Two-thirds of the contracts Gov. Bobby Jindal used to privatize the operation of Louisiana’s charity hospitals are being renegotiated.
Federal authorities, who are providing most of the dollars the private companies receive, are troubled with the way the finances are organized in the agreements worth more than $1 billion.
Taken out of the agreements — per federal directive — are the guaranteed higher-level reimbursements for the care of the poor and uninsured. That’s making executives with the private groups running the public hospitals a little nervous.
Six of the cooperative endeavor agreements that privatized nine of the LSU hospitals are being redrafted. They involve public hospitals in Lafayette, New Orleans, Bogalusa, Lake Charles, Shreveport and Monroe. Contracts at three other hospitals are not involved.
“As with any changes, it necessitates a thorough review,” said David Callecod, chief executive officer of Lafayette General Medical Center. “We have not reached a final document.”
“This is really a model of trusting each other,” said Kathy Kliebert, secretary of the state Department of Health and Hospitals.
Even with the changes sought by the federal government, the state will continue to pay at the higher levels, though that won’t be spelled out in the contracts. Private providers will continue to provide care for the poor and uninsured, Kliebert said, adding that she hopes to have the arrangements completed by October, the start of the federal fiscal year.
“We are now over 15 months into this marriage. All the trust issues are on the table,” LSU System Vice President Frank Opelka said. “This is a shared risk we are trying to remedy ... so as not to damage the balance sheets of our partners.”
Jindal moved aggressively to privatize LSU hospitals after a sudden reduction in federal funding in 2012. He argued that privatization would reduce costs to the taxpayers and lead to improved care for more people, while providing a better medical education experience for future state physicians, nurses and others being trained in the facilities. But the idea has attracted a lot of controversy.
LSU still owns the buildings and provides doctors, some of whom are in training. But the state pays private partners to run the hospitals.
The deals required private companies to pay more money at the beginning of the leases and less toward the end of the long-term arrangements. The private companies are paying to lease six LSU medical centers around the state, including those in New Orleans and Lafayette.
Because most of the money the state will use to pay its private partners for the services provided in the hospitals comes from the federal government, federal authorities have to agree with the financing plans.
Officials with the federal Centers for Medicare and Medicaid Services, called CMS, said the arrangement amounted to Louisiana trying to get extra federal dollars to repay the private managers for those front-loaded lease payments. That structure constituted a “hold harmless arrangement,” which is not allowed under federal rules.
In early May, CMS rejected the Jindal administration financing structure. The state then submitted a new plan that eliminated any link to the $260.8 million in lease agreements.
Under the revised plan, the state proposed to create the new classification of “Louisiana Low-Income Academic Hospitals,” which would get special higher levels of Medicaid reimbursement. The hospitals would get a higher level reimbursement based on how many poor and uninsured are served.
In August, CMS said it didn’t want guaranteed levels of Medicaid funding in the agreements, which requires changes that are being negotiated now. “We are working closely with LSU and the partners and we continue to have good conversations with CMS,” Secretary Kliebert said.
Because of CMS recommendations, DHH Undersecretary Jeff Reynolds said the two documents that will determine how DHH is going to pay the hospitals will be the state appropriations act and the state plan amendment pending federal approval that provides for higher levels of reimbursement for “Louisiana Low-Income Academic Hospitals.”
“Those are the two things that are going to govern,” Reynolds said. “There’s not going to be any side agreement.”
Louisiana Children’s Medical Center Health CEO Gregory Feirn responded to inquiries by issuing a statement which said the entity along with its public partners “recognizes the need” to amend the agreements “to address concerns brought forth by CMS.”
“Our negotiations have been incredibly productive,” Feirn said. No agreements have been signed yet.
The altered agreements will be submitted to the LSU Board of Supervisors for approval. The board has been briefed on the status of negotiations. “There’s some hesitancy but nothing we can’t work through,” LSU Board Chairwoman Ann Duplessis said.