Three years after Gov. Bobby Jindal’s administration began privatizing nearly all the LSU-run charity hospitals, Louisiana leaders still are sorting through the consequences of the deals struck by the Republican former governor.
Costs for the hospitals, their clinics and the safety net services have grown despite Jindal’s claims the contracts would save Louisiana money. Hospital operators are threatening to walk away because of state budget cuts. And medical schools are grappling with the spillover effects on their budgets and the widespread implications on graduate medical education.
Lawmakers and Jindal’s successor, Democratic Gov. John Bel Edwards, say the deals were rushed into place too quickly, with billions of dollars on the line, along with the patient care of hundreds of thousands of poor and uninsured residents.
The Edwards administration wants to renegotiate the agreements.
“These contracts were negotiated very hastily. They’re not very much in favor of the state’s position,” Commissioner of Administration Jay Dardenne told lawmakers.
Jindal privatized nine LSU-run hospitals and their clinics through no-bid contracts, with the earliest deal starting in April 2013. In most instances, the management company of a nearby hospital took over operations. Three contracts closed an LSU hospital — in Baton Rouge, Lake Charles and Pineville — and shifted its services to private hospitals.
The deals helped Jindal get millions of dollars in “advance lease payments” the hospital managers paid upfront as part of their agreements with the state, money the former governor used to plug state budget holes in a state awash with money problems.
Those upfront payments have gotten Louisiana in trouble with federal Medicaid officials, who ordered the state to repay $190 million in federal money they say was improperly tied to the advanced lease arrangement. Louisiana is appealing the ruling.
In north Louisiana, relations between LSU and the operator of its Shreveport and Monroe hospitals have grown so contentious that LSU tried to oust the hospital manager. A judge blocked the effort.
The privatization deals cost about $1.3 billion this budget year, paid with state and federal money.
Supporters say the deals provide better health care for the poor and uninsured, with reduced wait times, expanded services and improved access. There’s documentation to back those claims. Of course, the new hospital managers get paid more to provide care than LSU did when it controlled the facilities.
But as Edwards inherited worsening budget gaps, the new governor and lawmakers are struggling to find money to continue paying for the contracts. Edwards’ budget proposal for the fiscal year that begins July 1 doesn’t contain money for the contracts providing safety net services in Alexandria, Bogalusa, Houma and Lake Charles.
The state has no backup plan to fill the gaps if those facilities and services shutter, however. Dardenne said the administration is looking for other sources of financing for the privatization deals.
“We don’t want to see these hospitals closed,” he said.
Meanwhile, the LSU medical schools in New Orleans and Shreveport are trying to keep from getting stuck with millions in annual costs tied to the privatization deals.
While they took over the services, the managers of the LSU hospitals and clinics didn’t take on the liabilities associated with former and retired hospital employees, like termination pay, retiree health insurance and worker’s compensation expenses.
Millions of those “legacy costs” are expected for years, and LSU’s health sciences centers have been saddled with many of those payments.
Lawmakers provided $53 million to cover those costs this year, and Edwards is proposing the state pay the $50 million estimated for next year. But the medical schools burned through cash reserves covering those expenses for two prior years, leaving them little cushion amid looming budget cuts.
The Senate passed legislation by Sen. Barrow Peacock, R-Shreveport, aimed at ensuring the LSU health sciences centers don’t have to cover expenses tied to hospitals and clinics the university system no longer runs.
If forced to eat those costs, “it could basically destroy our medical schools,” Peacock said.
The measure awaits House consideration, as lawmakers also continue the broader debate about how to keep paying for the privatization deals.
Melinda Deslatte covers Louisiana politics for The Associated Press. Follow her on Twitter, @melindadeslatte.