BATON ROUGE, Louisiana — The first three LSU hospital privatization deals appear to use up 94 percent of the funding Gov. Bobby Jindal's administration set aside for eight such arrangements, budget analysts told senators Friday.
The assessment of the Legislative Fiscal Office, a nonpartisan office that evaluates budget proposals for lawmakers, worried several members of the Senate Finance Committee who are combing through the $25 billion budget proposed for the 2013-14 fiscal year that begins July 1.
"I'm extremely uncomfortable," said Sen. Sherri Smith Buffington, R-Keithville, after hearing the financial analysis.
Jindal is seeking to privatize the operations of most LSU-run safety net hospitals that care for the poor and uninsured and that train many of Louisiana's medical students.
The governor's budget recommendations assumed eight of 10 LSU hospitals would be privatized by the end of 2014, and the House didn't make any changes to those assumptions in the budget proposal sent to the Senate.
Three contracts have been signed.
In New Orleans and Lafayette, private hospital operators will take over LSU hospital management on June 24. In Baton Rouge, the LSU hospital was shuttered last month, with most of its services transferred to a private hospital in the city.
Shawn Hotstream, an analyst with the Legislative Fiscal Office, told lawmakers that those three deals leave only 6 percent of financing for other privatization contracts as next year's budget currently stands.
He said the three contracts are projected to cost $589 million next year, out of $625 million allocated for all the privatization deals.
Department of Health and Hospitals Undersecretary Jerry Phillips said administration officials were aware of the budget gap and have found sources of available funding that could be used to draw down federal Medicaid money to fill it.
"We're still identifying areas that are potential matches. We haven't come to a firm number on that," Phillips said. He added, "I feel comfortable we've got some funds there."
Senators questioned whether the dollars could line up in time to make the deals work and whether the financing will be available year after year.
"The sustainability of these models is what's particularly concerning," said Sen. Norby Chabert, R-Houma.
Phillips said the health department has used similar funding models repeatedly in other years and believed they could work to pay for the hospital deals.
Analysts with the Legislative Fiscal Office also said $42 million in estimated layoff costs associated with the privatization deals haven't been covered in the budget proposal, and another $15 million in more layoff costs could still be looming.
"There's no funding source at this point that we can identify to cover a good portion of those expenses," Hotstream said.
Workers at LSU hospitals that will be turned over to private management will be laid off and can reapply for their jobs. The Jindal administration disagrees with some layoff cost estimates and says it will use hospital lease payments to pay for part of the termination costs.
DHH Interim Secretary Kathy Kliebert said the Jindal administration was working on "contingency plans" in case the privatization deals for the LSU hospitals don't happen on the timeline currently anticipated in next year's budget.
Kliebert outlined her own concerns with the House-backed version of the budget, saying proposed cuts lawmakers made to travel, supplies, contracts and planned Medicaid spending could reach $192 million when federal matching dollars are included.
She said the reductions could force the closure of a state psychiatric hospital in Pineville and close mental health beds at other state-run facilities. She said DHH could be left choosing between items like shuttering the medication program for adult Medicaid patients or eliminating home-based services for the elderly and disabled.
"None of these are options are ones that we would like to take," Kliebert said.
House Bill 1 can be found at http://www.legis.la.gov