LSU Board OKs hospital agreements

Show caption
TRAVIS SPRADLING /
Advocate staff photo by TRAVIS SPRADLING -- LSU System Executive Vice President Frank Opelka, right, makes a point Wednesday during discussion of hospitals privatization at LSU's Board of Supervisors meeting. At left is Greg Feirn, chief financial officer for Children's Hospital, and at center is Patrick D. Seiter, an attorney with Taylor, Porter, Brooks & Phillips LLP.

The LSU Board of Supervisors on Wednesday approved agreements that would allow private companies to manage and operate public hospitals in New Orleans and Lafayette.

The cooperative endeavor agreements call for the take-over to commence on June 24, a week before the end of the fiscal year.

The Jindal administration’s budget proposal for the new budget year does not include state funding to run or staff the hospitals.

Under one agreement, Louisiana Children’s Medical Center takes over the charity hospital in New Orleans and ultimately the $1.2 billion academic medical center that is under construction.

In the other agreement, Lafayette General Health System will become the operator of LSU’s University Medical Center.

The deals include financial arrangements for the hospital corporations to lease the state buildings and equipment and purchase consumable inventory — all at fair market value. They also include financial reimbursement terms for state Medicaid and uninsured care payments that will be made to the new hospital operators.

The financial stipulations caught the attention of board member Scott Angelle who asked the meaning of a contract reference to providing “required program funding” in the New Orleans deal.

“I’m very concerned this is a loose term,” Angelle said.

LSU System Executive Vice President Frank Opelka said the contract provides an opportunity for “shared savings” through efficiencies by reducing the cost per patient per bed day.

“It can actually save the state,” Opelka said.

What happens if the Legislature doesn’t provide funding, Angelle asked.

“If it’s not financially feasible for them to stay in the partnership they can get out,” LSU contract lawyer Patrick Seiter said. But he said Children’s has already “put significant up-front capital into this project to the tune of $250 million.”

Each agreement guarantees that the facilities will continue to operate for a public purpose delivering care for Medicaid and uninsured patients, provide inmate care and be home bases for graduate medical education programs.

“We are comfortable with our partners in both of these situations,” said LSU Health Sciences Center Chancellor Larry Hollier, who is chief of the academic enterprise.

The New Orleans deal with Children’s has an initial term of 42 years — two years as operator of the Interim Hospital and the remainder for the new academic medical center. There’s an option of three renewal terms of 15 years each.

Under the agreement, Children’s also would become the sole member of the University Medical Center Management Corp., the LSU-affiliated
entity created to oversee the academic medical center operations.

The initial term of the Lafayette arrangement is 10 years and then it renews automatically in one-year increments.

“We believe this is yet another way to reach out to the entire community and serve in a safety net capacity,” Lafayette General president David Callecod said.

Callecod said a Level 2 trauma center will be set up “in the near future,” which will be a benefit to the entire community.