DALLAS — A commission tasked with making Louisiana government more efficient voted Tuesday to seek another study on the state’s plans to build a $1.2 billion academic medical center in New Orleans.
The Commission on Streamlining Government voted 7 to 3 for an independent study of all options for replacing state-owned Charity Hospital with a new 462-bed facility that would be one of 10 state hospitals that provide indigent care and serve as centers for medical education in Louisiana.
The proposed facility would be the primary teaching center for medical students and post-graduate residents at Louisiana State University, Tulane University, and other New Orleans-area universities.
The Legislature has adopted 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 from federal grants to the state for community development, and approximately $400 million of bonds supported by the hospital’s future operating revenues.
The revenue debt would be issued under the bonding authority already granted to the LSU system. An operating agreement calls for the system to own the hospital and lease it to an independent body that would issue the revenue bonds.
Sen. Jack Donahue, R-Mandeville, who chairs the streamlining commission, favored the study, which he said should include an evaluation of the business and revenue projections used to develop the financial plan.
State Treasurer John Kennedy said the requested study should consider if the state should rehabilitate Charity Hospital, buy existing medical facilities in New Orleans, or go ahead with the proposed new facility.
“I don’t think we ought to fear the facts,” he said. “I don’t see how anybody can be against getting the facts. What worries me is that if we borrow this amount of money and we are wrong, it will take all the state’s available capital outlay money for five years to pay for this facility.”
“We will not let those bonds default,” Kennedy added. “That would kill our bond ratings, and we cannot let that happen.”
The commission approved the study resolution over the objections of Commissioner of Administration Angèle Davis, one of the three no votes on the measure.
Davis said five studies have been conducted by the state, all of which found that building a new complex would be cheaper than rehabilitating Charity Hospital, which opened in 1939. “I do not agree with the recommendation of another study on the site,” she said.
Before the vote, Jack Davis, a trustee with the National Trust for Historic Preservation, said the state should completely gut the old Charity structure and build a new hospital inside the existing shell.
“That would cut the cost by 34%, and provide a much more compact site that would be more efficient to build and more efficient to operate,” Davis said.
However, assistant commissioner of administration Jerry Jones said the rehabilitation could cost more, not less, in part because the existing foundation of the building would not support the required construction.
“You can take any high-rise building in downtown New Orleans and fit a hospital in it. That’s true,” Jones said. “But is that the right thing to do?”
Jones said the current plan calls for the new LSU complex to be completed in 2013 and occupied in 2014.