Louisiana Voice

Those blank pages in the LSU Medical Center/E.A. Conway Medical Center contract for the takeover of the two facilities by a Shreveport research foundation have finally been filled in but questions nevertheless remain as to the validity of the document.

The one thing it does do with near certainty is to guarantee lots of legal work for attorneys down the road when the disagreements begin—as they almost assuredly will because of both the wording and issues over whether there even is a contract.

It also would appear to transfer both hospitals’ accounts receivable—potentially tens of millions of dollars—to BRF, as the agreement stipulates that LSU shall transfer “all assets” to lessee.

The contract, officially entitled Cooperative Endeavor Agreement (CEA) by and among Biomedical Research Foundation of Northwest Louisiana (BRF), BRF Hospital Holdings (BRFHH), Board of Supervisors of Louisiana State university, the State of Louisiana through the Division of Administration (DOA) and the Louisiana Department of Health and Hospitals (DHH), was provided to LouisianaVoice by LSU on Friday (Aug. 16) pursuant to LouisianaVoice’s public records request earlier in the week.

A companion document, the Master Hospital Lease Agreement, provided along with the CEA, calls for the lessee, BRFHH, to pay the state $38,763,891.38 per year in 12 monthly payments of just more than $3.23 million.

One caveat of the contract which would appear to leave the state on the hook financially is the provision that in the event the state’s required Medicaid per diem payments should appear to be inadequately funded, DHH “shall immediately notify BRFHH” and both the Commissioner of Administration and DHH would be required to seek additional appropriations from the Legislature.

There is no such provision for increased state Medicaid payments to any other medical facility in Louisiana and in fact, many hospitals across the state are in the midst of wholesale layoffs of medical personnel because of Medicaid cutbacks by the Jindal administration. Such cutbacks are placing a heavy strain on already overworked nurses, technicians and other medical employees and many doctors are refusing to accept new Medicaid patients as a result of the state cutbacks.

But even more questionable is the legality of the CEA itself.

The LSU Board of Supervisors on May 28 approved the private takeover of four LSU hospitals—LSU Medical Center (LSUMC) in Shreveport, E.A. Conway Medical Center in Monroe, W.O. Moss Medical Center in Lake Charles and Leonard J. Chabert Medical Center in Houma.

The only problem with that approval was the board approved contracts for each of the four hospitals which contained nearly 50 blank pages, omitting financial terms, the length of the leases involved and a termination clause.

All contracts, to have any legal standing whatsoever, must plainly state an offer and an acceptance (financial terms), dates (length of leases in this case) and a termination clause. None of those were contained in the approved documents.

Even more questionable, it would seem, is a stipulation under “Representations and Warranties of the State,” which says in part:

• This agreement and any and all agreements, documents or instruments to which the State, through DOA and DHH, is a party and which are executed and delivered by the State pursuant to this agreement constitute the legal, valid and binding obligations of the State, through DOA and DHH, enforceable against the state in accordance with its terms.

• DOA and DHH have the absolute and unrestricted right, power and authority to execute and deliver this agreement and such other agreement, documents or instruments to which it is a party on behalf of the State and to perform obligations on behalf of the state under this agreement and such other agreements (and) documents.

• Neither the execution and delivery of this agreement nor the consummation or performance of any of the contemplated transactions hereby will, directly or indirectly, with or without notice or lapse of time…give any governmental body or other person the right to validly challenge any of the contemplated transactions, or to exercise any remedy or obtain any relief under any legal requirement to which the State, DHH or DOA may be subject.

In other words, the contract claims that no governmental entity or individual has any legal rights insofar as mounting any challenge to the agreement by lawsuit or otherwise.

That would appear to be a particularly difficult stipulation to enforce given the fact that the contract may well not be a legal document in light of those nearly 50 blank pages.

Another curious section of the contract which addresses Medicare and Medicaid Certification, the CEA says, “With respect to the hospitals, LSU has met and does meet, without material exception, the conditions for the participation in the Medicare and Medicaid programs, and LSU does not have knowledge of any pending or threatened proceeding or investigation under such programs involving the hospitals or any basis for the revocation or limitation on such participation.”

A June 26 letter from the Center for Medicare & Medicaid Services, however, said the state has not submitted the required state plan amendments (SPA) proposing to fund Medicaid payments through the agreements “and CMS cannot offer former determination as to whether the arrangements would conflict with the requirements described in the Social Security Act. 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,” the letter said.

As recently as Tuesday of this week (Aug. 13) a CMS spokesman told LouisianaVoice by email there were “no updates at this time.”

The CEA said that LSU and BRFHH would, after the Oct. 1 execution date of the agreement, jointly submit the proper forms to CMS.

