The company that’s negotiating to lease one of the two major public hospitals in Jefferson Parish shaved $25 million from its offer on Thursday, responding to updated financial data showing the facility is in worse shape than originally feared.
LCMC Health CEO Gregory Feirn told Jefferson Parish officials by email that his company is now offering to lease West Jefferson Medical Center for at least $200 million in payments to the parish over 45 years. That’s down from a previous offer of at least $225 million.
Jefferson Parish Council President Chris Roberts said he and his colleagues likely will need to vote on whether to amend a pending lease deal with LCMC, which they originally approved in February. Roberts said the council would convene in emergency session at 10 a.m. Monday to discuss the matter.
The council doesn’t appear to have many options beyond accepting the reduced offer from LCMC. It has been struggling for years to strike a deal with a private operator as West Jefferson’s revenue declines and its reserves shrink.
The parish also has been unable to find a private operator willing to lease its financially troubled east bank public hospital.
A consultant advising the parish on the effort to lease West Jefferson urged the Parish Council to accept LCMC’s lowered offer immediately.
“My opinion is that Greg Feirn’s proposal is very fair and should be approved,” consultant Joshua Nemzoff said in an email.
Under the arrangement previously approved by the Parish Council, aside from the minimum $225 million in lease payments, LCMC was to make $340 million in capital improvements.
A valuation firm reporting to LCMC in early April pegged West Jefferson’s estimated value at between $230 million and $254 million.
But that valuation was based 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 revealed that it actually generated only $5.6 million last year, and officials recently learned that it lost $3 million in the first half of 2015.
A new valuation completed last week found that the hospital’s fair market value had fallen to somewhere between $184 million and $204 million, Nemzoff said.
The $25 million reduction in LCMC’s offer “represents a good-faith effort to resolve the issues raised by the material decline in financial position and continue moving forward to an expeditious close,” Feirn told the council.
His letter noted that West Jefferson’s poor financial performance this year did not factor into the adjusted valuation; if it had, it might have dropped the hospital’s estimated worth even more.
West Jefferson CEO Nancy Cassagne has defended her hospital’s bookkeeping, saying differences between unaudited financial figures and audited ones are routine.
According to Nemzoff’s email Thursday, Cassagne also told parish officials on July 31 that LCMC had always been “fully versed” on West Jefferson’s financial condition. But Nemzoff said it was not “until very recently” that LCMC learned West Jefferson was in worse financial shape than first believed.
“Although it would be very easy to infer that (LCMC is) making an 11th-hour change, that is not the case,” Nemzoff wrote. “It would, in my opinion, be a serious mistake for anyone to accuse LCMC of acting improperly by reducing their bid.”
The deal with LCMC won’t be officially closed until after the state Attorney General’s Office completes a review of the arrangement.
Nemzoff said he believes the lease agreement could be closed before the end of the month.
After closing, the deal will enter a “true up” phase in which all of the costs associated with it are adjusted as necessary. That process could take up to six months.
Feirn reiterated in his letter Thursday that LCMC remains committed to finalizing the agreement to lease West Jefferson.
Roberts said he wasn’t surprised by LCMC’s adjusted offer. After all, he said, the agreement approved in February was based on financial data from 2013.
Thursday’s news came one day after an episode illustrating how turbulent the attempt to lease West Jefferson often has been.
On Wednesday morning, word spread that Nemzoff had resigned as a consultant for the parish. He said he quit because the parish didn’t intend to pay his July bill unless he provided a more detailed invoice. He said his parish contract required his invoices to have only general descriptions of his work.
But by the end of the day, Nemzoff said he and the Parish Attorney’s Office had reached a compromise in principle on the level of detail in his invoices, and he was going to honor his contract, which is effective through Sept. 5.