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LRA Should Limit Grant for LSU Hospital, PAR Says

The Louisiana Recovery Authority (LRA) board will vote this Thursday on whether to approve a $300 million request to partially fund the rebuilding of charity hospital in New Orleans. The LRA should recommend that the Legislature only grant the Office of Facility Planning and Control enough for land acquisition and planning fees – roughly $70 million.

PAR supports the mission to replace charity hospital in New Orleans with an academic medical and level one trauma center. The conservative approach of providing only seed funding now should enable continued negotiations with the Veterans Administration (VA) regarding the construction of shared facilities and also allow time for further development of business plans to establish the appropriate size and function of the new facility before additional funds are dedicated.

The funds being requested are Community Development Block Grants that are allocated to Louisiana to spend for recovery from the storms of 2005. The LRA’s approval of the funding request is only the first step in the process of appropriating the funds. Approval must also be granted by the Legislature and the U.S. Department of Housing and Urban Development.

The LRA board initially expressed resistance to approving the $300 million request due to the lack of a business plan for the new hospital. A preliminary plan has now been released, but it is still in its infancy, based on assumptions that are certain to change and recommends a larger hospital than was originally envisioned by hospital planners.

The data to determine the appropriate size of the new hospital are simply not yet available. Certainly, further study now can yield plans for a teaching hospital and trauma center geared toward serving a mix of patients that will include both the insured paying patients and the uninsured whose care must be subsidized with public funding. Outpatient clinics that would offer primary care services for the uninsured are currently under development by the Louisiana State University Health Care Services Division. This is a step in the right direction toward improving access to care, but partnerships with the private sector to expand that access further should also be established.

To create a hospital with the ability to attract the appropriate payor mix and minimize the amount of state and federal funds necessary to support its ongoing operation, a radical overhaul of operations management will have to be designed. Additionally, careful analysis of opportunities for collaboration with the private hospitals in the region needs to be conducted in order to establish the best, minimal initial size of the new hospital. At the very least, that will require a research-based, independently validated business plan. The preliminary plan that was released last week needs further development and review.

While granting any money to rebuild the hospital would seem irresponsible without an operations plan in place, an unavoidable urgency has been created by the possibility of losing the VA hospital to a neighboring state. An initial investment of around $70 million should serve to keep the VA deal alive while buying the state time to develop its plans for the future of health care in New Orleans and buying the public time to evaluate those plans.

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