The Jindal administration Friday submitted a new plan to finance the privatization of most of the state’s charity hospitals, stripping the advance balloon payments in deals for leasing the facilities that had prompted federal rejection of the initial plan earlier this month.

State Health Secretary Kathy Kliebert said she expects the federal Centers for Medicare and Medicaid Services, called CMS, to approve the arrangements this time.

CMS previously questioned the deals that required the private companies to pay more money at the beginning of the leases and less toward the end of the multiyear arrangements. The private companies are paying to lease the six medical centers spread around the state including in New Orleans, Lafayette and Houma.

But Kliebert said the state could run into trouble down the road if CMS continues to question how the state uses about $260 million already received from the advance lease payments.

The Jindal administration’s initial plan referred to these agreements in plans that linked to how specific hospitals are paid for medical services provided to the poor and uninsured. The federal government wanted the state to change its approach for seeking reimbursement, Kliebert said.

CMS prefers that the hospitals are classified by how many poor and uninsured are served as well as what role they play in training future physicians and other health care professionals, Kliebert said. The federal government sets its reimbursement rates to the classification rather than to the specific hospital.

“This time we are making clear there are no specific hospitals. We are just tying it to the level of care delivered and medical education,” Kliebert said.

Under the revised plan, the state creates the new classification of “Louisiana Low-Income Academic Hospitals,” which would get special higher levels of Medicaid reimbursement. The state is unlinking the up-front payments from the state’s request to reimburse hospitals at a higher rate.

Kliebert said CMS officials have indicated that the updated proposal meets federal criteria. “We believe we have done what they asked us to do in putting forth an approvable state plan amendment,” she said.

Kliebert said the advance lease payments are a “means of financing” issue.

“They can question that at any time,” she said. “If they have a question about means of financing, they can question it apart from the state plan amendment.”

If CMS at some point in the future rejects the advance lease arrangements, Kliebert said the state would challenge that determination. “We clearly believe these are legitimate transactions not related to any of our payments” to the hospitals of higher reimbursement for patient care.

Commissioner of Administration Kristy Nichols said Louisiana taxpayers, instead of the federal government, could end up paying at least $200 million for services provided at the facilities for the state’s poor and uninsured if CMS insists the advance payments were not proper.

CMS advised the state Department of Health and Hospitals earlier this month that it was denying the financing plans for six privatization deals, including those involving New Orleans, Lafayette and Houma. The issue involves at least $265.8 million in advance lease payments provided through the contracts. CMS cited private hospitals that paid significantly more than the required annual lease payment.

CMS specifically cited Children’s Medical Corp., which paid $250 million ahead on a $2 billion long-term lease.

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