Private company takes over management of New Orleans public hospital

The transfer of New Orleans’ public hospital to management by a private hospital company — a historic moment for a system of care for poor New Orleanians that predates Louisiana’s statehood — passed quietly at midnight Monday without fanfare.

“Last night, quite frankly, was a non-event,” said Cindy Nuesslein, the new chief executive officer of the hospital once known as Charity and more recently as Interim LSU Public Hospital.

But she acknowledged that the change wasn’t completely tension-free; most hospital employees were laid off initially and then re-hired, in the process becoming employees of a private company instead of the state. “The employees seemed very relaxed and excited. (However) I think there are some mixed emotions for those who have been with Charity for their entire careers.”

There have been some bumps as Louisiana Children’s Medical Center moved to rapidly assume control of the hospital, a deal first announced in December. Some staff departed, meaning fewer beds can be staffed now than at the beginning of the year.

The hospital recently had to cancel 25 percent of all elective surgeries because of these staffing shortages. Patients have had to be held in the post-surgery rooms and emergency rooms because there weren’t any other rooms available. Nuesslein, a longtime Children’s executive who trained as a nurse at Charity, said she plans to quickly hire more employees to allow the hospital to open more beds and get surgeries rolling again.

The plan is to build back the hospital, which had been subject to successive budget cuts in recent years. By the end of the year, Nuesslein said, she hopes the hospital will have 190 to 200 beds in operation from about 120 beds now, along with 28 mental health beds at an outside facility.

“Our goal here really is that we have to grow this business,” Nuesslein said. “We are going to stay the safety-net hospital. We are going to stay the academic medical center.”

While the Charity hospital system has a long history in New Orleans — the first incarnation opened its doors in the French Quarter in 1736 – it had already gone through significant transformation in recent years. The behemoth downtown building, dating to the 1930s, has sat dormant since Hurricane Katrina. Instead, LSU, which has run the Charity system across Louisiana since 1997, moved its local operations to the much smaller former University Hospital on Perdido Street.

State leaders decided that, instead of reopening “Big Charity,” they would build a new hospital. That facility, a $1.2 billion project, is going up just blocks away from the interim hospital. It is slated to open in two years.

Louisiana Children’s Medical Center, which runs both Children’s Hospital and Touro Infirmary, will run the new hospital as well.

LSU leaders announced plans, backed by Gov. Bobby Jindal’s administration, to privatize the system’s 10 hospitals last fall, saying that federal Medicaid cutbacks made the public system untenable without an injection of private dollars. Three other state hospitals in Houma, Lafayette and Lake Charles also moved to private, nonprofit operators on Monday.

Ochsner Health System, together with Terrebonne General Medical Center, is taking over operation of the 60-bed hospital in Houma. Michael Hulefeld, chief operating officer at Ochsner, said the transition has been smooth, with no restriction in services.

Only one other deal has gone through, shifting most hospital care for the poor and uninsured in Baton Rouge to Our Lady of the Lake Medical Center.

At the core of the arrangements are lease payments the hospital companies are making to LSU, which will be used by the state to tap into federal Medicaid dollars that pay for care for the uninsured. Children’s is paying $24 million annually in rent for the interim hospital; that will grow to $69 million for the new hospital.

These agreements have all been approved by the LSU Board of Supervisors, but still must pass muster with the federal Centers for Medicare and Medicaid Services, which is also reviewing Louisiana’s plan to change the way it obtains federal dollars.

The federal agency is still considering the Baton Rouge deal, which is the only one submitted so far by the state Department of Health and Hospitals. A letter sent by the federal agency to state Sen. Ben Nevers, D-Bogalusa, suggests the lease arrangements could end up posing a problem for the state.

The letter by Cindy Mann, who runs the federal Medicaid program, says CMS “has concerns over the large up-front lease payments described in the Louisiana public-private partnership agreements.” But Mann, responding to questions sent by Nevers, said her staff has yet to see the documentation for the New Orleans deal.

The federal agency’s qualms about the lease payments are troubling, Nevers said. “What do we do then? Once you lay off all the LSU employees, how are you going to start up a system you have basically dismantled?” he asked.

But Jerry Phillips, undersecretary of DHH, said the kind of questions raised by CMS are standard when the state changes how it spends Medicaid dollars. The “state plan amendments” for the New Orleans, Lafayette and Lake Charles hospitals will be sent to the feds this week, he said.

The agency doesn’t expect any problems with the leases because the only question the federal government needs to consider is whether the private companies are paying “fair market value,” Phillips said.

State officials just have to show they aren’t using a private “donation” to tap into federal Medicaid funds. “If it is fair market value, there is nothing wrong with the state leasing its financial assets,” he said.

Federal regulators looking at the Baton Rouge deal haven’t given any indication they will reject that arrangement, he said.

At the New Orleans hospital, about 1,950 employees out of 2,173 who applied accepted offers to work at the now privately run hospital. Another 187 workers left the system, many to other jobs with the state, Nuesslein said. Another 40 employees have lost their jobs, largely because their offices, such as the department that handled the hospital’s timecards, have been eliminated.

Physicians at the hospital will continue to be employed by either LSU or Tulane, as are the many residents who train at the facility.

The departure of some employees has made it difficult to maintain all services. But Nuesslein said that she’s held off on more hiring until she can ensure she has hired as many former employees as possible.

Certainly the most dramatic problem for patients owing to the change has been the cancellation of some elective surgeries. One cancer patient, Deborah Foegelle, said she was supposed to have a colostomy reversed last week, only to have the hospital cancel the procedure at the last minute — after she had been prepped for surgery, in fact. Foegelle, who first told her story to The Times-Picayune, said she had a short window between chemotherapy sessions to have the operation.

“At the very last minute, (the doctor) was told and others were told that all surgeries were canceled until further notice,” Foegelle said.

Foegelle’s physician, a Tulane doctor, declined to comment about the postponed surgery. But Dr. Lee Hamm, the incoming dean of Tulane Medical School, expressed confidence that the hospital’s medical staff “will deal with these transitional issues promptly and reschedule all surgeries in a timely manner.”

Nuesslein said surgeries will get back on track after she’s able to hire more employees. It will likely be at least six weeks before those services are fully restored.

Other patients leaving the interim hospital on Monday reported that they hadn’t noticed any difference in the services provided. Alice Gurtner, of Belle Chasse, who was recently approved for “free care” at the hospital, said she went for a CAT scan and was out within three hours.

Gurtner said she’d worried that the change to a private operator meant free health care would no longer be provided. But she was told Monday that the same evaluations to determine who is eligible for no-cost treatment will be used under the new management.

A one-time patient at the old Charity hospital — where she said 24-hour waits for a doctor were commonplace — Gurtner said she’s been pleased with the care she’s gotten since April. “The employees are all attentive, courteous and respectful,” she said.