In a monster of a press release today, U.S. Sen. David Vitter, Louisiana Treasurer John Kennedy and Louisiana House Speaker Jim Tucker presented Gov. Bobby Jindal with an alternative to the $1.2 billion “Megacharity” project to create a large-scale teaching hospital as a flagship for the LSU-run Charity system.

The letter to Jindal authored by the three, released to the media today, reads as follows…

VIA ELECTRONIC MAIL AND FACSIMILE

IMMEDIATE ATTENTION REQUESTED

The Honorable Bobby Jindal

Governor of the State of Louisiana

P.O. Box 94004
Baton Rouge, LA 70804-9004

Dear Governor Jindal:

We are very concerned that the Charity Hospital rebuilding plan as currently proposed (424 beds, $1.2 billion) will saddle the state with large new capital and operating costs for years to come.  As you know, Kaufman Hall, a nationally recognized firm of health care experts that your own hospital board hired to study the issue, has issued a report which validates and underscores these concerns.

To address these legitimate concerns and achieve all of the goals of the project’s advocates, we put forward the attached proposal.  We ask you to study it carefully and then work with your hospital board to implement it as a fiscally responsible plan.

This proposal has several strengths:

• It would yield a 600-bed capacity, offering even greater opportunity to host a broad array of specialties and sophisticated practices than the current proposal.

• It does this by acquiring the Tulane-HCA facility, thus not adding net new hospital beds in the New Orleans market, which already has a very high number of beds for the size of our population.

• It would also accomplish this without the proposed $400 million of new borrowing at high interest rates by the state that is part of the current plan.

• It would greatly minimize or avoid the need for major operating subsidies (possibly $125 million per year according to Kaufman Hall) from the already strapped state budget.

• Far from delaying the project, this alternative plan can clearly be executed far more quickly than the current proposal of building a new mega-hospital from scratch.
• Buying the current Tulane-HCA facility as part of the plan not only acquires 354 beds at relatively low cost per bed, it also acquires a net revenue stream of $400 million per year and a robust, already existing private-pay book of business.

• It helps ensure that the new hospital is managed efficiently versus continuing the state and LSU’s very inefficient management.

We will be contacting your office for an appointment with you to discuss this in detail as soon as possible.  We would urge as a positive next step forward that you commission Kaufman Hall to analyze this proposal within the next thirty days.

We look forward to your response and leadership on this vital issue.

Sincerely,

David Vitter
U.S. Senator

Jim Tucker
Speaker of the House

John Kennedy
Treasurer

The particulars of the proposal are as follows (click here for a link to a PDF version)…

University Medical Center

Outline of a Fiscally Responsible Approach

Prepared by U.S. Senator David Vitter, Speaker Jim Tucker, and Treasurer John Kennedy

1. The State of Louisiana buy the Tulane-HCA Hospital and merge it into the proposed new University Medical Center (UMC) facility in downtown New Orleans.  This would provide UMC with 354 beds (235 downtown in the same immediate area as planned, 119 at the Lakeside Hospital site in Jefferson Parish) for an estimated cost of below $80 million. (This figure is based on industry estimates with no input from Tulane-HCA.)  This would be an acquisition of not just hospital beds but a $400 million net revenue stream and a robust private-pay book of business.
2. The state build a new downtown facility with approximately 250 beds within part of the shell of the historic Charity building or, if that were considered impractical, as brand new construction at the new UMC site.  This could be done at a fraction of the cost of the proposed $1.2 billion project, keeping the total cost of the new UMC at or below the approximately $800 million the state has in hand.  Those functions and specialties which would most benefit from newly designed and built facilities would be assigned to this portion of the new UMC.
3. Steps 1 and 2 (merged) would create a capacity of 600 beds.  This would create even greater capacity for specialties and particularly sophisticated practices than the proposed 424-bed facility.  It would also address the concern that the current plan is building even more beds for an already overbuilt New Orleans market because there would be no net increase of beds in the market.
4. In terms of cost, this approach would: 1) avoid any need for the state to borrow an additional $400 million at high interest rates; and 2) avoid or greatly minimize annual operating subsidies from the state.
5. Clearly establish as part of UMC’s core mission the training of LSU and Tulane medical students.  Staff the hospital through professional service contracts with the LSU and Tulane medical faculty in the same proportion as the two groups have staffed Charity and Tulane-HCA hospitals in recent years.
6. Hire a private hospital management firm with no ties to either LSU or Tulane to run UMC.  One of that firm’s top mandates would be to streamline operations and cut the historically very high management costs of previous University/Charity hospitals under state and LSU management.  (According to the LSU-commissioned Alvarez & Marsal report, Charity’s cost per patient per day was $5,031 compared to $2,794 for similarly-sized teaching hospitals.)