Jindal Wants More Details About Bond Plan for New LSU Hospital

DALLAS - Louisiana Gov. Bobby Jindal said a more detailed business plan is needed for a proposed state hospital complex in New Orleans that would replace storm-damaged Charity Hospital.

Jindal said he supports the proposal by Louisiana State University for a 424-bed hospital in the Mid-City area. However, he told reporters on Monday that the current business plan is too vague about how the hospital would generate sufficient revenue for debt service on revenue bonds that would finance much of the $1.2 billion project.

"It would be impossible to sell those bonds necessary to complement the available federal and state dollars without a detailed business plan that would be acceptable to the investors that would have to buy the bonds," Jindal said at the news conference. "The plan needs to show where the revenues are coming from, how the hospital will be operated, and how this hospital will be self-sufficient."

The Legislature's Joint Budget Committee last year approved a financing plan for the LSU hospital that includes $492 million from the Federal Emergency Management Agency for damages to Charity Hospital from Hurricane Katrina, $300 million of proceeds from state general obligation bonds that support the capital outlay budget, and $400 million of debt supported by the hospital's future operating revenues.

Jindal said that while the new facility would continue to receive state and federal funding for indigent and elderly care, the university needs to show how it would attract sufficient paying customers to support the revenue bonds.

"It would be to LSU's benefit to present a more detailed business plan," he said. "The only way they will be able to go to the bond market is with a much more detailed plan than they have today."

Louisiana Treasurer John Kennedy said he agreed with Jindal on the need for a more detailed business plan. Kennedy supports a bill that would prohibit the state from acquiring land for the LSU hospital project until the Joint Budget Committee approves the financing

Kennedy said the current plan assumes the new hospital will have double the number of paying customers that Charity served, without specifying how that will occur. In addition, he said, changes in federal health care policy could have significant effects on the LSU hospital.

"Congress and President Obama are talking about spending $1 trillion over the next 10 years to provide coverage to uninsured patients," the treasurer said. "If these patients have insurance and can go to any hospital they want to, how can this plan assume this hospital will attract 80% of them? The current plan is a little weak on some of these issues."

The new facility would be one of the 10 state hospitals that provide indigent care and serve as centers for medical education in Louisiana. It would be the primary teaching center for medical students and post-graduate residents at LSU, Tulane University, and other New Orleans-area universities.

FEMA has raised its estimate of the reimbursable damages to 70-year-old Charity from the original $23 million to the latest offer of $150 million, some $350 million less than the state is seeking.

The Louisiana Office of Facility Planning and Control and LSU have appealed the FEMA assessment. The appeal maintains that damage to Charity from flooding caused by Katrina exceeds 50% of the replacement cost of the building, making it eligible for full replacement costs of $491.8 million.

The university said if FEMA does not provide the full reimbursement, the hospital project would not be viable.

For reprint and licensing requests for this article, click here.
Healthcare industry
MORE FROM BOND BUYER