Louisiana Budget Showdown Threatens Opening of $1.1 Billion Medical Center

Governor Bobby Jindal wants the state budget to meet requirements of Americans for Tax Reform. Even a less severe plan that has passed the Louisiana House still falls short in funding to compensate private operators of charity hospitals and medical schools.

Governor Bobby Jindal’s presidential ambitions and the Louisiana Legislature’s lack of enthusiasm for his “no tax” pledge have created uncertainty for scores of institutions that depend on state funding, including one that yet to open: the $1.1 billion University Medical Center in New Orleans.

UMC New Orleans is the controversial and long-awaited replacement for Charity Hospital, the famous art deco building that treated generations of city’s poor before it was shuttered in the wake of Hurricane Katrina. The scheduled August opening has already been delayed, amid reports from small contractors that they have gone months without pay.

Now, published reports on nola.com state that LCMC Health, the private concern scheduled to partner with the state to run the hospital, may walk away from its contract to run to operate the 420-bed facility that would take over for the much-smaller Interim LSU Hospital.

The issue is money: LCMC Health has been promised $88 million from the state to open UMC New Orleans, but right now the state budget remains in disarray, with Jindal refusing to accept proposals for new revenues. The Republican governor, who faces term limits, leaves office next year and is exploring a run for president in 2016.

In written statement, LCMC Health CEO Greg Feirn said Thursday, “A UMC New Orleans that is not funded as requested will require our Board of Trustees to rethink our partnership with the state.”

Opening UMC New Orleans without adequate state funding would force service cuts elsewhere in the LCMC system, and lawmakers sympathetic to Feirn’s plight told nola.com they don’t blame him for taking a stand.

A Controversial Relocation

It’s just the latest twist in a saga that has proved controversial since the former safety-net hospital, known as “Big Charity,” closed in 2005. Its shuttering and relocation generated criticism from no less than Lt. Gen. Russell Honore, commander of the post-Katrina relief efforts. He and others said officials within the LSU health system used Katrina as an excuse to close Charity Hospital and put its successor in a neighborhood where it might attract a mix of insured and uninsured patients.

Fueling the financial challenge is Jindal’s dismantling of the state’s unique charity hospital system, which for decades steered poor, uninsured patients to a completely separate bricks-and-mortar system. Jindal engineered a plan that converted 9 of the 10 former charity hospitals from LSU management to public-private partnerships. What made the plan untenable was his decision to do an about-face on Medicaid expansion, after committing to the brand-new hospital in New Orleans.

In 2013, Evidence-Based Oncology, a publication of The American Journal of Managed Care, reported on a well-known criticism of Jindal: his “Louisiana Health First” plan, unveiled in November 2008, called for expanding Medicaid to more caretakers of eligible children, or at least more additional low-income persons with chronic conditions. Offering the poor healthcare choices and providing preventive care at medical homes were seen not as dreams but possibilities, given Jindal’s prior service as both a state and federal health official.

But then Medicaid expansion for those earning up to 138% of the federal poverty line became part of the 2010 Patient Protection and Affordable Care Act. Suddenly, Jindal wanted no part of extending Medicaid to more of his state’s working poor. Louisiana has some of the strictest limits on Medicaid eligibility, leaving a high share of persons with chronic conditions without access to coverage and reliant on the charity hospital system.

Numerous sources who spoke with Evidence-Based Oncology in 2013 speculated that hospitals and lawmakers alike would simply wait Jindal out to take up the federal government's offer on Medicaid expansion. That would seem to be the case, as lawmakers this week approved a measure that will let the next governor expand Medicaid in 2016. Jindal cannot veto the bill.

Budget Outlook Still Bleak

Louisiana’s House of Representative passed a budget May 21, 2015, that avoided the harshest cuts to health care and the state’s universities, but still fell short in 2 key areas: funds needed to pay the partners running the former charity hospitals, and funds for LSU medical schools.

Yet that might not be enough for Jindal, who has vowed to veto any budget that fails to meet the “no tax” requirements of the Americans for Tax Reform (ATR), the anti-tax group founded by Grover Nordquist. The House reportedly ignored ATR edicts in crafting its budget and has balked at other ATR-friendly measures.

UMC New Orleans had been scheduled to open in May, but the opening was delayed when Jindal released a budget that called for $1.6 billion in cuts. While Jindal Administration spokeswoman Shannon Bates Dirrman told nola.com that there were other proposals in the works to resolve the impasse, others were less optimistic.

“There is not enough money on the table to do all we need to do,” said state Sen. Edwin Murray, D-New Orleans.