Louisiana Voice

A week after the Dallas office of the Center for Medicare and Medicaid Services (CMS) confirmed to LouisianaVoice that the state still had not answered questions about the proposed privatization of state hospitals, the Washington, D.C. office has weighed in with similar concerns in a letter to two state senators.

On Monday it was announced that Health facilities in Houma, Lafayette, Lake Charles and New Orleans had been turned over to private operators as part of Gov. Bobby Jindal’s drive to privatize the university-run hospitals and clinics.

A three-page letter from Cindy Mann, Director of the Center for Medicaid and CHIP Services (CMCS), to State Sen. Ben Nevers (D-Bogalusa) addressed seven questions posed by Nevers and State Sen. Karen Carter Peterson (D-New Orleans) and the answers were no more encouraging to the Jindal administration than those of the Dallas office on June 12.

“In your letter, you raise questions concerning plans by the state to enter into public-private partnerships with Louisiana State University (LSU) and University Medical Center in Lafayette and LSU and Louisiana Children’s Medical Center, and questions related to the Affordable Care Act,” Mann wrote in her June 19 letter to Nevers.

The entire privatization deal would appear to revolve around the first question posed by Nevers: “Will CMS approve the large up-front lease payment arrangements as proposed in the attached public-private partnership lease agreements in Louisiana?”

“The Centers for (CMS) has concerns over the large up-front lease payments described in the Louisiana public-private partnership agreements,” Mann wrote.

A spokesperson for Mann’s office said nothing had changed since the June 19 letter.

“However, at this time, the state has not submitted state plan amendments (SPA) proposing to fund Medicaid payments through the agreements and CMS cannot offer formal determination as to whether the arrangements would conflict with the requirements described in (the Social Security Act,” Mann said. “Once the state submits the SPAs, CMS will request necessary supporting documentation and explanations from the state to demonstrate compliance with these provisions of the statute and regulations.”

Nearly 4,000 state employees were laid off because of the privatization of the facilities that care for the uninsured and which provide training for the state’s medical students.

Nevers, contacted in California where he was attending a conference, said he had never seen a situation where policies needing federal approval were undertaken and finalized before that approval was forthcoming. “It’s premature, to say the least, to do this without written approval in hand,” he said. “The private partners won’t stay in this deal if there are no payments and if CMS doesn’t approve the state’s plan, the whole thing falls apart.”

Nevers said his primary concern was continued health care delivery for the state’s poor. “In any business venture, you would not jeopardize services based on ‘maybes.’”

He said Jindal may well have more information than he has, “but the people who make the decisions do not have the information. Moving forward is something we should not be doing at this time.

“Neither should the LSU Board of Supervisors have agreed to a major contract for the transfer of the hospitals that contained 50 blank pages,” he said.

Mann, in her letter said that while the lease agreements themselves would not be subject to CMS approval, “to the extent that the lease agreements contain financing arrangements that are involved in the state’s funding of its Medicaid program, CMS will review the lease arrangements to insure compliance with federal Medicaid laws and regulations.”

She said any SPA request by the state to modify its Medicaid service payments will be reviewed by CMS to insure compliance with federal Medicaid laws and regulations. “This includes the source of non-federal funds used to fund the service payments,” she said.

Nevers, in his letter to Mann, asked if Louisiana were to expand its Medicaid program under the Affordable Care Act (Obamacare) “are there any federal provisions that would prohibit Louisiana from withdrawing from such an expanded Medicaid program at any time, including after participating in the 100 percent federal funding available in 2014, 2015 and 2016?”

Mann responded in the affirmative: “A state may choose whether and when to expand, and if a state covers the expansion group, it may later decide to drop the coverage, without any federal penalty.”

The Louisiana Civil Service Commission approved the contracts for the takeover of four hospitals in Houma, Lafayette, New Orleans and Lake Charles on June 10 despite the lack of CMS approval of the state’s privatization plan.

Commission member Scott Hughes of Shreveport said the approval was based on the state budget approved by the legislature which he said assumed the privatization of the hospital. That action, he said, would leave no money available to operate the hospitals through LSU if the deals had been rejected.

While that is not among the criteria that the Civil Service Commission is supposed to consider when layoff plans are submitted by state agencies, it left unanswered the question of what will happen if CMS does not ultimately approve the state’s plan.

A CMS spokesperson in Dallas said on June 12 that CMS does not play any role in the actual privatization of the hospitals. “However, as part of the privatization, the State of Louisiana is modifying the Medicaid reimbursement to those hospitals. The change in reimbursement requires the submission of State Plan Amendments (SPA). CMS currently has received some of the necessary SPA and they are under review.”

Last Jan. 30, Bill Brooks, associate regional administrator for the CMS Division of Medicaid and Children’s Health Operations in Dallas, sent a six-page letter to Ruth Kennedy, director of the Bureau of Health Services Financing for the Department of Health and Hospitals (DHH) in which he requested additional clarifying information which he cautioned had the effect of “stopping the 90-day clock” for CMS to take action on the proposed SPA which “proposed to revise the reimbursement methodology for inpatient hospital services to establish supplemental Medicaid payments to non-state-owned hospitals in order to encourage them to take over the operation and management of state-owned and operated hospitals that have terminated or reduced services.”

He said a new 90-day clock would not begin until his office had received satisfactory responses to his requests.

One of the requirements that Brooks cited was one which said CMS “must have copies of all signed standard Cooperative Endeavor Agreements.” He also asked the state to provide all Intergovernmental Transfer (IGT) management agreements and “any other agreements that would present the possibility of a transfer of value between the two entities.”

He said, “CMS has concerns that such financial arrangements meet the definition of non-bona fide provider donations as described in federal statute and regulations.

“Detailed information needs to be provided to determine whether the dollar value of the contracts between private and public entities had any fair market valuation. There can be no transfer of value or a return or reduction of payments reflected in these agreements,” he said.

“Additionally, whether the State is a party to the financial arrangement or not, the State is ultimately responsible to ensure that the funding is appropriate.”

Brooks asked, “How many entities does the State anticipate will participate in this arrangement? Please submit a list of all participating hospitals, all transferring entities doing the IGT, and the dollar amount that the transferring entities will IGT. Please describe how the hospitals are related/affiliated to the transferring entity and provide the names of all owners of the participating hospitals.”

In the case of the Leonard Chabert Medical Center in Houma, the lessee is listed as Terrebonne Medical Center of Houma but in reality, Ochsner Medical Center of New Orleans will be taking over operations of Leonard Chabert.

“What is the source of all funds that will be transferred?” Brooks asked. “Are they from tax assessments, special appropriations from the State to the county (parish)/city or some other source?

“The State plan methodology must be comprehensive enough to determine the required level of payment and the Federal Financial Participation (FFP) to allow interested parties to understand the rate setting process and the items and services that are paid through these rates,” Brooks said. “Claims for federal matching funds cannot be based upon estimates or projections. Please add language that describes the actual historical utilization and trend factors utilized in the calculation,” he said.

Brooks also asked if the private hospitals destined to take over operations of the state facilities are required to provide a specific amount of health care service to low income and needy patients. “Is this health care limited to hospital only or will health care be provided to the general public? What type of health care covered services will be provided?” he asked.

The CMS spokesperson on Wednesday said if CMS disapproved an amendment, “there would be no federal dollars provided for the changes proposed in the State Plan Amendment.”

“No federal dollars” could translate to hundreds of millions of dollars for a state already wrestling with suffocating budgetary constraints.

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