SADOW: Political Vendetta Continues Against Louisiana’s Hospital Plan

Politics continues to drive the issue of financing Louisiana’s transition from state-run to state-overseen hospital care for the indigent, leaving it uncertain whether the state will be forced to pay back some money to the federal government.

The U.S. Department of Health and Human Services finally approvedthe state’s deals for the majority of its state-owned hospitals that turn over management to nongovernment concerns. Through the first year of operation by doing so the state has saved $52 million and expanded services. But HHS also alleged that part of the financing arrangement violated regulations in that it relied upon front-loading lease payments by the operators. It essence, it claimed that early delivery of these provided additional money for the state to use to obtain reimbursement of Disproportionate Share Hospital claims (the federal government typically pays about three-fifths of these), to the tune of $190 million. Regulations forbid anything that is not a payment for service, so if this interpretation were to be accepted, the state would have to pay that back.

Logically speaking, HHS’s never has been a convincing argument. A lease payment is a lease payment regardless of its timing and does not turn into a “donation” just because it’s early. And it makes perfect sense for these kinds of early payments as an inducement for the operators to stay on the job; in fact, amendments forced upon the state in this review process made it easier for operators to bail out earlier, magnifying the value of this tactic. If an operator shows good faith to see through the length of the contract by paying more of it up front, then it is likelier not to terminate the contract early if it know its payments are going to go lower in future years. Making all lease payments equal only encourages instability in the program.

This adverse decision on financing means the state must appeal, which can become a lengthy process. Earlier this year, an appeal on overpayment by the federal government to Louisiana for DSH funds finally was resolved after eight years with repayment. During this period, the state does not have to repay the funds, and if it does, that conceivably could be not just one but even two gubernatorial terms away.

Or, perhaps more relevantly, maybe two presidential terms away. For the odd conceptualization of the advanced lease payments smacks of electoral politics intruding into the process. That it has been politicized already has been obvious, given that HHS had no problem in approving the very similar plan amendment used a couple of years ago to transfer public hospital responsibilities from the Earl K. Long facility to local Baton Rouge nongovernment operators, yet got hung up over this one. That it now reapproves what it did years ago yet now wishes to disallow the financing mechanism again demonstrates it is digging in trying to inconvenience the state some more.

Simply, the Pres. Barack Obama Administration will do what it can to force Louisiana generally and Gov. Bobby Jindal specifically to knuckle under to its policy preferences against which Jindal has acted as one of the most outspoken figures. It chafes the Obama Administration that the state steadfastly refuses to embark upon Medicaid expansion in the president’s signature law – which Jindal wisely resists particularly given the experiential data mounting against that – and that Jindal could be a major Republican contender for the presidency in 2016. Creating drama here by the permanent campaign machinery that drives Democrats’ policy-making these days attempts to strongarm the state into expansion and to make Jindal look bad.

Once Obama is gone, the federal ardor to pursue the matter may dissipate. It almost certainly will should his replacement be a Republican. In the meantime, should new personnel at HHS stubbornly stick to this interpretation, and then perhaps Congress not act to correct them, the state should plan ahead over the next few years to ameliorate the impact of a future payment such as by freezing reimbursement rates (the smaller lease payments would cushion that for the hospitals) and by identifying sources of money for potential repayment.

It’s the holiday season, but politics never takes a vacation. Certainly the spirit of the season seems to have escaped the Obama Administration through these punitive measures.



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