Board must slow rush to unwise grandiose hospital

Slowly but surely, the issue of the size of the new University Medical Center, the physical manifestation of which better known in the past affectionately/derisively as “Big Charity,” is becoming a policy quagmire to Gov. Bobby Jindal, infected as it is with the strains of government-as-venture-capitalist and populism viruses that have plagued Louisiana for so long.

Recent questioning by Sen. David Vitter over the size of the facility, currently pegged at 424 beds, and the apparent reluctance of the federal government to commit funding for that particular idea, have put the Jindal Administration on the defensive. A report, the fourth on the plan but the first done entirely independently of the Division of Administration and/or the Louisiana State University System, which operates the state’s charity hospitals, added more doubt when it concluded operating subsidies by the state would be higher than ever forecasted at this size, which it argued was unsustainable.

At first, Jindal actually put up some resistance to the notion of a grandiose new Big Charity, after the former Gov. Kathleen Blanco Administration intended for one to replace the damaged facilities as a result of Hurricane Katrina, justified by the self-serving initial report. He lopped off 60 beds from that proposal after commissioning a second and doggedly stuck to it when a third, like the others not independent of the executive branch, essentially ratified main conclusions although it did mention serious reservations with some assumptions even as it chose to go with the ones pushed by the LSU System (it notes the report was developed in consultation with those officials).

But the fourth report, requested by the new governing board of the facility that legally can act independently of the executive branch, concluded differently, basically giving greater credence to the misgivings cited in the third study. The LSU System and the Jindal Administration testified to that board that happened because of supposedly inaccurate information and that this report should not stop the project from moving ahead, rapidly. In fact, it was argued speed was of the essence, even though because of the federal government misgivings the state may have to find more expensive funding options, as construction costs would escalate if not started soon because of the Veterans Administration companion facility going up nearby in the near future.

Yet, in all of the debate, certain key facts have received insufficient inattention that casts doubt on the defense of the 424-bed plan. First, this latest study was in the works for months, with plenty of opportunity for the executive branch to give input. It seems inconceivable that it did not, and the reason why it calls what are mistakes actually are a result of the consultants finding alternative arguments more compelling than those based on data identified by the state – again, a conclusion in line with similar assumptions rejected for use on which to base alternative conclusions explicated in the third report of just about a year ago.

Second, the state’s assertion that New Orleans now does not have enough hospital beds, with many wiped out after Katrina, deftly sidesteps the real issue. While previous to the storm Louisiana had more beds per capita than almost any state at 4.0 per thousand with most of the excess in the New Orleans area, within months after only about half were back in operation. But as the latest report notes, when looking at the entire metropolitan region, not just the city, there still are plenty of beds, at 3.0 compared to the stable national average of 2.7. If there’s any overcrowding, it seems more genuinely related to the lack of intermediate care space available and the propensity of the area medical community to stick patients into hospitals when other alternatives are available.

Third, the line that speed is of the essence also is a red herring. Let’s say that redesign resulting in a smaller facility takes months and that it actually does increase construction costs. However, that is entirely unlikely to exceed the savings from a smaller facility, which might lop off as much as a quarter of the estimated $1.2 billion current cost. Taxpayers don’t have to put anything into it more than $300 million cash and some bond money and you get a more sustainable project – what’s the problem?

Fourth, except in its earliest and most optimistic scenarios the project never has been considered “sustainable” in the sense that it will not require ongoing state subsidies from the general fund. The Blanco Administration at first tried to push the fiction that it would pay for itself at its largest size, but then the Jindal Administration admitted a subsidy starting at around $40 million annually would be needed for its first few years. That increased further to $70-105 million in the report from last year, depending on assumptions regarding health care changes enacted at the federal level last year if constitutional, and was consistent with figures from other similarly-situated hospitals in other large cities. The latest report seems to have gone with the highest subsidization figure – which is twice what was paid in 2009, five times of those experienced under the last year of old undamaged Big Charity, and 100 times those of 10 years ago.

While proponents stress the new Big Charity orients more towards a teaching hospital than in providing indigent care and thus must be comprehensive in scope thereby arguing for the presence of more beds, taxpayers have to wonder if it’s worth the cost at this level, considering the alternative where residencies in many specialties can be performed in regional private facilities for lower overall costs -- which addresses another red herring argument about the composition of  the patient base, which for the most part can be served at any area hospital. Are that many beds really needed for the routine cases?

Why the Jindal Administration has refused to back away from maintaining that a version if not scaled down further would become prohibitively expensive even as evidence confirming that mounts seems related to the peculiar faith Jindal has in the use of public funds beyond infrastructure for “economic development.” Just as he unwisely has sanctioned a sort of bribery to get certain concerns to locate in state, he appears to believe that a larger Big Charity will create economic development such as seen in Birmingham and Houston. He finds allies in the LSU System, who equate more dollars/bigger projects as a sign of power and prestige in the old populist vein.

Perhaps a grandiose Big Charity might produce some desirable economic spillover effects. But given the up-front and long-term cost commitments the state would have to make, now validated in two different studies, at those levels simply it’s just not cost effective. Hopefully, the board designed to run the center will do its fiduciary duty and get the state to come back with a more modest Big Charity that will have benefits commensurate with its costs to taxpayers even if it delays by months the project further.