The Feds Nix Funding For Charity Hospital Privatization

Just when it was starting to look like this legislative session would be boring, a nuclear bomb just dropped on the state’s health care system.

Namely, the series of deals Gov. Bobby Jindal cut with a host of private hospital operators to lease the state’s 10 Charity hospitals from the LSU system and thus privatize their operations has been rejected by the federal government for funding.

Federal officials have rejected financing plans by Louisiana Gov. Bobby Jindal’s administration for privatization deals involving six state-run hospitals.

The U.S. Centers for Medicare and Medicaid Services notified the state health department Friday (May 2) of its refusal to sign off on the deals. The agency said they don’t meet federal guidelines governing how Medicaid dollars can be spent.

The decision was a significant blow to the Jindal administration and could create massive upheaval in the state’s budget because the deals rely on hundreds of millions of dollars in federal funding.

Six hospitals are affected by the rejection: the Charity campuses in New Orleans, Lafayette, Houma, Lake Charles, Shreveport and Monroe.

Last month there was an indication something like this might happen, as CMS notified the Louisiana Department of Health and Hospitals they would be deferring some $300 million in funds while reviewing the deals the state cut with the private hospital operators taking over the Charity facilities. Those deals are termed state plan amendments (SPA’s) in CMS jargon; at the time of the notice DHH officials were confident they’d have the funding issue straightened out.

But today, CMS dropped the bomb on DHH and said they’re not going to let the SPA’s for those six hospitals qualify. Which is a curious move, frankly; these arrangements are fairly similar to the deal the state did with Our Lady of the Lake Hospital in Baton Rouge that CMS fully signed off on in July of last year. The OLOL deal included some advance lease payments to the state, and CMS rubber-stamped that. But with the six hospital deals currently at issue CMS is calling the advance lease payments “donations” to the state, and using that to invalidate the deals for federal funding.

DHH says they’re confident the situation will be resolved upon an appeal to CMS, and if that appeal is turned down the matter will end up in the 5th Circuit Court of Appeals. In the meantime, we now have a political football on our hands.

Given the success of the arrangement with OLOL in Baton Rouge and CMS’ approval of it, today’s rejection smacks of petty politics and retribution on the part of the federal government and a personal attack on Jindal, and it’s quite likely there will be a large amount of outrage emanating from the Governor, the state’s Congressional delegation (at least on the GOP side) and maybe even from a number of Republican figures around the country.

But while it’s unclear what options Jindal might have to shuffle money around to make up the funding difference while the issue is resolved, you can bet this will become a problem for Mary Landrieu.

After all, though Landrieu’s current claim to fame is that she chairs the Senate Energy Committee, she’s been fairly aggressive in touting her general clout on Louisiana’s behalf in the Senate – and specifically in her ability to deliver funding for Louisiana where health care is concerned. The “Louisiana Purchase” in exchange for her Obamacare vote being a prime example.

But with the Charity deals being endangered thanks to CMS’ action today, the patients affected are overwhelmingly Landrieu’s base voters. It’s not great politics for her to be seen failing to deliver for those folks in an election year, particularly if every politician in the state starts loudly demanding she use her supposed influence with the Obama administration to get Marilyn Tavenner, the head of CMS whose name might be familiar given her role in the botched rollout of, to back off her opposition.

But should Landrieu get involved, it would look like a de-facto endorsement of the privatization deals – and it would be a real slap in the face of the state’s Democrat Party. This afternoon Karen Carter Peterson, that party’s chair and a state senator from New Orleans, put out a scathing attack on Jindal in the wake of CMS’ rejection…

“I wish I could say that today’s announcement that our governor’s hospital privatization schemes failed to win approval was a surprise, but it was not. Legislative Democrats have been warning for years that the deals weren’t worth the paper – in some cases blank paper – they were printed on. Moving forward without federal approval was gross negligence on the part of the Jindal administration, and their admission during hearings that they had no Plan B for funding our charity and university hospitals was the height of irresponsibility. Workers have lost their jobs, their benefits and their retirement. Families are hurting. If Jindal were a doctor and not a governor, the people of Louisiana would be suing for malpractice.”

That’s a nice bit of rhetorical piling on, but it also looks like Peterson and her crowd are more Democrats than Louisiana. It’s going to be difficult to make the case for resurrecting the old Charity system at this point when part of the reason for privatizing those hospitals was that the feds were becoming less and less interested in helping to fund them, so a “let it burn” philosophy when the people most hurt by the fire are all Democrats doesn’t exactly work.

And Jindal can tie this fiasco in with the Department of Justice’s ridiculous attack on the state’s school voucher program to build a narrative of an oppressive and lawless federal government trampling on innovative state policies which offer hope to lift Louisiana off the bottom not just in education but now in health care.

It will be interesting to see what options and opportunities this battle creates for Bill Cassidy. After all, Cassidy – who does Medicare and Medicaid work as a physician – used to see patients at the old Earl K. Long Hospital in Baton Rouge and he’s now at OLOL. He’s heavily involved in health care policy. And he’s running against Landrieu.

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