The LSU Board of Supervisors on Friday authorized continued negotiations with private hospitals interested in operating LSU hospitals in New Orleans, Lafayette and Houma as well as an under construction $1.1 billion academic center in New Orleans.
The action came as board members and top system executives said ultimate private sector hospital takeover will allow LSU to return to its core mission of medical education, patient care and research.
“LSU is returning ... to the things we excel at,” LSU board member Stephen Perry said. “LSU is getting out of managing hospitals.”
LSU System President William Jenkins said the LSU hospital system has been on “a downward glide” with less and less dollars for years, culminating with this year’s reduction in federal Medicaid funding support. The hospitals face a $300 million-plus budget cut.
“It was not a sustainable position ... It was a crisis we had to deal with,” Jenkins said. The private sector takeover will relieve that financial stress and strain, he added.
The entities will pay LSU to lease the hospitals and then be guaranteed payments for uninsured care as well as extra Medicaid reimbursement.
The LSU board signed off on three “memorandums of understanding” — an agreement that launches more in-depth discussions to work out “cooperative endeavor” contracts for management and operation of the three current LSU hospitals and the University Medical Center being built in New Orleans.
The partners are Louisiana Children’s Medical Center for the New Orleans facilities, the Interim Hospital and the academic medical center; Lafayette General Health Systems for University Medical Center in Lafayette; and Ochsner Health System and Terrebonne General Medical Center for Leonard J. Chabert Medical Center in Houma. The private entities will lease the LSU hospitals.
“We felt a moral and ethical obligation to step in when we saw cuts looming,” said Lafayette General CEO David Callecod, one of the hospital executives attending the board meeting. “One of the fears we had was the loss of graduate medical education in Acadiana” which would translate into a loss of future physicians to practice there, Callecod said. “It’s something we could not let happen for the citizens of Acadiana,” he said.
LSU already has an agreement in which Our Lady of the Lake Regional Medical Center will become home to in-patient care and medical training programs with the late 2013 closure of LSU’s Earl K. Long Medical Center in Baton Rouge. That cooperative endeavor agreement is being used to pattern others.
“There are six others (LSU hospitals) out there. We would want all of them to join in a much better system delivery model,” LSU System Executive Vice President Frank Opelka said. He said discussions are ongoing with private entities for the remainder of the hospitals and he hoped to have further announcements soon.
The hospitals are part of LSU’s 10-hospital system. The other facilities are located in Bogalusa, Independence, Lake Charles, Shreveport, Pineville and Monroe.
Opelka outlined benefits of each proposed private partnership, including preservation of jobs, retention and potential expansion of medical education programs as well as services to the poor and uninsured. He noted that the Lafayette arrangement includes the addition of Level II trauma care beds.
LSU board member Scott Angelle, who left before the votes, questioned the process used in determining with whom LSU would partner, noting that there was no formal “request for proposals” issued.
Opelka said the question came up early because of the fast track LSU had to be on to get agreements finalized by the end of the current fiscal year, which is June 30.
He said LSU announced it was seeking proposals from interested parties early on without going through the formal process. “We took all comers,” said Opelka.
Opelka noted that there would be “appropriate oversight” through the Legislature.
The timeline is “tight” to get the deals completed, Opelka said.
The initial agreements call for an initial 10-year contract with renewable options, he said.