Jindal officials defend hospital plans

Administration aiming to get federal OK on proposals

The Jindal administration on Friday vigorously defended lease arrangements involved in the private takeover of LSU hospital operations, responding to questions from federal officials.

The federal Centers for Medicare and Medicaid, called CMS, must sign off on the state’s proposals to privatize the operations at Louisiana’s charity hospitals. The federal government provides most funding that would make the agreements between the state and the private administrators work.

CMS questioned details about the LSU leases for six public hospital facilities to the private entities as well as advance lease payments made by some of the private operators. Receipts from the lease deals are about $140.2 million, revenues that are expected for the state government’s budget for the fiscal year that began in July.

“Such lease payments generate state general funds, but are neither (prohibited) provider donations nor non-bona fide donations under applicable regulations,” state Department of Health and Hospitals Secretary Kathy Kliebert and LSU System vice president Dr. Frank Opelka wrote in a nine-page letter to CMS.

The two explain that the lease payments are supported by fair market value appraisals and any advance payments “serve to pay down the partners’ overall rent obligation.”

“Neither an advance lease payment nor any subsequent lease payment constitutes a provider-related donation ... instead they are payments by the partner in exchange for access to and use of LSU’s facilities under valid and enforceable leases,” according to the letter.

In late November, the administration pulled back its requests for federal approval of financing plans associated with six of the hospital deals, including those in New Orleans, Lafayette and Houma. Officials said the state needed more time to answer complex questions raised by CMS. The nature of the “complex questions” was not revealed.

On Friday, DHH Undersecretary Jerry Phillips said CMS “seems to be OK” with state plans to reimburse the private partners for care of the uninsured as well as to provide additional funds for care of the poor covered through the government’s Medicaid program.

“They had questions on the lease payments and advance lease payments,” Phillips said. “We felt like CMS needed the whole picture of what was going on as we move forward with reforming the hospital system. They are trying to understand each deal.”

The questions could lead to a delay in federal approval of the plans, but operations of the hospitals would not be impacted. If problems arise, changes in the lease arrangements could have to be made.

“We wanted to explain there was an advance payment but there were offsets where the leasee recovered the money they put up,” said Phillips.

For instance, Phillips and the letter cited the $110 million advance payment Children’s Hospital paid for its right to occupy and operate for 40 years the new $1 billion academic medical center that will be part of the University Medical Center in New Orleans. He said there will be a $5.5 million annual credit against the annual rent otherwise due LSU.

“Advance payments are not just payments given to the state. It’s earnest money up front that says, ‘We are in the deal and in this deal for the long haul,’ ” Phillips said.