Governor Bobby Jindal’s plan to build a massive new teaching hospital in Mid-City was dealt a massive blow on Thursday, June 9th, when U.S. Sen. David Vitter, La. Treasurer John Kennedy and La. House Speaker Jim Tucker, in a joint press release, urged the purchase of the Tulane-HCA Facility as a substitute for the Megacharity Plan.

This comes on the heals of criticisms that the state would have to subsidize the new academic medical center with over $100 million in general fund appropriations each year, on top of spending $1.2 billion to construct the 424-bed complex.

The recent claims by prominent legislators that the new medical center could not be self supporting comes months too late for the residents of the 19th-century, predominantly African-American Mid-City neighborhood who saw their homes plowed under. And, it is just two weeks too late for the historic Deutsches Haus which was demolished to make way for the new hospital.

In a letter to the governor, his three fellow Republicans write, “We are very concerned that the Charity Hospital rebuilding plan as currently proposed (424 beds, $1.2 billion) will saddle the state with large new capital and operating costs for years to come. As you know, Kaufman Hall, a nationally recognized firm of healthcare experts that your own hospital board hired to study the issue, has issued a report which validates and underscores these concerns.”

The Senator, Treasurer, and Speaker propose a two-step plan for the new teaching hospital. First, the State of Louisiana would buy the Tulane-HCA Hospital and merge it into the proposed new University Medical Center (UMC) facility in downtown New Orleans. This would provide UMC with 354 beds (235 downtown in the same immediate area as planned, 119 at the Lakeside Hos­pital site in Jefferson Parish) for an estimated cost of below $80 million. (This figure is based on industry estimates with no input from Tulane-HCA.) This would be an acquisition of not just hospital beds but a $400 million net revenue stream and a robust private-pay book of business.

Second, the state would build a new downtown facility with approximately 250 beds within part of the shell of the historic Charity building or, if that were considered impractical, as brand new construction at the new UMC site. The three maintain that this could be done at a fraction of the cost of the proposed $1.2 billion project, keeping the total cost of the new UMC at or below the approximately $800 million the state has in hand. Those functions and specialties which would most benefit from newly designed and built facilities would be assigned to this portion of the new UMC.

Merged together, steps one and two would create a hospital with a capacity of 600 beds. This would create even greater ca­pacity for specialties and particularly sophisticated practices than the proposed 424-bed facility. It would also address the concern that the current plan is building even more beds for an already overbuilt New Orleans market because there would be no net increase of beds in the market.

According to Tucker, Vitter, and Kennedy, in terms of cost, this approach would: 1) avoid any need for the state to borrow an additional $400 million at high interest rates; and 2) avoid or greatly minimize annual operating subsidies from the state.

They also contend that since the UMC’s core mission the training of LSU and Tulane medical students, the merged hospital should staff through professional service contracts with the LSU and Tulane medical faculty in the same proportion as the two groups have staffed Charity and Tulane-HCA hospitals in recent years—giving Tulane a larger voice in the new Academic Med Center than LSU proposed for its rival/partner in the new facility.

Lastly, the three Republicans, in a overt critique of LSU, propose that the new UMC should hire a private hospital management firm with no ties to either LSU or Tulane to run the hospital.

As Vitter, Tucker, and Kennedy explain, “One of that firm’s top mandates would be to streamline operations and cut the historically very high management costs of previous University/Charity hospitals under state and LSU management. (According to the LSU-commissioned Alvarez & Marsal report, Charity’s cost per patient per day was $5,031 compared to $2,794 for similarly-sized teaching hospitals.)”

“Far from delaying the project,” they continued in the open letter to Bobby Jindal, “this alternative plan can clearly be executed far more quickly than the current proposal of building a new mega-hospital from scratch. Buying the current Tulane-HCA facility as part of the plan not only acquires 354 beds at relatively low cost per bed, it also acquires a net revenue stream of $400 million per year and a robust, already existing private-pay book of business. It helps ensure that the new hospital is managed efficiently versus continuing the state and LSU’s very inefficient management.”

The letter is suspiciously silent on what to do with the land already cleared for the new hospital. Under state law, land expropriated for a specific public use, if not used for that purpose, must be returned to the original owners.

The catch is, part of it is being used—in a very impractical way, if the new UMC is not built.

The confusion over the hospital complex revolves around the fact that it is being constructed in two parts, one that is the state’s responsibility and one that is paid for by the Feds.

On the 70-acre tract, stretching from Claiborne Ave to Rocheblave, half was put aside for a new Veterans Administration hospital, and half for a successor to Charity. The joint suburban style campus was to serve as the nucleus of an Academic Medical Complex that along with the new Cancer Research center would build a biotech corridor that could compete with M.D. Anderson or the Mayo Clinic.

LSU Medical head Fred Cerise and fellow senior LSU managers insisted that the VA portion of the joint hospital be build on the lot between S. Galvez and Roche­blave, instead of the track along Claiborne Ave.

