Analysis: The Commission on Streamlining Government and Charity Hospital

Yesterday, a key subcommittee on the Commission for Streamlining Government unanimously approved a resolution endorsing the FHL/RMJM alternative plan to gut and rebuild Charity Hospital. The move signaled the first time in this running controversy over medical facilities that an official body has explicitly endorsed the alternative plan to build cutting edge facilities in less time, for less money, and without destroying a residential neighborhood.

This begs an important question: Why does the Commission for Streamlining Government, a body charged with the task of recommending areas of waste and inefficiency to eliminate or reform, care about the hospital controversy in New Orleans?

Though the details are complicated, the core answer to that question is quite simple. Burdened by a tight economy and a voter mandate to improve state governance, the Commission for Streamlining Government was created to identify areas where spending doesn't yield sufficiently positive outcomes for the public. While exercises in identifying areas where spending can be reduced often devolves into a typical partisan battle over the role of government, there are sometimes instances where waste is so unambiguous that politicians from both sides of the aisle can reach a consensus.

The proposed medical complex project came under the scrutiny of the Commission not just because it is a controversial issue but because the State of Louisiana earmarked $300 million in state taxpayer funds toward the LSU/VA medical complex back in 2007 and has not yet seen results. Work on the project has not yet begun because LSU administrators have not been able to secure the additional funding needed to begin work, which they say will come from some combination of loans and a reimbursement from FEMA.

The FHL/RMJM plan, which to this point has never been seriously considered by public officials as an alternative to the stalled LSU/VA proposal, has been estimated to save taxpayers at least $280 million in land acquisition and construction costs because the plan does not rely on the expropriation of private property in Lower Mid-City or the forced eviction of neighborhood residents.

Though it would seem obvious that a panel whose mission it is to identify areas in which Louisiana can save money would take a look at the two competing hospital plans, it was not a sure bet. State Representative and Senators have had many opportunities to reexamine the proposal to build the LSU/VA medical complex and to order a side by side cost-benefit analysis of the two competing plans. They have failed to do so. As recently as June, the State Senate Education Committee even declined an opportunity to protect homeowners in the Lower Mid-City footprint of the proposed LSU/VA medical complex by refusing to pass a measure that would have required LSU to earn legislative approval of their business plan before proceeding with land acquisition.

What's different now? Why has this subcommittee unanimously endorsed the FHL/RMJM plan to save Charity Hospital and what are the chances the resolution will pass when it goes before the full Commission on Streamlining Government?

Though it's true that the subcommittee that unanimously passed the motion endorsing the alternative plan was headed by a longtime skeptic of the LSU/VA project, State Treasurer John Kennedy, it's also true that state leaders are becoming increasingly concerned about the business rationale for the project.

At issue is how the anticipated healthcare reform measures being debated in the US Congress will change DSH payments, or reimbursements for Disproportionate Share Hospitals. These federal reimbursements go to hospitals that serve a high number of uninsured low-income patients who are not covered by other government programs such as Medicare, Medicaid, or SCHIP. Congress is currently planning to cut DSH payments as part of the healthcare bill under the assumption that as insurance is extended to more Americans, hospitals won't require reimbursement money for treating uninsured patients.

Because the high price tag of the proposed LSU/VA medical center will require so many loans, the anticipated absence of DSH funding will make it harder for hospital administrators to meet debt obligations. Therefore it is less likely that bond companies will be willing to loan the required money to pay for building the hospital in the first place.

Conversely, because the FHL/RMJM plan to gut and rebuild Charity Hospital is less expensive, less loans will be required. Additionally, because the FHL/RMJM plan promises to a faster construction time, hospital administrators will be able to begin repaying those loans sooner. This is the point Treasurer Kennedy has been making since last Spring and the point he reiterated at yesterday's subcommittee hearing. Thankfully, the members of the Commission on Streamlining Government are beginning to get the message.