Feds looking at privatization funding

The federal Centers for Medicare and Medicaid Services is asking questions about the financial arrangements needed to make privatization of LSU hospitals work.

A top state health official said the inquiries are routine, but state Treasurer John Kennedy fears the privatization effort might be improperly laundering federal money.

Kennedy said he is concerned the federal government will not accept the way the state is accounting for lease payments under the LSU plan.

The payments are being included as part of the calculation that determines how much the federal government pays for reimbursing the hospitals for medical care to patients under Medicaid.

Kennedy also mentioned the potential of state use of the lease dollars as “matching funds” for the program.

“It’s undeniably clever. The question is whether it is legal,” he said.

The state has gotten into trouble in the past with similar leveraging mechanisms, Kennedy said.

State Department of Health and Hospitals Undersecretary Jerry Phillips said, “We are extremely comfortable that these are within the regulations.”

In its inquiries, the Centers for Medicare and Medicaid Services is questioning what is being included in the state’s calculations that determine how much the federal government will contribute.

The agency’s letter reminded state officials that the state government would be “responsible for refunding” any of the monies that are found to come from an inappropriate source.

Privatizing the state’s public hospitals is one of Gov. Bobby Jindal’s signature initiatives.

He has argued private companies provide better health care services at a lower cost for taxpayers.

It involves a private company leasing and operating the facilities from LSU. The companies are paid by the hospital patients’ insurance policies, including Medicaid, the government coverage for the poor paid for partly by the state and mostly by the federal government.

Phillips said the Centers for Medicare and Medicaid Services already has approved state financial deals in which Our Lady of the Lake Regional Medical Center in Baton Rouge took over the duties of the LSU Earl K. Long Medical Center.

Some of the deals involved the Lake’s lease at fair market value of out-patient clinic structures and equipment, he said.

“That whole concept was presented to CMS and approved by CMS,” Phillips said.

Phillips said lease payments are allowable costs when considering Medicaid reimbursement amounts.

“It’s the cost of doing business,” he said. “There’s no recycling of federal money. It goes into calculating how much the uninsured payment would be.

“There’s no money going to the provider and coming directly back to us. This is not a gimmick — a payment to somebody that returns to us.”

Commissioner of Administration Kristy Nichols said it’s treated as a commercial transaction, a bonafide donation not a private donation based on independent Fair Market Value appraisals.

“We have researched this very carefully. We went through a very exhaustive review.” Nichols said. “Private providers don’t want any issue with this any more than we do.”