used as the LSU Health Sciences Center Uptown Campus. Show caption
Advocate staff photo by RUSTY COSTANZA -- The state is trying to sell the New Orleans Adolescent Hospital, shown Wednesday, for $35 million. It is used as the LSU Health Sciences Center Uptown Campus.

Appraisals on a state-owned hospital in New Orleans estimate the property is worth far less than the Jindal administration hopes to collect by leasing it to Children’s Hospital.

“The worth put on the property is potentially the market value when they have a vested interest in the property,” Commissioner of Administration Kristy Nichols said late Wednesday.

The Jindal administration released the appraisals this week after numerous delays. They show New Orleans Adolescent Hospital’s 17-acre property is worth, at the most, $20.9 million and is beset with collapsing roofs and possible hazardous materials problems.

Negotiations for Children’s Hospital of New Orleans to lease or buy the hospital located in the middle of the property at 210 State St. have dragged on for months.

At the same time, the Jindal administration is banking on the negotiations being successful and generating $35 million. State budget bills direct the dollars towards helping fund public health care in the current year’s $25 billion state operating budget, creating a sizeable hole if the negotiations fail.

“We’re still in negotiations, but we’re confident that we’ll reach a deal,” Nichols said.

She said the goal is to sign a long-term lease with an upfront payment of at least $35 million.

New Orleans Adolescent Hospital, or NOAH, has a long history. The state acquired the property from the federal government in 1981. The property holds a plantation owner’s house and other buildings in addition to the five-story main hospital.

The federal government’s agreement with the state stipulated that the property had to be used for “general health care” for 30 years. The hospital treated mentally ill children until Hurricane Katrina hit the city in 2005. After the storm, the hospital started admitting adults as well.

Gov. Bobby Jindal closed the hospital in 2009 as part of a cost-cutting measure. Two years later, the federal government’s agreement with the state expired.

In March, Children’s Hospital of New Orleans announced plans to buy the hospital, next to its campus on Henry Clay Avenue.

The Legislature later passed a bill stipulating that the property could be leased but not sold.

The state budget commits $35 million from a lease or sale to help pay the state’s health care bills.

Brian T. Landry, vice president of marketing for Children’s Hospital of New Orleans, said his employer has used space at NOAH for years and would like to acquire the property.

“We’re in discussions with the state,” he said.

State Rep. Neil Abramson, D-New Orleans, said he is uncertain how the Jindal administration arrived at a $35 million estimate for a sale or lease.

“I was surprised to see the money in the budget at all because that property’s in my district and no one had ever said anything to me,” he said.

Abramson said he wants the hospital to reopen and provide mental health treatment, reinstating those services in New Orleans.

After the governor closed the hospital, NOAH’s inpatient beds moved to Southeast Louisiana Hospital in Mandeville. The governor announced plans this year to close Southeast because of a drop in health care funding.

Despite including $35 million from the sale or lease of NOAH in a proposed budget released before summer, appraisals of the property were not completed until months later.

Nichols said the $35 million was based on the insured value of the property.

Argote, Derbes, Graham, Shuffield and Tatje Inc., of Metairie, concluded in July that the property’s market value was $20 million. The firm estimated the hospital was “in mostly average condition” while other buildings’ conditions were poor.

“It was apparent during our site visit that hazardous building materials ... were contained within a number of buildings on the site,” the appraiser warned.

Argianas and Associates’ appraisal arrived in August. The Illinois-headquartered firm estimated the real estate value to be $20.9 million but recommended structural engineering and professional topographical surveys.

Nichols said there are no plans to spend money on correcting problems with the property.

She said other parties besides Children’s are interested in the property and a decision will be announced “very, very soon.”

Legislators gave the Jindal administration until February to reach an agreement with Children’s or start looking for other possible tenants.

If no one signs a lease by Aug. 1, the property reverts to the control of the LSU Board of Supervisors.