DALLAS — Louisiana’s string of 10 state charity hospitals is imperiled by a drastic cut in federal assistance to the Medicaid program that serves 1.2 million low income and disabled residents.

Health and Hospitals Secretary Bruce Greenstein and interim LSU System president Williams Jenkins told lawmakers Thursday that an unexpected early end to a temporary increase in federal funding to the state’s health care system will cost Louisiana $860 million from the programs $7.7 billion budget in fiscal 2013.

“The LSU Health System as it is run today is unsustainable,” Greenstein said during the six-hour joint session of the House Appropriations and Health and Welfare committees. “If it’s cuts that force modernization, if it’s the 21st century that forces modernization, it’s what’s in front of us. LSU is going to look differently.”

A provision in the latest highway funding bill moved the demise of the temporary reimbursement program to Oct. 1 from the original October 2013 termination.

Gov. Bobby Jindal said the reduced funding will require $522.5 million in immediate cuts from the state Medicaid program, including $320 million from the hospitals operated by the LSU system. The reduction amounts to 25% of the hospital system’s fiscal 2013 budget. The cuts include $193 million of state general fund revenue and $358 million of federal aid.

Jenkins denied rumors that only two of the LSU-run hospitals would remain open after the budget cuts. State law gives that authority to the Legislature, he noted.

“We can’t close hospitals on our own accord,” Jenkins said. “The Legislature has to be involved with us as we attack that challenge.” He said LSU was not aware the funding situation was dire until Jindal announced the budget cuts on July 13.

“It’s difficult to come up with a final plan of how we’re going to deal with these challenges,” Jennkins said.

LSU Board vice chairman Bobby Yarborough said he hopes to keep most of the hospitals open but gave no promises.

“We are looking at all options and it depends on how successful we are on some of the options,” he said. “It’s an option if some of the other options don’t work out like we hope them to.”

Yarborough said it is too early in the process to discuss specifics of the plans for dealing with the problem. A detailed plan would not be available until late August, he said. The Joint Legislative Budget Committee will meet on Monday.

Greenstein said more cuts would be needed in August if the state does not end the year with a $93 million surplus. It could be matched with federal funds to compensate for the remaining $338 million needed to fill the $860 million shortfall.

The 2012 Legislature passed a law directing State Treasurer John Kennedy to put up to $205 million of a surplus into the state’s rainy-day fund. Commissioner of Administration Paul Rainwater said the law does not impede the use of surplus dollars to support Medicaid.

“We feel confident that any savings will be available to mitigate the health care reductions as the provision applies only to dollars recognized before the end of the fiscal year,” Rainwater said.

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