DALLAS — The board overseeing the construction of a $1.1 billion Louisiana state hospital in New Orleans unanimously adopted a revised no-debt financial plan on Thursday.
The original plan included $407 million of revenue bonds to build the $1.2 billion, 424-bed University Medical Center that would replace flood-damaged Old Charity Hospital.
The newly adopted plan developed by Verité Healthcare Consulting LLC keeps the facility at the same size but reduces the cost to $1.088 billion.
However, the project will not be debt free. An ambulatory treatment center, which is expected to cost $99.6 million, will be built by the LSU Physicians Foundation with bond proceeds and then leased to UMC.
“There will be debt issued by an LSU-affiliated entity,” Verité president Keith Hearle said at the meeting of the University Medical Center Management Corp.
In addition to the treatment center, the plan includes third-party financing of $25 million for equipment purchases and $32.2 million for a parking garage.
The state will finance its portion of the project with $300.7 million of proceeds from capital outlay bonds approved in 2006 and $630.7 million in federal reimbursements for damage to Old Charity and its equipment.
The UMC board asked Verité in June to revise the facility’s business plan after Gov. Bobby Jindal called for a new, no-debt financial package.
Jindal said then that he wanted the new plan to explore “all options to maximize the benefits and outcomes of the project.” He said Thursday he supported the revised proposal.
“I’m excited about the new business plan,” the Republican governor said. “You’ve got a business plan that will not require additional state subsidies, compared to what we are spending today on the existing Charity Hospital.”
The complex will require $44.1 million of state subsidies when it opens in 2015, the plan predicts, and an annual subsidy of $60 million by 2020. The interim public hospital in New Orleans received a $57.4 million state subsidy in fiscal 2011.
Hearle said a wide range of options were considered, including a 250-bed facility, a 484-bed hospital, redeveloping Charity Hospital, and a small academic research hospital.
“After careful analysis and review, the board and its advisors have concluded that the planned project presents the greatest benefits and the fewest risks to the state,” Verité said in the proposal outlined to the UMC board.
The hospital’s financial plan will be reviewed Sept. 16 by the Joint Legislative Committee on the Budget. Approval by the committee is required before the state can begin actual construction.
Bobby Yarborough, chairman of the University Medical Center board, said if the committee approves the plan on Friday, work at the site in New Orleans’s lower Mid-City area could begin as early as Saturday morning.
“The joint budget committee certainly has the prerogative to vote when they feel like they should vote,” Yarborough said. “But at the same time we’re hopeful that they will vote next Friday on this project.”
The hospital will be part of the Louisiana State University system. UMC will be the primary teaching hospital of the LSU Health Sciences Center in New Orleans, Tulane University School of Medicine, and other area medical schools.