Analysis: Lawmakers hear about shortfalls, troubles with LSU hospital privatization deals

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BATON ROUGE, Louisiana — Two years after Gov. Bobby Jindal began privatizing the state-run charity hospital system, problems and financial questions continue to appear as lawmakers and communities sift through the spill-out effect.

The private managers that now operate the hospitals say they're $159 million short in Jindal's budget of what they need to provide adequate care for the poor and uninsured in the fiscal year that begins July 1.

The LSU medical schools in New Orleans and Shreveport are stuck with millions of dollars in annual costs associated with former and retired hospital workers they say they can't afford.

And in two of the state's largest cities, Baton Rouge and Shreveport, more acute problems have developed.

The Baton Rouge privatization deal is blamed for the closure of a private hospital emergency room that received a flood of uninsured patients when the LSU hospital was shuttered and its services moved to a hospital in another part of town.

Meanwhile, the Shreveport outsourcing is considered a threat to the viability of the nearby medical school, and the hospital's long-term viability under its current management is questioned.

Jindal has privatized nine LSU-run hospitals and their clinics since 2013 through no-bid contracts. In most instances, the management company of a nearby hospital took over operations. Three contracts closed an LSU hospital and shifted its services to private hospitals.

The Republican governor and the hospital operators say the arrangements have improved patient care, expanded services and cut down on wait times. Even critics of the deals say they don't see a way to return to the old charity hospital model.

But there are transition pains, repeatedly showing up in legislative financial discussions.

Jindal's $1.1 billion budget proposal for the hospital deals next year would provide standstill funding. Hospital managers say they need $159 million more, nearly $88 million to pay for the New Orleans hospital, which will shift services from an interim facility to a larger, new hospital this summer.

Without the bump in spending, hospital leaders say they may have to scale back those heavily-touted improved services.

While they took over the services, the private managers of the LSU hospitals and clinics didn't take on the liabilities associated with former and retired hospital employees, costs like termination pay, retiree health insurance and workers compensation expenses.

Millions of dollars in those costs are expected year after year, and LSU's medical schools have been saddled with the payments, struggling to cover costs estimated at more than $56 million next year.

So far, the Jindal administration hasn't come up with a plan to provide any money for those costs, though administration officials say they're looking at options.

Asked what happens if the medical schools are forced to absorb those costs, Larry Hollier, chancellor of the LSU Health Sciences Center-New Orleans, replied: "The term bankruptcy comes to mind."

Sen. Ed Murray, D-New Orleans, said he was amazed "these things were not taken into account when we went down this road with privatization."

Already struggling with the costs from the hospital employees, LSU's Shreveport medical school is considered to be "at risk financially and programmatically," according to a consulting firm's review of the privatization deal struck for the state-owned hospitals in north Louisiana.

Control of LSU's Shreveport and Monroe hospitals was turned over to the Biomedical Research Foundation of Northwest Louisiana, which had never run a patient care facility. The foundation operates the hospitals as University Health.

An audit showed the foundation lost more than $703,000 during the first year of its hospital management — though Stephen Skrivanos, chairman of the foundation board, told a Senate committee the audit "basically shows that our expenses matched our revenues."

Sen. Sherri Smith Buffington, R-Keithville, questioned claims that services had grown under private management, saying many items listed as new or expanded were done when LSU was in charge.

She also raised concerns about an outside analysis that said the foundation's baseline financial projections show multimillion-dollar shortfalls continuing for years that are "not sustainable."

"I am concerned about the financial stability of the (medical) school, and candidly, I'm concerned about the financial stability of University Health," Buffington said.


EDITOR'S NOTE: Melinda Deslatte covers the Louisiana Capitol for The Associated Press.

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