Report: Hospital overhaul fraught with 'uncertainties'

“Looking ahead and considering the potential risks of the current federal funding streams, the state must evaluate the comparative costs of moving to an insurance model for those adults without coverage rather than a safety net reimbursement model based heavily on urgent care.” Public Affairs Research Council report

The Jindal administration’s privatization of LSU public hospitals is fraught with “considerable uncertainties” and “may not be financially feasible in later years,” a Public Affairs Research Council report released Friday concludes.

The report, by former state Medicaid director Don Gregory and PAR Research Director Alison Neustrom, looked at private sector entities taking over LSU’s hospital “safety net” system for the poor and uninsured.

Nine such public-private ventures are involved and impact all but one of LSU’s 10-hospital charity system. LSU hospitals in Baton Rouge, New Orleans and Lafayette are included. Lallie Kemp Medical Center in Independence will continue being run by LSU.

“Uncertainty has become an unfortunate fact of life for public health care financing, no matter what plan or scenario might be proposed,” the PAR report states. “Looking ahead and considering the potential risks of the current federal funding streams, the state must evaluate the comparative costs of moving to an insurance model for those adults without coverage rather than a safety net reimbursement model based heavily on urgent care.”

PAR is a Baton Rouge group that researches governmental policy.

In response, state Department of Health and Hospitals Undersecretary Jerry Phillips said the financial model for operations is sustainable “given the information we know today ... When things change, smart people adapt.” The hospital privatization deals evolved in the aftermath of a $1.8 billion cut in federal funding support, he said.

“It’s much more sustainable than the old LSU model,” Phillips said.

Phillips said the new arrangements are providing better and more access to care for the poor and uninsured. “You have much better access to primary care, more physicians and specialty care,” he said.

PAR said decreased federal funding for uninsured care “could have a major impact on the system’s revenue model” and a recently created “upper payment limit” mechanism of federal funding that is relied up in the deals “ is not an assured revenue source over time.”

The federal health care revamp moves more people to insurance coverage and reduces dollars for uninsured care. From 2015 to 2020, $18 billion of uncompensated care funding will be reduced nationally.

The report also warned that the amount the state is obligated to pay to cover the private partners’ expenses will not be known until some point in the future when the final bills, or cost reports, are completed.

Some hospital deals do not include limits on the costs that the state will have to cover for uninsured care, the report states. That could expose taxpayers to more expenses. Under the state’s charity hospital law, any Louisiana resident at or below 200 percent of the federal poverty level is guaranteed free care at the LSU facility being operated by the private partner. “This is a state-created entitlement the private partner will be obligated to meet regardless of the cap,” PAR said.

PAR said the state rejected the Medicaid expansion called for in the Affordable Care Act covering people up to 133 percent of the federal poverty level in favor of “its more generous free-care threshold of 200 percent.”

The PAR report said the new setup does not make primary and preventive care a priority for adults without health insurance who rely on free care at the charity hospitals.

“Whatever the advantages of the reinvented safety net, it is still basically a safety net,” according to the PAR report. “Urgent care will continue to be a principal avenue of health care service for uninsured adults both at the partnership and non-partner hospitals.”

PAR also criticized the manner in which the agreements for private takeover were developed.