Auditor: Funding for hospital layoff costs unbudgeted

The Jindal administration’s budget does not contain $42 million in termination pay and unemployment costs for the 5,000-plus state employees losing jobs because of its privatization of LSU hospitals, according to a report issued Monday.

The report also notes that there are another $26 million in annually reoccurring “legacy” costs to cover retiree health and life insurance.

The legislative auditor’s report looked at various effects of the privatization of hospitals in Baton Rouge, New Orleans, Lafayette, Houma, Bogalusa and Lake Charles.

Later in the day, state Division of Administration spokesman Michael DiResto issued a response disputing many of the report’s conclusions.

“LSU will utilize (hospital) lease payments to address a portion of term pay costs, and any remaining costs will be addressed with supplemental funds,” DiResto said.

The auditor put termination pay obligations at $28.6 million.

The administration disagrees with the auditor’s unemployment cost projection of a $13 million expense because 91 percent or more of the state employees will find jobs in the private sector, DiResto said.

The retiree health and life insurance costs are already figured in the proposed budget for the fiscal year that starts July 1, he said.

The only LSU hospital employees laid off to date are some 800 employees at Earl K. Long Medical Center in Baton Rouge. That happened with the April 15 closure of the hospital and movement of inpatient care and medical education programs to Our Lady of the Lake Regional Medical Center.

The other five south Louisiana hospitals are scheduled to be turned over to private operators by June 24. Some 40 percent of the employees losing jobs are at the Medical Center at New Orleans (Interim Hospital).

The six hospitals are among the seven facilities that fall under the umbrella of the LSU Health Care Services Division. No funding for them is included in the proposed budget for the fiscal year beginning July 1.

“HCSD will have limited future income to pay health benefits legacy cost and the termination and unemployment cost was not planned for in the 2013 budget,” according to the auditor’s report.

“According to HCSD, the Division of Administration and the Department of Health and Hospitals are aware of this expense and are working to find a mechanism to fund them.”

Health and life insurance liabilities run about $26 million annually, the auditor said. “This estimated cost represents the employer share of current and potential retirees’ health-life premiums that the state is responsible for paying,” the report said.

The auditor’s report also said many employees will take early retirement, which may increase the retirement systems’ payouts.

DiResto said the auditor left out of the report that the hospital partnerships will reduce the state’s retirement system liabilities by $300 million and the cost of the retirement system to government agencies by $82 million annually.

The auditor said there were 5,287 employees as of Feb. 17 at the six hospitals broken down as follows: Earl K. Long Medical Center-Baton Rouge, 812; Medical Center at New Orleans, 2,014; Leonard J. Chabert Medical Center-Houma, 810; University Medical Center-Lafayette, 773; Washington-St. Tammany-Bogalusa, 538; and Walter O. Moss-Lake Charles, 340.