LSU hospital deal questioned

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The Louisiana Civil Service Commission notwithstanding, the state may not yet be out of the woods with its plan to privatize nine of 10 LSU hospitals and clinics that provide medical care for the state’s poor and uninsured, as well as serve as training sites for many of the state’s medical students.

A spokesman for the Center for Medicare and Medicaid Services (CMS) in Dallas said last week that it still has not received answers to all its questions put to the state in a Jan. 30 letter and the continued flow of hundreds of millions of dollars in federal Medicaid funds could hinge on satisfactory responses by the state to those questions.



The Civil Service Commission last Monday reversed an earlier vote and approved the contracts for the takeover of four hospitals in Houma, Lafayette, New Orleans and Lake Charles.



That approval, however, was based on criteria that did not appear to fall within the purview of the commission. Commission member Scott Hughes of Shreveport said since the commission’s previous vote, the Legislature approved a budget for next year that assumed the privatization of the hospitals. That action, he said, would leave no money available to operate the hospitals through LSU if the deals had been rejected.

A lawsuit against the City of New Orleans by the New Orleans Civil Service Commission – not unilateral administration or legislative actions – has traditionally been the precedent the commission considers when presented with layoff plans from state agencies. That decision said that administrations “do not have the unfettered discretion to potentially decimate the civil service system by eliminating all civil service positions to privatization.”



The ruling also said the city must turn over “all documents and other evidence which (might) enable the commission to determine (1) whether any civil service employees will be involuntarily displaced from civil service and if so, (2) whether the contract was entered into for reasons of efficiency and economy and not for politically motivated reasons.”



The question of whether the contracts will produce greater efficiency and economy remain unanswered because the contracts for the privatization of the four hospitals contained about 50 blank pages and contained no financial details, no offer, no acceptance and no termination clause.

Yet, Hughes, who changed his vote of opposition to one of approval after Michael Kaiser, chief executive officer of the LSU Health Care Services Division, described the financial arrangements in a general overview with few specifics.



Kaiser said a reduction in federal Medicaid financing to the state would force the closure of facilities. He even listed a number of closures that were under consideration before the lease deals – all of which apparently helped Hughes see the light and to become a convert. “If we were to deny these contracts, we will not be able to provide these services to the citizens,” he said. “I believe these hospitals would close.”



So, apparently, the procedure is to delete funding from the state budget, thereby creating a crisis by throwing the continued operation of the hospitals into doubt and forcing the Civil Service Commission to do the governor’s bidding by accepting the contracts and in the process, throwing some 4,000 employees out of work.

The CMS spokesperson last week said, “CMS does not play any role in the actual privatization of the hospitals. “However, as part of the privatization, the State of Louisiana is modifying the Medicaid reimbursement to those hospitals. The change in reimbursement requires the submission of State Plan Amendments (SPA). CMS currently has received some of the necessary SPA and they are under review.”



When asked to be more specific as to the number of SPA responses, he replied, “We’ve received two or three but we don’t have a firm number on how many the state would need to submit.”



Last Jan. 30, Bill Brooks, associate regional administrator for the CMS Division of Medicaid and Children’s Health Operations in Dallas, sent a six-page letter to Ruth Kennedy, director of the Bureau of Health Services Financing for the Department of Health and Hospitals (DHH) in which he requested additional clarifying information, which he cautioned had the effect of “stopping the 90-day clock” for CMS to take action on the proposed State plan amendment (SPA) that “proposed to revise the reimbursement methodology for inpatient hospital services to establish supplemental Medicaid payments to non-state owned hospitals in order to encourage them to take over the operation and management of state-owned and operated hospitals that have terminated or reduced services.”

Brooks said a new 90-day clock would not begin until his office had received satisfactory responses to his requests.

A CMS spokesperson clarified that stipulation. “By regulation, we have 90 days from initial submission to review, disapprove or request additional information,” he said last week. “When we request additional information and the state formally responds, we have an additional 90 days to review and approve or disapprove.”

The spokesman noted CMS has no control on how long it may take the state to respond. “These are complex state plan amendments, so you can assume that requests for additional information will occur.”

One of the requirements Brooks cited was one specifying CMS “must have copies of all signed standard Cooperative Endeavor Agreements.” He also asked the state to provide all Intergovernmental Transfer (IGT) management agreements and “any other agreements that would present the possibility of a transfer of value between the two entities.”

Brooks said, “CMS has concerns that such financial arrangements meet the definition of non-bona fide provider donations as described in federal statute and regulations.

“Detailed information needs to be provided to determine whether the dollar value of the contracts between private and public entities had any fair market valuation. There can be no transfer of value or a return or reduction of payments reflected in these agreements,” he said.

“Additionally, whether the state is a party to the financial arrangement or not, the state is ultimately responsible to ensure that the funding is appropriate.”

Brooks asked, “How many entities does the state anticipate will participate in this arrangement? Please submit a list of all participating hospitals, all transferring entities doing the IGT, and the dollar amount that the transferring entities will IGT. Please describe how the hospitals are related/affiliated to the transferring entity and provide the names of all owners of the participating hospitals.”

In the case of the Leonard Chabert Medical Center in Houma, the lessee is listed as Terrebonne Medical Center of Houma but in reality, Ochsner Medical Center of New Orleans will be taking over Chabert’s operations.

“What is the source of all funds that will be transferred?” Brooks asked. “Are they from tax assessments, special appropriations from the state to the county (parish)/city or some other source?

“The state plan methodology must be comprehensive enough to determine the required level of payment and the Federal Financial Participation (FFP) to allow interested parties to understand the rate setting process and the items and services that are paid through these rates,” Brooks said. “Claims for federal matching funds cannot be based upon estimates or projections. Please add language that describes the actual historical utilization and trend factors utilized in the calculation.”

Brooks also asked if the private hospitals destined to take over operations of the state facilities are required to provide a specific amount of health care service to low income and needy patients. “Is this health care limited to hospital only or will health care be provided to the general public? What type of health care covered services will be provided?” he asked.

The CMS spokesperson said if CMS disapproved an amendment, “there would be no federal dollars provided for the changes proposed in the State Plan Amendment.”