The Foundation for Historical Louisiana’s Sandra Stokes told The Louisiana Weekly over a year ago that this was a “recipe for disaster” if the state did not choose to fund the LSU UMC on the other tract.

She noted to this newspaper that the V.A. hospital was paid for by the federal government, so it would be built. However, at the Jindal Administration’s insistence, it would be constructed over what was the most historically relevant part of the Mid-City neighborhood. If the LSU-UMC portion on the other side of S. Galvez was not constructed as well, though, the VA would be placed too far away from the teaching hospital to be an effective academic partner. “If you have to get in your car and drive to other buildings, it sort of defeats the purpose of a single medical campus.”

Stokes and her allies urged that the VA should rebuild on top of its existing hospital complex next to Big Charity. Failing that, LSU should have allowed the VA to occupy the S. Galvez to Claiborne tract. If the UMC were to be funded by the state, it could be built on the other tract.

This would have preserved most of the historic neighborhood for at least a couple of more years. Perhaps forever, if something like the Tucker/Vitter/Kennedy plan were to be adopted by the legislature. But, the advice was not headed. Earlier this year, the tract for the VA was cleared, chasing away hundreds of homeowners, some whose families had owned their homes since the late 1800s.

The Foundation for Historical Louisiana, of course, had also proposed a rehabilitation of Charity Hospital, similar to the Tucker/Vitter/Kennedy plan. (Their proposal can be found at the group’s website www.fhl.org)

It is now too late for those pre-dominantly African-American homeowners in Mid-City. Even if the three’s plan were to be adopted by the legislature, the new VA Complex would sit 20-30 blocks away from the UMC under the Tucker-et-al Plan.

Meanwhile, the properties in the Claiborne Ave. tract continue to be demolished, as the Deutsches Haus was half a month ago. This occurs just as the legislature, in the last two weeks of the current session, considers a budget that severely cuts overall health care spending. And, that is the crux of the current budgetary problem. There are fears by many House and Senate members that the Medicaid operating budgets that fund hospitals in their districts would face an ever greater ax if the new LSU-UMC is constructed according to plan.

According to an independent study by Kaufman Hall, the state would have to subsidize a hospital as large as the new LSU UMC with an additional $100 million. The terror in the minds of legislative appropriators is that the funds would have to come from already dwindling Medicaid budgets which fund other public hospitals throughout the state.

New Orleans’ gain would be their constituents’ loss, according to insiders who have spoken to The Louisiana Weekly.

State Senator Jack Donahue, Chairman of the recent Stream­lining Government commission, notes that the financial impracticality of the new UMC was brought up by his commission to the Administration over a year ago — prior to the demolitions.

In fact, Treasurer Kennedy’s concern, who sat on the commission, specifically, “was how to pay for the hospital.” According to Dona­hue, Kennedy brought up those concerns to Jindal’s staff and was ignored.

Vitter, the Senator revealed, told him of similar concerns over a year ago, and the fact that LSU officials refused to listen.

“It has to do, I say as a novice in the political game, with power in the state,” said the first term State Senator, but equally influential member of the Senate Finance Committee. Donahue noted that LSU, Jindal, and their allies decided that they wanted a new hospital. The details of how to pay for it were irrelevant.

The wisdom of borrowing a half of a billion dollars, on top of spending $729 million already in the bank, was never realistically examined, according to Donahue. Ripping down houses, at great cost, before the hospital was funded was never seriously reviewed. In short, no one actually had a plan that asked if building a hospital in Mid-City was either affordable for the state or practical for the populace.

“Their attitude was ‘Let’s just go out and build it, and we will think about how to pay for it later,” the Senator recounted, noting the attitudes of the Jindal/LSU advocates of the hospital.

They never considered another alternative such as “when facilities exist to do that already,” i.e., to reuse an existing hospital as a teaching center.

“Not enough thought has been given to what is the overall plan,” Donahue told the Weekly. “I met with Sen. Vitter last week, and I know he is upset about it…There is nobody talking about if this is the right idea, if this is the right time?”

In his private career, Donahue operates a highly successful commercial construction company. He explained, “I build hospitals. Hospitals generally cost a million dollars a bed.

An academic medical center might cost more, but $1.2 billion is too much.

When I look at the overall costs for the number of beds, it [the Jindal/LSU plan] just doesn’t add up to me.”

The $1.2 billion cost of the new hospital far exceeds comparable commercial construction prices for new hospitals. “That’s the problem with government moving and not having any idea what to do…making some recommendations and [saying] ‘we’ll figure how to pay for it later.’”

And, the people who were forced to sell their historic homes to the state, at a loss, to make way for a hospital complex that might never be built are the ones who pay the ultimate price.

This story originally published in the June 13, 2011 print edition of The Louisiana Weekly newspaper.