Invalid critiques of privatization fit Kennedy profile

After his long stint in statewide elected office, we’ve learned one thing about Treas. John Kennedy: if something is his idea, even if it has warts, he’ll promote it as the greatest thing since sliced bread, but if somebody else comes up with something else based on the same concept with solid evidence to confirm, he’ll criticize it. His comments about privatization of state hospital operations provide an object lesson in this trait.

Kennedy has tried over the last several years to make himself a cottage industry about running state government efficiently and not wastefully. His specialty has been to repeat endlessly some bromides along these lines that, at best, are hit-or-miss in value, in part because some suggestions are too simplistic to work, and others of them already are being done. Typically, such recommendations have little or nothing to do with his actual job title, because he’s always seen that as a springboard to higher office.

This has driven him to a frustrating inconsistency reflected both in terms of general ideology and on specific issues. A decade ago, as the sitting Democrat treasurer he was running as a liberal for the Senate seat eventually won then by Sen. David Vitter. Half a decade ago, he had transfigured into a conservative, having switched his partisan identification prior to his last treasurer reelection, to challenge unsuccessfully for the seat now slipping away from Sen. Mary Landrieu.

And his position on issues often appears on the surface to be determined by their relative political convenience more than any underlying belief system. For example, he recently criticized a bond refinancing deal by the Gov. Bobby Jindal Administration when eight years prior he had felt favorably about an identical deal. Or last year he caterwauled about a deal that went sour on the state when six years earlier he had showed no qualms about initiating it. And while on issues where poor spending choices are involved, he’s vocal on some, but then curiously silent on others. This creates the lamentable perception that he goes whichever way the winds blow, no matter how contradictory with his past record this might be, to cultivate an image that he is the guardian of the public weal in the pursuit of greater ambitions.

Recent remarks he has made about the deals made by the Jindal Administration, which will net the state in savings somewhere around $140 million this year, $75 million the next, then probably $150 million or more beyond that, exemplifies the sour grapes attitude he exhibits when cost-saving ideas of others are implemented to the neglect of his in state government. Rather than celebrate this arrangement, which removes Louisiana as the only state in the union with a substantial portfolio of public-owned, state-run hospitals and where comparative evidence suggests outcomes will improve as a result, Kennedy keeps trying to throw cold water on it for what turns out to be spurious reasons.

Speaking to a group in Shreveport where the issue of the changeover at the Louisiana State University Health Sciences Center – Shreveport and its Monroe counterpart E.L. Conway Medical Center came up, Kennedy incredibly dismissed the cost savings aspect altogether, characterizing the transformation at the beginning of October as a strategy to expand Medicaid to bring in more money. He also pointed out that the deal was subject to final Centers for Medicare and Medicaid Services in terms of expected reimbursement levels, echoing his latest opinion piece of the kind regularly floated on the state’s Treasury website and which he circulates to the state’s media for their publication

In essence, his argument is that (based upon the remarks of the new operator of the two hospitals, the only one that does not have previous health care facility operator experience) that there are no operational savings and that it’s all just an accounting trick. And, an accounting maneuver he argues that has yet to gain approval, which he equates to some past efforts that backfired.

Yet the assertion that the only savings might come from accounting gimmickry is on its face absurd. For example, all hospitals undergoing the process have shed redundant employees (only 86 percent to date rehired with lower headcounts in all cases) so this money must be going somewhere (a result consistent with the literature that shows how the typical privatization of public hospital operations reduces costs by 10 percent). Let’s argue that, even with escalator clauses in the lease payments, that what would be “savings” from this increased efficiency instead becomes “profit” for the operators (even as some of them operate as nonprofits). If the state thinks there is too much of its and wishes to recapture this beyond the escalator clauses, then when the next lease comes up (for example, for these two hospitals in 2023) then it can negotiate upwards the next lease. But, for now, it seems satisfied with the current financial arrangements.

Also, Kennedy’s view on this is far too restrictive and narrow that misses other savings in other parts of government caused by the deals. For example, Jindal in his own opinion piece has pointed out that the Legislative Auditor has determined the partnerships will reduce the state's retirement system debt by $300 million and lower the annual cost burden of the retirement system to government agencies by $82 million. Kennedy ignores this when he makes the claim there are no “savings.”

As far as the applicability of the funding mechanisms goes, state officials report that CMS already has approved of the same kind of deals attached to the pioneer institution in this process, the absorption of charity functions by Baton Rouge’s Our Lady of the Lake Regional Medical Center that already has been consummated. So it seems highly unlikely that the federal government suddenly would do an about-face and deny the use of an allowable cost by a provider, a lease payment for facilities, a component in calculating reimbursement. Kennedy’s examples give about past CMS denials or reversals concern unrelated matters.

Kennedy also has led a chorus that finds issue about reporting requirements for these institutions, claiming there will be less transparency now with these deals. Again, this assertion flies in the face of reality; not only does the state retain full authority over auditing matters pertaining to the contracts and the parties to it face the same oversight of financing mechanisms by the federal government, but an additional layer of transparency may be added by moving these operations out of the shadow of state government: filings to the Internal Revenue Service will provide details that state government operation allowed to be obscured (depending upon the accounting treatment of subsidiary and consolidated operations).

Actually, that aspect doesn’t seem to concern Kennedy as much as that operators now may not have to reveal specific salaries or equipment purchases, which by state law are public records under state operation. But why should they? They are private concerns so what’s the compelling government interest here? (And some of this information already is available; for example, IRS Form 990 reveals the salaries of top officials for the nonprofit operators.) Why should they be treated any differently than all of the other health care providers that Louisiana pays, from the substantial, like Molina Healthcare Systems that gets hundreds of millions of dollars from the state currently to process Medicaid claims, to the smallest, such as home health care agencies whose revenues come entirely from state government?

In other words, this complaint also is a red herring. Unfortunately, this style typifies Kennedy’s governing approach, where no matter how flawed are some of his money-saving policy suggestions he ignores the evidence against them and continues to plug them endlessly, but with those that don’t come from him he relentlessly criticizes them even as the facts don’t support his contentions.

This does not mean he doesn’t come up with some good ideas or valid complaints, once the wheat is separated from the chaff. It does mean one must wonder whether the motivation behind them comes less from a genuine search for good policy than more from a desire to create a perception that advances his political ambitions.