Charity hospital transformation plan needs implementation

With news that most of Louisiana’s charity hospitals may get downsized confirms the move to dismantle the system as it is has come to the stage of a realistic alternative future, also bringing big change to some other related areas of policy, and not a second too soon to benefit the state.

Spurred by the sudden loss of a good chunk of its Medicaid reimbursement from the federal government – the vast majority of these public hospitals’ business is paid for that way, making Louisiana public institutions a wildly disproportionate user of those funds – at first former system leaders developed a strategy to cope by using mainly reserve funds, necessary because they remained invested in the notion that public hospitals providing free care to the indigent must exist.  In retrospect, this appears now accepted then only because of the compressed time frame, but that the basing of the response on the concept of necessity of public hospitals was not considered viable over the long haul.

As such, the officials in charge of the entire ten-hospital system and of the Health Care Services Division that oversees seven of them, while the remaining three in Shreveport, Monroe, and Pineville are organized separately under the auspices of the Louisiana State University Health Sciences Center Shreveport, were removed and the new officials came up with a different strategic paln for the system that largely gets it out of the direct provision of hospitalization services. In its most radical version, the plan calls for all but the New Orleans one to be downsized in bed capacity to 10, with the New Orleans one set at 150.

Besides the revolutionary shift in focus, following this path solves one specific problem and dramatically reconceptualizes another. The state has committed to closing the aging Baton Rouge one with its functions essentially farmed out but recently ran into bureaucratic difficulties as the federal government seemed convinced for it to operate satellite clinics and get federal funding then at least some aspect of it had to remain open. This decision would create some state commitment to run a small version of a hospital in Baton Rouge, which will cost more than the original idea, but will salvage clinic use without either their abandonment or working out a way to have other nonprofit or local government providers step in.

It also indicates that the system, and therefore perhaps Gov. Bobby Jindal, finally has recognized the wisdom of a smaller hospital in New Orleans. While his predecessor, like her recently-ousted appointees a true believer in government health care provided directly by it, had recommended rebuilding from scratch a grandiose replacement for the facility damaged by the hurricane disasters of 2005, Jindal scaled that down a bit but still left a contemplated complex of size really greater than needed for the area, medical education, and if there was to be a shift from the existing money-goes-to-the-institution model to one of money-follows-the-person.

This potentially fits into a plan that relies on more beds elsewhere in the area allied with the new facility, which can be smaller even as the initial building commences. The current envisioned structure is estimated to cost $100 million or more in state subsidies annually. It may not even be too late to somehow use or integrate the old facility into a smaller structure, which could save even more on building costs and reduce debt and operating services costs.

A move in this direction also has other, beneficial, ripple effects. It would sort out the question posed by the Baton Rouge situation, where other hospitals had been negotiating with non-government providers to perform services which might have encountered a similar roadblock. LSUHSCS has explored similar arrangements, but rather than extensive downscaling as with the LSUHCSD it might become a tax-exempt nonprofit corporation.

This move also would produce a very needed centralization of medical education to replace the less-efficient existing system the rationale for which more than anything was to justify having so many charity hospitals. It could be run out of the New Orleans and Shreveport locations solely, with the exception of the rural medicine program which could find a home in Monroe or Pineville.

Finally, it recognizes the reality of the expanding Bayou Health program that creates incentives to use non-government providers for Medicaid. When all is said and done with perhaps only a quarter of all indigent remaining in “legacy Medicaid” that steers many of them to charity hospitals, demand for these facilities should decrease substantially.

Those wedded to the current system both politically and/or remuneratively no doubt will fight to prevent this transformation. This resistance in fact shaped the scenario, because to close a hospital, emergency room, or to cut funding by more than 35 percent (this plan estimates it would save 34.5 percent) requires legislative approval, hence keeping open six hospitals even if they become more like clinics.

Most likely they will argue against this plan claiming it would restrict supply of services as roughly 350 staffed beds would be lost. Whether all, some or none would disappear is another matter, for it is likely that non-government providers would take up at least some of the slack, either at their own facilities or through arrangements with the hospitals. But even if around that many went away this would not end up having much impact as Louisiana, at 3.4, remains well above the national average of beds per thousand population of 2.6, ranking tenth among the states and the District of Columbia.

The Jindal Administration need not let opposition based on politics, weighed down by the state’s populist past, deter it from embracing this wonderful option that promises to bring care as good if not better at reduced cost to the state’s citizens. This truly transformative moment awaits and must be seized.