Panel award no excuse not to rethink Big Charity

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The Gov. Bobby Jindal Administration just about got what it wanted from a federal arbitration panel hearing concerning federal government reimbursements for the 2005 hurricane disasters. Now the question is whether it will spend the windfall wisely.

Yesterday the Civilian Board of Contract Appeals ruled basically in the state’s favor, awarding it $474.7 million to go to replacing the old Medical Center of Louisiana – New Orleans campus, primarily known as the “Big Charity” hospital complex for treatment of the indigent and for medical education. The federal government had argued for an amount less than a third of that, arguing that much of what was claimed as storm damage in reality was decrepitude allowed in by the state unwilling to pay properly for maintenance costs over the decades.

That the decision came fairly quickly indicates the three-person panel found the state’s argument pretty convincing. Legally the arbitrators could have taken up to a couple of months to make the decision, and even longer if they felt necessary. Thus, this likely is the final word that will come out without any judicial or legislative intervention.

Now the ball is in Jindal’s court to use the proceeds most effectively. At least $300 million was saved by the state not having to put up that much more, now to be paid by the federal government. However, the overall cost of the project will be at least twice the awarded amount, so the projected state commitment of more than a half-billion dollars must be reviewed carefully.

In 2008, the Administration released a study outlining its vision of what the new facility would look like. It revised downwards more ambitious assumptions made by predecessor Kathleen Blanco that better comported to reality in terms of costs, demands, and population served. However, over a year-and-a-half now has passed since its release and conditions have changed further which provide substantial reason for the key assumptions to be reviewed which, upon further reflection, very likely will argue for the state to go back and come up with an even less-grandiose facility.

They include:

• Demographic shifts. There is considerable dispute over just what the area’s population and its components will be which will determine the usage of the facility as the majority of its clients are predicted to be there on some kind of federal-government run insurance or reimbursement. Using even more conservative estimates, with room to grow would prove more cost-effective.
• DSH redefinition. The Disproportionate Share Hospital payments program was changed a year ago which means fewer revenues can be drawn by a charity hospital, meaning a reduction in the number of beds may be in order.
• National policy. One way or the other, national health policy seems driven to get the government out of direct reimbursement of health expenses, either by forcing higher costs onto the private sector and consumers or by empowering consumers with more choice and less government interference to improve efficiency. Either way, this means less business for a charity hospital.
• Other state priorities. Competition for state one-time dollars only has been increasing, with road needs drifting upwards into the $14 billion range, unfunded accrued liabilities in pensions now approaching $17 billion, and an unknown in cost but greater demand placed upon coastal restoration. Downsizing the present facility planned could save an extra couple of hundred million dollars to be used for these purposes that might prove more cost effective than for the facility.

Instead of breathing a sigh of relief and counting its dough, Louisiana needs to reevaluate where it is going with a rebuilt Big Charity, not only taking these above factors into account, but also keeping in mind how the purpose of the facility, which really primarily should be medical education and not care of the indigent, plays into the overall redesign of health care that Jindal has pursued in piecemeal fashion. An option that needs to be taken far more seriously than to date the Administration has is not to build an entirely new facility but instead to renovate the old. Jindal has stressed wise stewardship of funds as a hallmark of his term; he should not allow special interests or avoidance of critiquing his own previous work to prevent use of a rigorous application of that principle to recreation of a permanent state-owned hospital in New Orleans.