The Louisiana Civil Service Commission notwithstanding, the state may not yet be out of the woods with its plan to privatize nine of 10 LSU hospitals and clinics that provide medical care for the state’s poor and uninsured and which provide training sites for many of the state’s medical students.
A spokesman for the Center for Medicare and Medicaid Services (CMS) in Dallas said on Wednesday that it still has not received answers to all its questions put to the state in a Jan. 30 letter and the continued flow of hundreds of millions of dollars in federal Medicaid funds could hinge on satisfactory responses by the state to those questions.
The Civil Service Commission on Monday reversed an earlier vote and approved the contracts for the takeover of four hospitals in Houma, Lafayette, New Orleans and Lake Charles.
That approval, however, was based on criteria that did not appear to fall within the purview of the commission. Commission member Scott Hughes of Shreveport said since the commission’s previous vote of last week, the legislature approved a budget for next year that assumed the privatization of the hospitals. That action, he said, would leave no money available to operate the hospitals through LSU if the deals had been rejected.
A lawsuit against the City of New Orleans by the New Orleans Civil Service Commission—not unilateral administration or legislative actions—has traditionally been the precedent the commission considers when presented with layoff plans from state agencies. That decision said that administrations “do not have the unfettered discretion to potentially decimate the civil service system by eliminating all civil service positions to privatization.”
That ruling also said the city must turn over “all documents and other evidence which (might) enable the commission to determine (1) whether any civil service employees will be involuntarily displaced from civil service and if so, (2) whether the contract was entered into for reasons of efficiency and economy and not for politically motivated reasons.”
The question of whether the contracts will produce greater efficiency and economy remain unanswered because the contracts for the privatization of the four hospitals contained insufficient financial details.
Hughes changed his vote of opposition last week to one of approval on Monday after Michael Kaiser, chief executive officer of the LSU Health Care Services Division described the financial arrangements in a general overview with few specifics.
Kaiser said a reduction in federal Medicaid financing to the state would force the closure of facilities. He even listed a number of closures that were under consideration before the lease deals—all of which apparently helped Hughes see the light and to become a convert. “If we were to deny these contracts, we will not be able to provide these services to the citizens,” he said. “I believe these hospitals would close.”
So apparently the procedure is to delete funding from the state budget, thereby creating a crisis by throwing the continued operation of the hospitals into doubt and forcing the Civil Service Commission to do the governor’s bidding by accepting the contracts and in the process, throwing some 4,000 employees out of work.
The CMS spokesperson on Wednesday said, “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.”
When asked to be more specific as to the number of SPA responses, he replied, “We’ve received two or three but we don’t have a firm number on how many the state would need to submit.”
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 State plan amendment (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.”
Brooks said a new 90-day clock would not begin until his office had received satisfactory responses to his requests.
A CMS spokesperson on Wednesday clarified that stipulation. “By regulation, we have 90 days from initial submission to review, disapprove or request additional information,” he said. “When we request additional information and the state formally responds, we have an additional 90 days to review and approve or disapprove.”
He said CMS has no control on how long it may take the state to respond. “These are complex state plan amendments, so you can assume that requests for additional information will occur.”
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.
Louisiana Voice 
I thought the 50 blank pages were in the Shreveport LSU Hospital contract. The four approved have competed CEAs and financial sheets. Either way none of them have CMS approval as you properly describe.
Please show me a copy of the CEA without blank pages for WO Moss. The CEA that was posted on the Civil Service Commission website was filled with blanks throughout with no attached exhibits.
To paraphrase you Tom quoting Earl Long to Leander Perez;
Whatcha gonna do now Bobby? The Feds have got the medicaid dollars.
So if Im understanding this correctly, the civil service committie still has the right to oppose the lay offs of the first 4 hospitals to be privatized even though layoff notices were received by the DHH employees on Tuesday.
This brings me to the question of how did LSU have time to put together 4000 lay off notices, address them, get them in the mail and to the mail boxes of the laid off employes Tuesday? The civil Service Commission did not vote until Monday. Therefore these letters were in the mail before the vote even took place.
I received my layoff notice two weeks ago via mail.
Great job! I wonder what the effect will be of 4000 laid off workers on the unemployment system.
Some but obviously not all are being hired by the partners. I’m sure Jitler will find a way to make the unemployment rate decrease to continue to polish his reputation for his quest to the White House.
