The UMC Board were in Baton Rouge on Friday, September 16th to present a business plan developed by Verite consultants [atttached] - and overseen by Kaufman Hall and Associates - to the Joint Budget Committee.
"Sandra Stokes, board member of the Foundation for Historical Louisiana put it, “Abracadabra- a miracle! Same project for much less money. It’s magic!”"
The new plan calls for a 1.09 Billion dollar plan requiring no additional funding from the state for construction money needed to build the UMC Academic Medical Center. Previously, the design plan called for 1.2 billion dollars. That plan required 100 million dollars in state subsidy funding and additional 400 million dollars in private bond money after the HUD application for federal backed mortgage financing was recalled.
You may recall that Kaufman Hall - the well-respected financial consulting firm specializing in health care - had presented a financial report to the Board back in June that showed the proposed Hospital would not cash flow and was unsustainable due to failure by the board to show how they would make up 400 million dollars in money for construction of the 1.2 billion dollar design, and the failure by the board to demonstrate a business plan to show operating costs and how the proposed hospital would cash flow.
That report attracted protest by some of Louisiana's top legislators who came up with an alternative plan. Speaker Jim Tucker, State Treasurer John Kennedy and Senator Vitter proposed reusing the existing Charity Hospital building for a smaller hospital, make use of a Jefferson Parish hospital as well as buying a share of Tulane University's New Orleans Hospital. The three combined would comprise the University Medical Center, would come in at at least 400 million dollars cheaper and provide more existing beds.
The Verite report dismissed that option saying that Tulane Medical Center - a partnership jointly owned by HCA and Tulane University - was not for sale. Yet in an Eyewitness News report the day before the Joint Budget Committee hearing approving the construction budget, it was stated that
"Eyewitness News can confirm that Tulane Medical Center and Ochsner, two of the biggest players on the local health care market have been in negotiations recently over the future of Tulane Medical Center."
The Verite report also made claim to the fact that they had considered reusing Reverend Avery C. Alexander Charity Hospital. If they considered it's reuse it appears that they did not consider the retrofit. The Foundation For Historical Louisiana were never contacted about the RMJM Hillier study that proves retrofitting the Reverend Avery C. Alexander Charity Hospital is possible. FHL conducted the $600 000 dollar feasibility study that was executed by RMJM Hillier Architects – the same firm that built the cancer treatment center and whose reputation is world class in building health-care related facilities. If the Board had really given it a fair shake, you would think that they would have contacted the people that did that study.
There are numerous holes in the Verite business plan that raise doubts about the success of the new hospital and whether or not it will cash flow. Disturbingly, no mention was made that if it doesn't, more likely than not tax payers will be on the hook to fork over bail out money to keep the facility alive.
State Treasurer John Kennedy was in Baton Rouge on Friday to express his concerns. You can watch his testimony beginning at about 1:09:30.
Some outstanding issues are:
How will the UMC board repay the Louisiana Physicians Foundation for the approximately
$130 million dollars that they say they will put up to fund a new clinical building in the now 1.09 Billion dollar design?
No one from The LSU Physicians Foundation was there to comment. However, Dr. Fred Cerise - LSU System Vice President for Health Affairs and Medical Education - assured the committee that he has commitments of about 130 million dollars for an ambulatory care building and a parking deck.
Where will the money come from for working capital?
Byron Harrell from the UMC Board steering committee, that studied the business plan, stated that he did not foresee a problem with obtaining a line of credit seeing as successful billion dollar projects that are firmly in the ground are not likely to be turned away. He said that the steering committee did not look at that issue too deeply claiming that they will seek a line of credit when the time comes.
How will Charity Hospitals be funded when the federal Disproportionate Share [DSH] money runs out after the federal health care bill comes into effect in 2014?
The State Treasurer pointed out that the Charity Hospitals around the state cannot cash flow without federal DSH money and that the UMC Board's request to the state for up to 60 million dollars - as opposed to the previous amount of 100 million dollars - in general fund dollars by 2020 may significantly increase if the state loses it's DSH money. This will force the Hospital to rely increasingly on a privately insured population.
What about the saturation of the bed market? Will this drive up competition between area hospitals?
The Treasurer once again stated his concern that the national average for beds per 1000 people is 2.7. A 424 bed hospital along with new hospitals in New Orleans East and Chalmette will drive up bed count in Louisiana to 3 beds per 1000 people.
The UMC Board attempted to quell concerns with the argument that competition will not increase as the UMCMC are looking at finding niche patients that will be determined by programs offered and cultural shifts.
Senator Morrell, sitting in for Senator Jackson, emphasized that the issue today is jobs. That argument is a red herring. Jobs will come no matter where the hospital is built.
Other concerns that were brought up at the meeting were about the costs and success of repatriating patients and doctors to the new hospital. Interestingly one advocate for retrofitting the Reverend Avery C. Alexander Charity Hospital mentioned that her experience in outreach shows that if the doors of Charity opened tomorrow, there would be no need to spend any dollars on repatriation. The hospital would flood with doctors and patients alike, regardless of whether or not it is no longer a fully public hospital. Advocate's comments begin at about 2:00:00.
So what will become of the Reverend Avery C. Alexander Charity Hospital? There were assurances after the meeting from at least one senator who stated there will be a public process for people to give input. Hmmmmmmm.....
In the words of one official - "this is not a sprint, it's a marathon."
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