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End govt handout to organization overseeing hospitals

After sucking up tens of millions of dollars in public funds over nearly two decades,  Shreveport’s Biomedical Research Foundation continues to hang on to taxpayers’ udders even as its new purpose transforms the organization away from its original that has not proven cost-effective for the citizenry.

An ordinance by Caddo Commissioner Ken Epperson that would have stripped public funding of the organization failed last week, falling four votes short of passage. By Oct. 1, the  BRF becomes the administrator of both the Louisiana State University Health Sciences Center – Shreveport and E.A. Conway Medical Center in Monroe, including their clinics. The state is in the transition of finding non-government operators for all but one of its state-owned charity hospitals and while the others have been recommended to be managed by hospitals, the only entity that currently does not deliver in-patient health care tapped to take over management of a state facility is the BRF, which never has run any hospitals.

Its experience lies elsewhere. From its beginning, the 501(c)(3) tax entity was envisioned as instrument to provide facilities to small concerns in the area of biomedicine, where they could develop innovative products. Since then, it has expanded its purview to trying to attract any technology-related tenant to its portfolio of facilities worth $53 million and also has gotten into the providing of venture capital.

Its only direct provision of medical services has come from its Positron Emission Tomography scanner; it also provides radiopharmaceutical products both for clinical and research use through a subsidiary. It oversees facilities used for research and also lets grants for research, congruent to the medical education aspect of LSUHCS-S. But besides these activities, it has no experience in running a hospital, teaching or otherwise. And that in its last reported fiscal year (calendar year 2011), it actually took a small loss on the PET scan and radiopharmaceutical operations may not inspire confidence that it should operate much more extensive and complicated facilities.

Especially when understanding the scope of the business conducted by the two entities. Presently, those two hospitals have annual revenues of $655 million – about 52 times last year’s revenue for the BRF, meaning a huge difference in scale in performance. Although of the partners lined up to assume management of the nine hospitals, BMR has the most incestuous relationship with state government – it already has leasing agreements with LSUHCS-S and the Department of Economic Development that represent over a quarter of its revenues. And its Chief Executive Office, an unpaid position, John George sits on the LSU Board of Supervisors.

With this tremendous influx of revenues coming to the BRF, one might have thought this would obviate any need for the organization to draw upon the 1.74 mills of property tax in Caddo Parish that began at a higher rate in 1997, which last reported year transferred $2.5 million to it. This represented about a fifth of all BRF revenues but begs the question why it should receive that money in the first place if it has so much in assets, including more cash on hand than the annual tax subsidy, and in that it, an entity that pays no income taxes and may receive tax-free donations, competes in the provision of PET scan services and radiopharmaceutical products with the private sector. The BRF claims it will continue to use the subsidy only on economic development projects.

In its latest released annual report, the organization claims it houses tenants with $18 million in payroll for 350 employees. Assuming very likely incorrectly that all otherwise would have relocated outside of the parish without the BMR and assuming half of this payroll gets spent on local goods, paying sales taxes, and half of them own homes in the parish worth $125,000, paying property taxes, that otherwise would not be built, that’s still less than a million dollars a year that they contribute to the coffers of Caddo Parish governments. It’s a net loss to Caddo taxpayers and cannot justify any overblown claims about how the economic development pays for itself.

Even as it says it will use the subsidy for it's original purpose, that purpose never has been cost-effective for the citizenry. And it's they who ultimately determine whether the subsidy is given, with their next chance to vet it coming in 2017. But discretion is the better part of valor here; the BRF should recognize its organization has changed dramatically away from economic development and forgo the subsidy, if not in the immediate future, then letting the levy expire if by then it has proven itself as a capable long-term manager of the hospitals.

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