PS. I have 28 years with the State and I am not one of the lucky few being rehired.
Unemployment payments have to come from the state risk fund because the state is self insured. The UI trust fund will have to be reimbursed. I wonder when that will happen since the risk fund has probably been depleted by Jindal.
Given that Civil Service met last week and LSU was clearly expecting a yes vote then it is safe to assume they had the letters done at that point. And it also seems clear the employes were being laid off regardless of the Civil Service vote. That is what Templates comment means. As to Moss, it was different as it has a legislative act to shut down much like EKL. I do not remember if it was a full shutdown or partial, but Moss has legislative approval. Interestingly Moss was actually shown to cost more in the private format by ire than $7 million.
I am a little confused as to the claims on no finically data. They clearly showed numbers that totaled over $140M in savings for the four hospitals and they claimed another $100M in lease payments which results in a $240M swing. The big questions seemed to be the CMS approval which Tom outlines really well and Sen. Karen Peterson has spoken often about and blogged about and the numbers they actually presented.
It is all very confusing but it appears LSU just showed the savings last week when they got rejected. That was about $800M if I remember that number. This week they also showed the DHH payments to the providers which totaled about $650M apparently for the $140M savings. They said the $100M in lease payments goes to the state treasury. The best I could tell I think the numbers question revolves around the money DHH already pays now to the private providers which is somehow now going to be paid to the “partnership” instead of the private. Sounded like an accounting move to get a higher reimbursement rate for the poor people services since the new partnership is a public entity. I think this is part of what Brad and CMS are challenging. But that is why the numbers are more is what I think I heard Jerry Phillips from DHH say. Would love to get Brad’s take. But they clearly did have some detailed financials because Hughes and Polite went through those sheets for along time asking about specific numbers. If those sheets are true, and they should be public documents Tom, they showed a savings and efficiency. The other issue with the state budget was an add-on that even Freeman acknowledged meant the jobs were gone regardless of the vote. I think that was the point.
Reblogged this on The Daily Kingfish and commented:
Jindal policy-making puts state on edge of disaster. If Jindalistas can’t convince CMS Charity Hospital privatization plans work, whole system comes crashing down.
The problem with our “plan” is that CMS (predictably) doesn’t like UPL schemes (“Upper Payment Limit” schemes). We rely far too much on unstable, and largely despised, “tricks” that maximize our federal matching dollars by simply moving money around via “donations” or here “lease payments,” that have to somehow be interpreted as true donations/payments made without any expectation for a quid pro quo (, i.e., a “non-bona-fide donation”,…which CMS may think is hard to believe), and IGTs of those funds back to DHH to then draw down more federal dollars without there being any real additional state spending. While legal (if structured properly), UPL schemes cause large increases in federal spending without corresponding increases in real state spending (if you dont count as additional state spending the “donations” that allowed the governmental entity to IGT its “savings” back to DHH, which it then in turn paid to the private provider in the form of supplemental payments which are allegedly not in exchange for the private provider’s “donation”). It’s impossible to give a complete description of how UPL schemes work and all of the restrictions and ancillary implications of them in a post like this, but the main hurdle our plan will have to overcome is the plan cannot be seen as a private provider giving DHH the state’s portion of rate increases or supplemental payments to be paid to the private provider unless its done as a tax (I.e., “bed taxes,” etc). It’s a “handshake” deal where the private provider, governmental provider, and DHH all have a “wink, wink” agreement to keep up their side of the non-bargain without there being an actual quid pro quo between the private provider and DHH (instead the private provider has an agreement with the governmental provider, not DHH directly). Although there cannot be a contractual quid pro quo, if any of the three parties doesn’t continue performing their part of the scheme (i.e., the “donations” keep coming from the private provider, the IGTs keep flowing from the governmental provoder to DHH, and DHH keeps making supplemental payments to the private provider that are allegedly unrelated to the “donation”), then it all falls apart anyway. The same amount of care gets provided, but yet the private provider gets more money, the government provider saves money, and the DHH saves money,….all while CMS pays more for the same services simply because we moved money around. Hmmm, I wonder why CMS wants to ask a few questions about these arrangements? We should definitely utilize UPL schemes so long as they are legal, but why base so much of our indigent care funding on a scheme that is not viewed favorably by the federal agency that governs them and might finally be able to crack down on them via amendments to the social security act and its underlying regulations? Why go this far through the planning process without having a clue whether CMS will ultimately approve of our new spin on UPL finding mechanisms? We are operating within a very “grey” area of law. Sorry for the long post.
