The proposed $1.2 billion University Medical Center in New Orleans may be built with the proceeds from bonds supported solely by hospital revenue if federal mortgage insurance is denied for the debt.

Louisiana is seeking federal enhancement through the Federal Housing Administration for $400 million of revenue bonds to help build the 424-room replacement for the flood-damaged Old Charity Hospital.

Bobby Yarborough, chairman of the University Medical Center Management Corp., said the enhancement provided by the FHA guarantee does not appear likely, but is not essential to the financing for the project.

“I don’t want to say 'absolutely not’ on winning federal government backing for the project,” Yarborough said. “But I think we’ll be going to the … bond market.”

Yarborough was appointed by Gov. Bobby Jindal to the board that will finance the 424-bed facility. It will be operated by Louisiana State University as an academic hospital.

Commissioner of administration Paul Rainwater said in March that work would proceed on the hospital project while the loan guarantee was being reviewed by the FHA.

If the enhancement is denied, he said, the state would go ahead with construction with available resources.

Republican U.S. Sen. David Vitter in April urged the FHA to reject the request. He called the proposal “irresponsible” and “imprudent.”

A report from Kaufman Hall last week on the project’s finances said the New Orleans market would not support a facility with more than 400 beds by 2020. If the project remains on schedule, it would open in 2015.

The report said the new hospital could require an annual subsidy from the state of $100 million by fiscal 2019.

The Jindal administration would consider a smaller hospital, as suggested by the study, according to spokesman Kyle Plotkin.

“The focus should be on establishing a world-class academic medical center that provides first-rate care, trains the medical workforce of the future, and attracts more research funding to Louisiana,” Plotkin said.

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