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LSU needs more than $100M to finalize hospital privatization plan

Monday, May 13, 2013 - 5:23pm

The true cost of shutting down Earl K. Long Memorial Hospital is just emerging.

A report released Monday by the Louisiana Legislative Auditor's office showed that LSU needs to come up with tens of millions of dollars that it does not currently have.

The report addressed all facets of LSU Health Care Services Division's decision to form public-private partnerships for six of its hospitals.

"No judgments," said Ernie Summerville, an assistant director of financial audit services and one of the authors of the report. "We're just trying to present the facts as we know of it right now."

The most impactful item in the report discussed the cost to LSU Health to get rid of those hospitals.

According to the report, LSU laid off 812 people at Earl K. Long. Between severance pay and unemployment insurance, it paid them more than $5.5 million. For the six hospitals combined, that figure jumps to more than $41 million.

"We're dealing with over 5,000 employees, and that's a significant amount," Summerville noted. "A lot of these employees have been there for a significant amount of time."

But the even bigger problem for LSU Health will be legacy costs, such as health insurance and life insurance benefits for current and potential retirees. That number was pegged at $25.9 million annually. When LSU Health transfers its hospitals to private partners, it will lose a significant source of revenue. It will likely need assistance from the state, and therefore taxpayers, to pay those expenses.

"I know DHH and the division are looking to try to find monies to fund those costs," Summerville said.

One of the reasons why the auditors made no recommendations in the report is that LSU's contract with Our Lady of the Lake to close Earl K. Long is the only one it has actually signed. LSU Health told the auditors it will have partners ready to take over the other hospitals by June 24. But the state Department of Health and Hospitals has to approve any deal, as does the federal Centers for Medicare and Medicaid Services.

"It's a very large and complex issue that we're, and they're, trying to figure out," Summerville stated. "And it lends itself to having a lot of people that they need the approval from."

Summerville pointed out that the other transitions might be easier than the one between Earl K. Long and Our Lady of the Lake because the other hospitals will all remain open. Whereas Our Lady of the Lake tried to add staff to its existing facilities, no buildings will close under the other arrangements, so any employees laid off by LSU Health could probably get their jobs back with the new management.

The audit stated that Our Lady of the Lake had hired 318 former LSU Health employees as of April 16. A spokesperson for the hospital said Monday that number is closer to 400 today, and the possibility remains that a few more may still be offered jobs.

To read the full audit, click the attachment at the bottom of this page. 

LLA 051313 LSU Health Report.pdf181.89 KB

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