Privatized hospitals short of money

The Jindal administration’s budget is coming up short of funds to cover some costs related to the privatization of LSU hospitals, according to a Legislative Fiscal Office report.

There could be as much as a $13.75 million shortfall related to hospital retiree insurance benefit costs for which the state is on the hook, fiscal analyst Alan Boxberger wrote.

“The system’s transition timeline and funding strategies” are the culprits, Boxberger said.

Most of the shortfall — $10 million — is associated with privatization of LSU hospitals in south Louisiana that had been under the LSU Health Care Services Division umbrella.

In a “Focus on the Fisc” report, Boxberger said the state Department of Health and Hospitals erroneously assumed that it would get federal funds to pay for a majority of the estimated $19 million to $20 million expense associated with the state’s portion of health insurance costs for retirees.

“However, DHH has determined that these legacy costs, now outside of a specific hospital’s cost of operations, are not matchable by federal dollars,” Boxberger said.

So the funds won’t be there to pay the obligation, he said.

The remaining $3.75 million shortfall is related to the three LSU hospitals in north Louisiana, two of which have been moved to private management. The state budget appropriated $6.9 million to cover the retiree group insurance premiums at the Shreveport and Monroe facilities, but the current projected expenditure is $10.65 million.

Jindal’s Division of Administration issued a statement late Monday stating that it is working on closing the financial hole.

The Division of Administration indicated DHH is using the $9 million in state funds “to leverage federal funds” in a different way than initially proposed. “Whatever the outcome is regarding the amount of federal funds available, all remaining retirement costs associated with HCSD and LSU Shreveport will be covered through the use of hospital reserve funds if necessary,” according to the statement.

Commissioner of Administration Kristy Nichols said money was available in the reserves of both HCSD and LSU Shreveport.

The administration originally appropriated $26 million to DHH to cover group insurance for retiree benefits for the south Louisiana hospitals moving to private management. Of that, $9 million was state dollars and the rest federal funds.

LSU’s Health Care Services Division had operated the hospitals. The insurance expense had previously been budgeted to each individual public hospital, but could no longer be with their privatization.

At the end of December, the administration revised its estimate of needed funding to $19 million to $20 million. The reduction came partially because of fewer retirees than originally projected and the phased implementation of privatization, the report said. Without the federal funding support, there is approximately a $10 million shortfall to cover the expense.

By the July 1 end of the current budget year, six of LSU’s seven south Louisiana hospitals will be privately operated. They are in Baton Rouge, New Orleans, Lafayette, Houma, Bogalusa and Lake Charles. The seventh — Lallie Kemp Medical Center in Independence — will remain state-operated for the time being.