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Privatization deal set for north La. LSU hospitals

Melinda Deslatte, Associated Press

BATON ROUGE, La. (AP) -- Management of two LSU hospitals in north Louisiana is being turned over to a nonprofit research foundation that has never run a patient care facility, raising concerns about whether it has the experience and the financing needed to oversee the public hospitals.

The privatization of the university-run hospitals in Shreveport and Monroe is in contrast to the approach Gov. Bobby Jindal's administration took in south Louisiana, where nearly all of LSU's facilities are being overseen by companies that run other private hospitals in the area.

The Biomedical Research Foundation of Northwest Louisiana, or BRF, has more limited resources to pump into hospital operations and no background in hospital management.

But on Oct. 1, the research foundation — led by a Jindal campaign donor and member of the LSU System governing board — will take over one of the state's largest university-run hospitals.

The BRF will assume management of the LSU Medical Center in Shreveport, which has more than 2,200 employees and a budget that topped $276 million in the last fiscal year. It also will operate E.A. Conway Medical Center in Monroe, a smaller hospital with about 550 workers.

The no-bid, minimum 10-year contract will have an arm of the research foundation paying the state more than $40 million annually to lease the hospitals, under terms still being worked out, according to the state Division of Administration.

The Jindal administration and LSU leaders say they are confident the research foundation, created in 1986 to boost regional economic development, will be a strong partner. They say the privatization will save Louisiana money while protecting safety-net services for the poor and uninsured.

"The BRF has a history of mission-based alignment with the LSU medical school. There are members of the BRF who have extensive experience in health care management," said Hugh Mighty, vice chancellor for clinical affairs at the LSU Health Sciences Center-Shreveport.

Mighty wouldn't agree to an interview but responded to questions by email. The Division of Administration and the Department of Health and Hospitals directed questions about the privatization plans to LSU.

Critics say the north Louisiana hospitals deal could harm the LSU medical school in Shreveport and cause disruptions in graduate medical education programs. The medical school has received about $30 million from Shreveport hospital revenue annually, according to the Legislative Fiscal Office. But the BRF hasn't pledged such support to the medical school.

Questions also have been raised about the appropriateness of turning over the hospitals' management to a foundation whose president and CEO, John George, sits on the LSU Board of Supervisors as a Jindal appointee and contributed $10,000 to Jindal campaigns.

Elliott Stonecipher, who runs a Shreveport-based market research and consulting firm, has criticized the outsourcing deal as secretive, rushed and laden with politics.

"There is no transparency. None. Everything that's being done is being done in secret. That's not a way to build public confidence," said Stonecipher, who has done health care consulting work, including for the Willis-Knighton Health System that pulled itself from consideration as a possible partner to take over the Shreveport and Monroe hospitals.

North Louisiana lawmakers repeatedly have said they are missing critical details about the contract arrangement to ensure the deal protects the patients who rely on the hospitals and the employees who will be laid off and must reapply for their jobs.

"I get my information very much like the general public. I have to go to the Biomed website and read it. The documents I have still have missing pages," said Sen. Sherri Smith Buffington, R-Keithville, who has been an advocate for the hospital and medical school at the Legislature.

George said any criticism was misplaced.

He said the Biomedical Research Foundation stepped up to help north Louisiana when other private hospitals weren't willing to take over LSU hospital and clinic operations there. He said without privatization, the hospitals would have faced steep, damaging cuts, after Jindal levied much of a federal Medicaid financing reduction on the LSU health care system.

"We take this as a personal challenge to make sure that our community stays viable. We were heading for disaster," George said. "It's not that the BRF wanted to run a hospital, but we wanted to save the hospital for the community."

The state ethics board cleared George in May to stay on the LSU board, saying he was not prohibited because he's not compensated for his work at BRF and can recuse himself from votes involving the foundation.

George said concerns about BRF's lack of hospital management expertise were answered when the foundation hired health care consulting firm Alvarez and Marsal to devise a strategic plan for the hospitals and to help hire executives to run the facilities.

"The only thing we haven't done is we haven't overseen a hospital's operations, but we're going to be hiring people who have that capability, new, innovative people," George said.

But publicly available tax forms for the Biomedical Research Foundation have drawn concerns about whether the nonprofit has the assets and startup cash needed.

Its revenue, listed at about $13 million on its 2011 tax return, is largely from a share of the local property tax and rental leases.

Included in the total is money LSU pays to lease space for its employees. The lease agreement was recently more than doubled to $8.6 million a year, providing money BRF can use to help pay its annual lease cost to the state.

The mechanics of the financing, according to George, involve creating an arm of BRF, called the Biomedical Research Foundation Hospital Holdings LLC, which will lease the hospitals and manage them. He said the nonprofit is loaning the holding company at least $20 million in startup money by borrowing against its building.