The Jindal administration’s financing plan for privatizing operations of six LSU hospitals got clearance Tuesday from the federal health agency.
But the good news — which has been long in coming — was coupled with the potential of a $190 million financial blow to the state.
The same federal agency disallowed Louisiana’s use of advance lease payments to prop up the deals — meaning the state must come up with other funding sources to cover the expense.
The federal Centers for Medicare and Medicaid Services had questioned the administration’s use of up-front lease payments as it initially rejected the hospital deals. CMS chief Marilyn Travenner stated that the arrangement amounted to Louisiana trying to get extra federal Medicaid dollars to repay private managers for those advance payments. That constituted “a hold-harmless arrangement” that is not allowed under federal rules, she said.
State Department of Health and Hospitals Secretary Kathy Kliebert said the state will appeal the CMS decision. There will be no immediate impact on the state budget because of an appeals process that can take years to complete, she said.
Federal approval of the financing plans means the private companies operating the public hospitals can receive a higher level of reimbursement for care of the poor and uninsured. The hospitals are in New Orleans, Lafayette, Bogalusa, Lake Charles, Shreveport and Monroe.
CMS, which provides a majority of the health care funding in the state, must approve state plan changes involving Medicaid. The privatization agreements are worth more than $1 billion annually.
In early May, CMS rejected the administration’s initial financing plans over the lease payment issue. The private companies are leasing hospitals and equipment from the state.
The state then eliminated any link to the $260.8 million in up-front lease payments in a revised federal submission.
Under the revised plan, the state creates the new classification of “Louisiana Low-Income Academic Hospitals,” which would get special higher reimbursement levels based on how many poor and uninsured are served. The federal government sets its reimbursement rates to the classification, rather than to the specific hospitals.
CMS raised more questions and the state revised the deals again, eliminating funding guarantees to the private operators which had bothered federal authorities. In return, the private partners would get an early out provision, if things go awry and the financing isn’t working for them. It is those arrangements that finally won CMS approval.
The new cooperative endeavor agreements also limited the private partners obligation to provide “core” and “key” services at the LSU hospitals.
Both Kliebert and Gov. Bobby Jindal expressed pleasure with the CMS approval.
“The public-private partnerships are making access to care for primary, specialty and surgery services a reality for thousands of Louisiana residents,” Kliebert said in a statement. “We are so pleased to have the final approval from the federal government so that we may continue to care for the health care and wellness needs of our commuities.”
“The partnership hospitals are revolutionizing health care around the state, and now they’ll be able to continue their work to reduce patient wait times, expand access to quality care and tran the doctors of tomorrow right here in Louisiana,” Jindal said in a prepared statement.