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.

The estimated value of the public hospital in Marrero that Jefferson Parish is trying to lease to a private operator has dropped by $50 million based on new financial data, a consultant working on the deal has told parish officials.

That in turn may affect how much LCMC Health is willing to pay the parish for West Jefferson Medical Center under the terms of a lease deal that has not yet been finalized, according to parish consultant Joshua Nemzoff.

Nemzoff hinted that the deal may change based on the new valuation in an email Thursday evening to the Parish Council and Parish Attorney’s Office.

On the other hand, Parish Council Chairman Chris Roberts, who has had a testy relationship with Nemzoff, said Friday he has “no reason to believe there is any adverse change in LCMC’s offer.”

Moreover, LCMC CEO Gregory Feirn said West Jefferson Medical Center “is an outstanding facility, and our commitment to its remarkable team and the community it serves remains unchanged.”

Despite the new data suggesting the hospital is in worse financial shape than some thought, “We are confident that WJMC will be part of the LCMC Health system in the very near future,” Feirn said.

In early April, the health care consulting firm ECG Management told LCMC that the fair market value for West Jefferson was between $230 million and $254 million.

The deal Jefferson council members approved earlier in the year called for leasing the hospital to LCMC for 45 years in return for between $225 million and $245 million in payments to the parish and $340 million worth of capital improvements, with terms set to vary based on the facility’s financial performance. LCMC also was given the option to extend the lease term up to 30 additional years.

But the original valuation relied on unaudited financial data provided by West Jefferson that showed the hospital generated about $15.1 million in cash in 2014.

An audit completed in June showed that West Jefferson actually generated only $5.6 million last year, and officials recently learned that the hospital is on pace to lose $6 million in 2015, having already lost $3 million through June.

When ECG completed a new valuation using updated figures this week, the fair market value for West Jefferson fell to $195 million.

“I have no idea if LCMC plans to change their offer based on the corrected audit as well as the year-to-date financial performance of the hospital,” Nemzoff, the parish consultant, wrote in his email to officials. “But I would not be surprised if that occurs.”

Nemzoff also said the parish should consider exploring whether the state Attorney General’s Office — which is conducting a review of the deal — will be concerned that LCMC will pay “significantly in excess” of the more recent valuation to lease West Jefferson if the arrangement is finalized as is.

West Jefferson’s administration this week defended its bookkeeping despite the $9.5 million difference between the audited and unaudited figures, calling such corrections routine.

Roberts said “it’s no secret” West Jefferson is facing financial challenges. After all, the parish decided it needed to lease the facility to a private operator because the hospital was depleting its reserves to offset falling revenue.

“The more delays as a result of games by consultants leads me to believe the situation will only worsen as the public, employees and, most importantly, the patients want the future of the hospital resolved,” Roberts said.

Referring to Nemzoff’s hourly rate, Roberts added, “When consultants earn $650 an hour, I am of the opinion that leads one to be less anxious and more concerned about churning a bill.”

Nemzoff responded, “There’s a number of people working very hard to get this deal closed, and I happen to be one of those people. If Councilman Roberts thinks I am charging too much money, he is certainly entitled to his own opinion.”