LSU hospitals privatization cost more than budget

The total operating expense associated with the privatization of nine LSU hospitals will hit $1 billion during the new fiscal year, Commissioner of Administration Kristy Nichols said Thursday.

That’s more than is in the current year’s budget — $955 million — for the state to operate the charity hospitals.

And more than the $626 million Gov. Bobby Jindal proposed for private companies to operate the public hospitals in the fiscal year that begins July 1.

Nichols said the administration would submit amendments to the state Senate Finance Committee to close the funding gap, recommending using some money from hospital leases as well as other state and local revenues.

Nichols said the state’s deals with the private companies would generate $140 million annually in lease payments.

After expenses, Nichols said the state would have $100 million for spending on other state needs, plus “we are able to sustain services in the communities,” Nichols said. She called the $100 million a “savings.”

The sudden reduction in federal funding in the current budget year prompted the administration’s expedited push to privatize LSU hospitals, hoping to reduce state expenses associated with hospital operations.

Nichols’ comments came as she updated reporters on efforts to finalize the private takeovers by the June 30 end of the current fiscal year and provide the required funding.

LSU Earl K. Long Medical Center in north Baton Rouge closed on April 15 with inpatient care and medical education programs moving to Our Lady of the Lake Regional Medical Center in south Baton Rouge. Other agreements have been reached for New Orleans and Lafayette.

Other deals are pending for Houma, Bogalusa, Lake Charles, Shreveport, Monroe and Pineville. Consideration of all but the Bogalusa agreement is on the agenda for a special LSU Board of Supervisors meeting May 28.

LSU will continue to operate Lallie Kemp Regional Medical Center in Independence and money is appropriated for it.

Legislative Fiscal Office senior analyst Shawn Hotstream reported last week that the three completed contracts — Baton Rouge, New Orleans and Lafayette — ate up 94 percent of the dollars set aside in the budget for all of the deals. Of $626 million appropriated, Hotstream said $589 million was obligated.

“It would take in excess of $100 million (in state funds) to bring down the federal funds” to close the gap, he said.

Nichols said the state will get more from private lease payments than originally anticipated in the budget — $140 million versus $90 million — and those dollars will be used to partially offset the shortfall.

The Houma hospital deal taps into funds from a hospital service district that can be used to attract federal dollars, she said. The administration will also propose use of about $15 million in newly identified revenues available for spending in the new budget year, she said.

The administration will also ask the Senate Finance Committee to add funding for continued operation of LSU’s Huey P. Long Hospital in Pineville as efforts are geared to transition services to England Air Park, Nichols said.

The Pineville facility as well as LSU’s W.O. Moss Medical Center in Lake Charles will cease operation as hospitals under the new arrangements, she said.

Most of the pending deals will be effective June 24, Nichols said. The north Louisiana hospitals will be later, she said.

Hospital employee layoff plans are scheduled to go before Civil Service on June 5, Nichols said.

The layoff of thousands of LSU hospital employees will reduce employer pension contributions by $82 million in the coming fiscal year and result in a $300 million reduction in retirement system liabilities over 30 years, Nichols said.

She said the state still has some expenses associated with the layoffs for which money must be appropriated, including termination pay.

Nichols said the state will also not have to invest dollars in facility improvements as private entities take over operations.

She said the state spent some $100 million over the last decade.