National accounting firm to examine West Jefferson hospital’s books after lease deal inaccuracies surface _lowres

Advocate staff photo by SHERRI MILLER -- West Jefferson Medical Center in Marrero on Thursday, Dec. 18, 2014.

After months of tense negotiations, Jefferson Parish officials have secured approval from the state Attorney General’s Office for an almost $600 million deal to lease the parish-owned West Jefferson Medical Center to a private operator.

The AG’s Office gave its blessing to the transaction in a letter sent Tuesday to Deputy Parish Attorney Ed Rapier. The office had spent months reviewing whether the terms of the deal with LCMC Health are fair and will still allow parish residents access to affordable health care.

Getting the AG’s approval for the deal was the last hurdle the parties had to clear before they could close out the transaction by exchanging signed copies of the transfer documents with each other.

LCMC is due to officially assume control of West Jefferson Medical Center at 12:01 a.m. Thursday, though the lease deal will be subject to a six-month “true up process” during which all monetary figures associated with it can be adjusted as needed.

LCMC has agreed to lease the Marrero hospital from Jefferson Parish for a minimum of 45 years in return for at least $200 million in rental fees, $340 million in capital improvements and between $31 million and $51 million in other payments that depend on factors such as financial performance. LCMC will have two, 15-year renewal options.

Leaders of civic groups spoke overwhelmingly in support of the lease deal at a hearing that an AG’s Office representative hosted at the hospital Monday.

Those speakers noted that the hospital has been hurting financially for years. The shift to private management is expected to improve its economic prospects while aligning it with a New Orleans-based, not-for-profit group operating Children’s Hospital, Touro Infirmary, University Medical Center and New Orleans East Hospital.

LCMC CEO Gregory Feirn was similarly buoyant at the thought of adding West Jefferson to his firm’s portfolio.

“You can see how important these facilities are for their communities,” Feirn said Monday. “LCMC (is) thankful that ... West Jefferson Medical Center will be part of a locally based, nonprofit health care system.”

But the process hasn’t always been marked by such positive vibes. Officials wrangled in public and private for more than a year about whether to lease both West Jefferson and its equally troubled east bank counterpart to one or more of three competing health care systems.

Then, when the Jefferson Parish Council first voted in February to lease West Jefferson to LCMC, the deal called for at least $225 million in lease payments. But that figure relied on outdated, unaudited financial data that suggested the hospital generated more than $15 million in cash in 2014. An audit completed in June revealed that West Jefferson actually generated almost $10 million less in 2014, and it lost about $3 million in the first half of this year.

LCMC subsequently said it would drop its rental fees amount by $25 million, and the Parish Council could do nothing but accept the reduced payment.

Some Parish Council members have also harshly criticized an outside consultant they hired to assist them in working on the West Jefferson lease. Joshua Nemzoff, a hospital mergers and acquisitions specialist, has charged the parish $1 million or so for his work on the West Jefferson deal, and some council members have balked at that amount.

The Pennsylvania-based Nemzoff has countered that he originally proposed a flat fee of $625,000, but the parish preferred to put him on an hourly billing structure that ended up costing much more.

Nonetheless, such episodes were squarely in officials’ rear-view mirrors following the AG’s approval.

“All decent people know how to forgive and love to forgive,” said Chip Cahill, the chairman of West Jefferson’s governing board. “A healing process can and should take place.”

Nemzoff — whose contract with the parish will expire when the lease’s closing papers are exchanged — said, “This has been a very long process on a very complicated deal. And as far as I’m concerned, this is a great transaction for the Jefferson Parish Council and the people of the parish.”

The parish hopes it can attain a similar ending for East Jefferson General Hospital in Metairie. But efforts to lease that facility to Hospital Corporation of America — which operates Tulane University Hospital — collapsed earlier this year. East Jefferson, therefore, will remain under parish control for the foreseeable future, according to officials.