BATON ROUGE, Louisiana — Gov. Bobby Jindal's push to privatize all but one of the LSU-run hospitals across south Louisiana will cost the state an estimated $42 million to make the layoffs, according to an audit released Monday.
The review by Legislative Auditor Daryl Purpera's office said privatization of six hospitals in the LSU Health Care Services Division would require an estimated $29 million for termination pay and another $13 million for unemployment payments.
LSU told auditors that Jindal's Division of Administration and the Department of Health and Hospitals know of the projected costs and "are working to find a mechanism to fund them."
More than 5,200 workers at the hospitals and associated clinics face layoffs because of privatization. They can reapply for their jobs with the private hospital operators that are assuming management of the facilities and the health services.
Some of the workers are expected to retire early, rather than reapply, boosting other costs for the university system.
The audit said because of the outsourcing deals, LSU estimated it will have to pay $26 million annually for new retiree health insurance and life insurance premiums.
"HCSD will have limited future income to pay health benefits legacy cost, and the termination and unemployment cost was not planned for in the 2013 budget," the audit said.
A spokesman for the Division of Administration, Michael DiResto, said the administration will use lease payments to pay for part of the termination costs and would seek supplemental funding for the rest. He disagreed with estimates of the unemployment costs, which were provided to auditors by LSU.
He said the new retiree health costs were expected to be covered through the DHH budget for next year.
Jindal pitched the LSU hospital privatization as a way to cut costs, to continue safety net health care across the state for the poor and uninsured, and to improve graduate medical training programs.
The Republican governor sought the change in hospital management after Louisiana received a cut to the federal Medicaid financing on which the LSU hospitals rely. Jindal levied the bulk of the cut on the public hospitals rather than on private Medicaid providers. His administration projects hefty savings in the 2013-14 budget year because of the privatization.
Administration leaders said savings will come from the private hospital operators making lease payments that will be used to draw down federal matching dollars through the Medicaid program. DiResto said the hospital deals also will cut down on annual state government retirement costs.
Lawmakers have questioned whether the privatization efforts are moving too quickly, with too few details and incorrect savings assumptions. The Jindal administration hasn't sought legislative approval for the arrangements, which have been buoyed by an attorney general's opinion that the Legislature doesn't need to sign off on the deals.
Only three of the privatization contracts are complete — in New Orleans and Lafayette, where private hospital operators are taking over LSU hospital management on June 24, and in Baton Rouge, where the LSU hospital was shuttered last month, with most of its services transferred to a private hospital in the city.
Deals for the Houma and Lake Charles hospitals are being crafted, while no privatization arrangement has been announced for the facility in Bogalusa.
The audit does not look at the three LSU hospitals in north and central Louisiana, which are run separately from the Health Care Services Division.
Jindal also wants to turn over management of those hospitals to private facilities, which likely would lead to similar costs as those discussed in the audit for HCSD.