But Bill Brooks, associate regional administrator for the CMS Division of Medicaid and Children’s Health Operations in Dallas, said last January that whenever documents are submitted to CMS, the process starts a “90-day clock,” during which time his office may pose additional questions. A new 90-day clock would begin when his office receives satisfactory responses to his requests.

Thusly, so long as the state fails to satisfactorily answer all questions and provide adequate documentation, the 90-day clock could conceivably run indefinitely. And that would be bad because if CMS disapproved an amendment submitted by the state, “there would be no federal dollars provided for the changes proposed” in the agreement.

Another provision in the agreement says that the Department of Corrections (DOC) is responsible for paying BRFHH for medical care provided state prisoners should DOC suspend payments for any reason, the state would have to find “alternative sources of medically necessary health care” for prisoners.

Though the agreement requires that all LSU Hospital employees shall be offered employment by BRFHH, the agreement says they “shall be employed subject to terms and conditions established by BRFHH”—meaning potentially lower wages and fewer benefits. At the same time the agreement also holds LSU liable for state employee expenses such as unemployment benefits, wages and benefits for “past, present and future employees of LSU.”

One other clause, this one contained in the lease agreement, warrants particular attention because of the failure to enforce an identical clause in another state agency privatization contract in 2010:

“Lessee (BRFHH) shall not assign this lease or any interest therein without the prior written consent of lessor” and “may not sublease all or any portion of the leased premises without the prior written consent of lessor.”

In 2010, the state contracted with F.A. Richard and Associates (FARA) to take over operations of the Louisiana Office of Risk Management (ORM) at a cost to the state of just over $68 million. Less than eight months later, ORM and DOA agreed to a 10 percent amendment to that contract, bumping the state’s cost to $75 million. Within weeks, FARA sold its interests to an Ohio company which in turn sold out to a New York firm—all within the first year of the contract.

A similar “prior written approval” clause was contained in the contract with FARA but when LouisianaVoice made a public records request for the written approval, DOA responded that no such document existed.

That, naturally, would raise the question of whether or not DOA would enforce that stipulation in this contract or not.

The lease agreement does give BRF the authority to lease to a “non-profit corporation, a limited liability company, limited liability partnership or other non-profit legal entity wholly owned or controlled by lessee or Biomedical Research Foundation of Northwest Louisiana.” That, of course, would be BRFHH, a non-profit entity “wholly owned” by BRF.

Finally, a clause in the CEA which might otherwise be overlooked, takes on significant importance in that “financial and other records created by, for or otherwise belonging to BRF or BRFHH shall remain in the possession, custody and control of BRF and BRFHH, respectively,” and such records would be considered “proprietary to BRF and BRFHH” and “such records shall be clearly marked as confidential and/or proprietary,” and thus protected from the Louisiana public records laws.

This could be crucial inasmuch as questions have arisen as to the financial viability of BRF, a non-profit organization that depends heavily on grant money, much of it from the state, for its operations. BRF has no experience in operating a facility like the two medical centers it is being contracted to run and skeptics feel it also does not have the financial resources to be successful in that endeavor.

Adding to the aura of mystique is the reported sighting of former DHH Secretary Bruce Greenstein having lunch in a Shreveport restaurant with BRF Board Chairman Stephen Skrivanos recently. BRF CEO/President Dr. John George was also reported to have been in that meeting but he has publicly denied he was present and has threatened Shreveport political consultant Elliott Stonecipher with a libel lawsuit over the reports of his attendance.

George, in addition to being the CEO and President of BRF, is also a member of the LSU Board of Supervisors which approved the agreement with BRF but Jindal has claimed there was no conflict of interests in George’s serving in the two capacities.

What makes all this so intriguing is that Greenstein resigned in the wake of an ongoing federal investigation into a $187 million DHH contract with CNSI, his former employer. Greenstein assured legislators at his confirmation hearings in 2012 that he had erected a “firewall” between him and CNSI to ensure there would be no contact with his old company during the contractor selection process. Emails and phone records subpoenaed by the committee, however, revealed Greenstein was in constant contact with CNSI officials throughout the selection process.

Even though he quickly announced his “resignation” following news of the FBI probe, he was allowed to remain on the job a month before vacating his office. He subsequently moved back to Seattle but recently showed up in Shreveport with Skrivanos.

Adding fuel to the fires of speculation was the appearance at the State Capitol a few months ago by Alan Levine, Greenstein’s predecessor at DHH.

With the blank contract, questionable financial abilities of BRF (in some minds), the mysterious appearances of Greenstein and Levine, the defensive reaction of George to the report of meeting with Greenstein even to the point of a threatened lawsuit, and potential conflict of interest of George serving as head of BRF which was approved to take over two major hospitals by an LSU board on which he sits, there is plenty of room for speculation and conspiracy theories.

Had the federal investigation into the CNSI contract not surfaced, who knows what direction this plot may have taken?

That’s especially true given the lack of transparency and openess in this administration.

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