The operations of Louisiana State University's public hospitals in New Orleans, Houma and Lafayette will be turned over to not-for-profit corporations that run private hospitals in the three cities under outsourcing plans unveiled Monday by Gov. Bobby Jindal's administration.
The arrangements were announced by Health and Hospitals Secretary Bruce Greenstein and LSU hospital chief Frank Opelka as part of an administration effort to cut state costs by turning over university-run health care services for the poor and uninsured to the private sector.
The Louisiana Children's Medical Center, which operates Children's Hospital and Touro Infirmary, will lease the Interim LSU Public Hospital in New Orleans and the new $1 billion, 424-bed medical training and research center set to open in two years.
Ochsner Health System will manage the LSU hospital in Houma, the L.J. Chabert Medical Center. Lafayette General Health System will operate the LSU hospital in Lafayette, the University Medical Center, according to documents released by the LSU System.
"We are going to be executing this before the end of the fiscal year," Greenstein said. "This is what has allowed us to not make significant reductions at these hospitals."
The privatization plans need approval from the LSU Board of Supervisors and lawmakers on the joint House and Senate budget committee. Opelka said the leases didn't need to be put out through a public bid process.
The lease agreements are designed to help fill budget gaps at the hospitals. Jindal stripped more than $300 million in state and federal funding for the LSU health system after Louisiana's Medicaid financing was reduced by Congress.
Lease payments and other upfront "milestone payments" will be made by the nonprofit corporations to the state. Greenstein said the money will be used to draw down federal matching dollars through the Medicaid program for health care services to keep existing beds and services open.
The details of the annual lease payments haven't been released.
In New Orleans, the milestone payment from the Louisiana Children's Medical Center will be $17 million over three installments. In Houma, Ochsner will pay $5.1 million for the milestone payment. In Lafayette, the payment will be $7.8 million.