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Privatization plans for LSU hospitals approved

Last Modified: Friday, December 14, 2012 4:26 PM

BATON ROUGE (AP) — The LSU Board of Supervisors agreed Friday to privatize the operations of its public hospitals in New Orleans, Houma and Lafayette that provide safety net care for the uninsured and help train medical students.

Management of the hospitals and their outpatient clinics will be turned over to nonprofit corporations that run private hospitals in the regions, under plans pushed by Gov. Bobby Jindal's administration.

Basic outlines of the agreements were approved unanimously by LSU board members who said they hoped to move LSU out of the hospital business and return the university system's focus to education.

"We're getting back to our core competencies, and we're very excited about that," LSU hospital chief Frank Opelka said.

University System President William Jenkins said he was relieved to see LSU moving away from the administration of health care facilities, saying repeated budget cuts threatened patient care and education programs.

"By any analysis, we were not on a sustainable path and very soon our training of health care professionals was going to be impacted," Jenkins said.

The companies taking over hospital management will make lease payments to the state, dollars that Opelka said would be used to draw federal matching money to pay for services.

Lease terms are under negotiation and haven't been released. The nonprofit corporations agreed to put up about $30 million in initial "milestone payments" as part of the deals, with additional lease payments to be required to manage the hospitals.

The Louisiana Children's Medical Center, which operates Children's Hospital and Touro Infirmary, will lease the Interim LSU Public Hospital in New Orleans and the new $1 billion, 424-bed medical training and research center set to open in two years.

Ochsner Health System and Terrebonne General Medical Center will manage the LSU hospital in Houma, the L.J. Chabert Medical Center and its outpatient clinics. Lafayette General Health System will operate the LSU hospital in Lafayette, the University Medical Center and its clinics.

Opelka, LSU System executive vice president for health care and medical education redesign, said the privatization plans will shrink state costs, while maintaining health services and graduate medical education programs.

The lease agreements are designed to help fill budget gaps at the hospitals. Jindal stripped more than $300 million in state and federal funding for the LSU health system after Louisiana's Medicaid financing was reduced by Congress.

David Callecod, president and CEO of Lafayette General, said he and his board felt a "moral and ethical obligation to step in when we saw the potential cuts that were about to happen to the safety net."

Thousands of workers at the LSU health facilities will face layoffs under the plans and will have to reapply for their jobs with the private hospital operators.

The cooperative endeavor agreements, when they are completed between the state and the hospitals, will go to lawmakers on the joint House and Senate budget committee for review. Opelka said he hoped to have the transactions complete before the budget year ends June 30.

When asked by LSU board member Scott Angelle if a public bid process was needed, Opelka said his lawyers said bid solicitations weren't required under the law for a lease arrangement.

The Jindal administration and LSU leaders also are seeking private health care companies to run the other university hospitals as well.

LSU's Baton Rouge-based hospital already has an agreement in place to shift operations in the coming months to Our Lady of the Lake Regional Medical Center, rather than build a replacement hospital for Earl K. Long Medical Center.

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