Much of the budget savings associated with the Jindal administration’s privatization of LSU public hospitals comes from a $400 million reduction in funding for employee pay and benefits as hospital workers lose their state jobs across south Louisiana.
Gov. Bobby Jindal’s proposed $24.7 billion budget for the fiscal year beginning July 1, strips funding for hospitals in Baton Rouge, New Orleans, Lafayette, Houma, Bogalusa and Lake Charles, impacting potentially about 5,000 employee jobs.
The hospitals are six of the seven medical facilities under the LSU Health Care Services Division that the Jindal administration wants to turn over to private operation.
The initial current fiscal year budget included $439.2 million for employee salaries and benefits at the seven hospitals and for LSU Health Care Services Division central office staff, according to LSU HCSD records.
Now all that’s left is funding for Lallie Kemp Regional Medical Center in Independence, including $18.66 million for salaries and benefits for employees.
Health Care Services Division funding is handled “off budget.” Few funding details are offered in the governor’s proposed spending plan.
The $65 million is coming from self-generated revenue and contracts with the private partnerships, according to the agency’s fiscal division.
Some hospital employees, such as physicians, pharmacists and specialized nurses, are moving to HCSD. Some of the Health Care Services facilities will contract with private hospitals for their employment.
Included in agency funding is $25.45 million “to cover retiree insurance premiums for those that have already retired and soon-to-be retired employees from the six hospitals” where operations are planned to be privatized, HCSD communication director Marvin McGraw said.
Similar employee pay and benefit statistics information was not available for the three north Louisiana hospitals operated under the LSU Health Sciences Center-Shreveport umbrella. Those facilities are in Shreveport, Monroe and Pineville. Privatization plans are being developed for those entities too.
The budget proposals includes no separate funding for the Pineville facility and limited funding for Monroe.
Jindal’s budget presupposes Civil Service approval of hospital employee layoff plans and the successful conclusion of cooperative endeavor agreements with private hospitals to lease and operate the facilities.
LSU has not submitted the layoff plans to Civil Service, yet, although there have been some discussions between the two agencies, Civil Service director Shannon Templet said. LSU has asked for a special commission meeting later this month, she said.
The state Civil Service Commission policy is not to take up layoff plans until contracts are finalized, so agreements can be reviewed, Templet said.
No final agreements have been announced with the private hospitals with the exception of one involving Our Lady of the Lake Regional Medical Center in Baton Rouge, which was signed in 2011.
The Lake becomes home to LSU in-patient care and medical education programs once LSU Earl K. Long Medical Center in Baton Rouge closes April 15. The agreement is undergoing revision as the private hospital takes over the Earl K. Long center’s independent medical clinics — a new development that is prompting a slew of employee departures.
According to Civil Service statistics, there has been a drop of 136 employees since the beginning of the fiscal year from 930 to 794 employees.
The hospital is the only one in the state being closed at this point. The others are being leased by private partners.
Jindal’s budget counts on using $93 million from lease payments, although agreements are not complete. The administration said the number is based on a “conservative fair market value” of the hospitals.
In an email response, Commissioner of Administration Kristy Nichols called the lease payments “an annual investment that will be placed in the overcollections fund, which can be used for general government expenses ...
“In the proposed budget for the upcoming fiscal year, it will be used to protect higher education from further reductions that are unnecessary when these additional dollars are available,” Nichols said.
Once the “cooperative endeavor agreements” are negotiated, they will be submitted to federal Centers for Medicare and Medicaid Services for approval, said Department of Health and Hospitals Undersecretary Jerry Phillips.
“The lease is a new component, a different component,” Phillips said.
“What is a fair market value of the leases?” said Phillips. “There’s a lot of work going into obtaining that fair market value.”
The Jindal budget proposal counts on achieving a $107 million savings in the state’s Medicaid program as a result of private hospitals taking over LSU hospitals.
Phillips said the LSU system hospital budget for the current fiscal year is $955 million. What’s appropriated for LSU hospitals and the public-private partnerships together is $848 million, he said.
“It’s a $107 million drop in expenses required to support the continued services at LSU locations in those communities,” Phillips said. “It’s really a $107 million reduction in Medicaid.”
“The amount that went to LSU will be drastically reduced,” he said.
Phillips said the savings are going to come from “efficiencies” that the private hospital partners are going to bring to the management of the system.
Louisiana Department of Health and Hospitals Secretary Bruce Greenstein said the number is based on forecasting done based on prior claims history.“Will update them as more data points are available ... We will have the opportunity before session to have better information,” he said.
“We believe we are going to get that savings,” Greenstein said.