Analysis: New Orleans Public Hospital Still Faces Hurdles

The end is near for the long-running dispute between the state and the federal government over just how much Louisiana is due for Hurricane Katrina’s damage to Charity Hospital in New Orleans.

Too bad that’s not the last dispute needing resolution before a new $1.2 billion LSU public hospital can be built.

Gov. Bobby Jindal’s administration recently announced that a federal arbitration panel will make a final decision on what Louisiana will receive from the Federal Emergency Management Agency for damage to the now-closed hospital nicknamed “Big Charity.”

That starts a clock ticking and means a decision should come by early next year on whether Louisiana will receive the $150 million offered by FEMA, the $492 million sought by the state or something in between.

“The good news here is that there’s a very defined timeline, and so we do expect to get an answer on this claim,” said Fred Cerise, LSU vice chancellor for health affairs and medical education.

Now, if only all those other minefields were cleared, like questions about how the rest of the new hospital costs will be financed and disagreements among state officials about whether LSU should build a new hospital or gut and rebuild the existing one. The state also is grappling with landowners and preservationists over property it needs to buy for the new hospital.

Plus, if the arbitration panel doesn’t side with Louisiana officials on the $492 million and chooses a lesser figure, there’s the quandary about how to fill the rest of that gap.

“If we don’t get the money from FEMA, then we’re going to have step back and say, ‘OK, now what is the plan? What can we iron out?”‘ Cerise told a legislative budget panel last week.

The LSU-run Charity Hospital – which provided indigent care for the New Orleans area and was a main training hospital for Louisiana medical students – was flooded and shuttered by Katrina in 2005. The university opened a temporary replacement, called the Interim LSU Public Hospital, while pushing plans to build the new 424-bed teaching and research hospital.

LSU has the support of the governor for the new hospital, a critical piece of making sure it will be built. But a financing plan for the facility, which Cerise said would open in 2014, remains uncertain.

The state has set aside $300 million for the facility and wants $492 million from FEMA. LSU proposes to borrow the remaining $400 million by selling bonds that LSU officials said would be paid off with the hospital’s income from paying patients, though some critics question whether the hospital will generate enough money to cover the bond repayment.

State Treasurer John Kennedy is pushing for a renovated Big Charity in New Orleans, rather than construction of a new replacement facility, saying it would be cheaper to gut and rebuild. Other lawmakers have suggested that might be a better idea as well, despite arguments from the Jindal administration that the old hospital space is too outdated to house a state-of-the art facility and a renovation could cost more than a new hospital.

Lawmakers also have questioned whether the state can afford its share of the new hospital’s costs – which includes $225 million in state bond sales – amid the climate of budget shortfalls and deficits.

Rep. Bernard LeBas, D-Ville Platte, listed the state’s money woes, including a Medicaid shortfall, a multibillion dollar backlog in highway needs and outstanding debts owed to the federal government.

“From what I’m understanding and hearing other legislators say, no one’s against anything, but they just want to make sure we can afford it,” LeBas said.

So far, the disputes, unanswered questions and criticism haven’t derailed the hospital plans or ongoing work to make it a reality. The state is continuing with land acquisition, and LSU is working on a revised business plan. Cerise said the schedule remains on track.

“We are still on that timeline despite the issues that we’ve been grappling with,” he said.

The question is how long it can stay that way.