Dearest Health Lawyer,
Thanks to you, I actually understand why the Public/Private Partnerships are taking place.
I think Bobby’s ultimate goal is for the Public Hospitals to FAIL. It seems that his dream is coming true.
Agreed on what his goal is. It’s pretty clear I think. I guess it’s one way to go about it. My problem is that the way they handled this was kind of backwards. They started decreasing services at the LSU hospitals, cut bed counts, laid off half the everyday staff, and stopped renewing contacts with specialists, vendors, etc. That killed the Fair Market Value of each facility before we got to the point of shopping it around to the potential partners. We won’t be able to get anywhere near the lease rates they would have commanded before they stripped the hospitals of more that half of the things that contribute to a hospital’s value in normal settings. Basically they made them “distressed providers” when none of them were actually “distressed” at the time and didn’t have to be for another year or so. I don’t know about you, but I always like to sell assets before I dismantle them and decimate their price as a result. This may have just been bad planning, or intentional as a way to lure the private operators with bargain basement below market value lease payments. Hospitals are valued based on the services they offer and beds they have in service though, so if you look back at what’s been going on you will notice them making several changes months ahead of the negotiations that were no doubt extremely damaging to the hospitals’ value.
Thank you for helping me understand this “shell game”. It would appear, if CMS refuses to fund the new partnerships, the unfunded hospitals would be closed. Bobby could then place the blame on the “Obama-controlled” CMS, a win-win for Bobby on the national level.
Really,really good post.
For as long as I can remember, Louisiana has gamed the Medicaid system to the extent possible. Things like this are, as the attorney says, ultimately geared toward making the feds pay more and the state less. Even when they are successful who continues to pay? Us.
And, even when a byzantine system is developed in an effort to hide it, the quid pro quo becomes apparent once a process like this goes into motion. As one might guess, approval of these kind of things often requires intervention by our U. S. Congressional delegation and the White House pushed with the assistance of high-powered, and expensive D. C. attorneys.
It’s hard to gauge how much our Congressional delegation is willing to help Governor Jindal with this one, but it’s a safe bet he won’t get much help from the White House. The only thing that will save him is the real human tragedy that would ensue if the feds backed out altogether.
More voodoo economics from the Jindalicans, long on B.S. and short on facts, just like the tax swap proposal.
LSU Health Services on Thursday released more information on the transfer of services from W.O. Moss Regional Medical (WOM) Center to Lake Charles Memorial Hospital.
The transfer comes amid cuts and privatizations within the LSU Health System.
Officials, in a news release, said the cooperative endeavor agreement between LSU Health and Lake Charles Memorial Health System will go into effect on June 24.
Officials said in preparation for the transition, Moss Regional will stop taking new inpatient admissions on Friday, June 14.
WOM will also stop surgery at the close of business on Friday, officials said.
“Any inpatients remaining in the hospital on June 17 will transfer to Lake Charles Memorial Hospital. The WOM Emergency Department will remain open until 7 p.m., June 20,” officials said in a release.
“Inpatient, emergency and surgery services provided at WOM will transfer to Memorial Hospital’s Oak Park campus. West Calcasieu Cameron Hospital will provide some surgery and inpatient services for patients living near it,” the release continued.
WOM will close effective June 24, officials said.
Officials said outpatient clinics will remain open at their current locations on the WOM campus under management of Lake Charles Memorial.
“These primary care and specialty clinics include infectious disease, rheumatology, oncology, dermatology, ophthalmology, gynecology, asthma, diabetes, hypertension, health maintenance and renal,” officials said.
“Most of our patients at W.O. Moss are treated in outpatient clinics,” said Jimmy Pottorff, WOM Hospital Administrator. “This transition will preserve access to quality healthcare services to both our outpatients and inpatients.”
“Teams from LSU Health and Lake Charles Memorial are working together to prepare for this transition, which includes communication with patients, medical-records transfer, patient scheduling and follow up for procedures and continuing care. LSU is also working with the 342 full and part-time employees of WOM to make them aware of job opportunities with Lake Charles Memorial,” officials said in the release.