DALLAS — A proposal to scrap plans for a $1.2 billion state hospital in New Orleans in favor of a smaller, less-expensive project was outlined Thursday at a joint news conference by U.S. Sen. David Vitter, Louisiana Treasurer John Kennedy, and House Speaker Jim Tucker.

The trio said in a letter to Gov. Bobby Jindal that their plan would eliminate the need to issue $400 million of high-interest, low-rated debt to build the proposed 424-bed facility.

The plan calls for construction of a 250-bed facility within the shell of flood-damaged Old Charity Hospital or on the site of the proposed University Medical Center.

To supplement the new, smaller hospital, the state would acquire Tulane Medical Center for $80 million. That would provide 235 beds near the proposed UMC site, they said, and another 119 beds in nearby Jefferson Parish.

The entire substitute plan could be accomplished with the money the state has on hand, Kennedy said, without the estimated $407 million of revenue debt expected to be issued for the project under the current financial plan.

“This rids us of the need to take $400 million of junk bonds to a market that is choppy at best,” the long-time treasurer said. “That is a fool’s mission.”

Tucker, who had earlier supported the larger hospital, said members of the House are concerned over the likelihood that the new facility would require ever-increasing financial support from the state.

“The focus should be on medical education,” Tucker said. “This is not about us owning a hospital or operating a behemoth.”

The $800 million to $900 million available to the state for the project includes $474.8 million of federal reimbursements for damage to Old Charity’s structure, with another $175 million expected for hospital equipment damaged in the flood resulting from Hurricane Katrina in 2005.

Commissioner of Administration Paul Rainwater said the state cannot use the federal reimbursements to acquire an existing hospital. That money is dedicated to a new 424-bed facility, he said, and work will continue on that effort.

Vitter, Kennedy, and Tucker asked for a meeting soon with the governor, but Jindal spokesman Kyle Plotkin was noncommittal.

“We appreciate their ideas and look forward to meeting with them after the legislative session,” he said. The current session will end June 23.

The University Medical Center is currently proposed as a 424-bed academic hospital that would be part of the Louisiana State University system. It would provide training for medical students at LSU, Tulane University, and other schools in the area.

The facility would be financed and built by the University Medical Center Management Corp.

The UMC Corp. is seeking enhancement for the revenue debt through a program of the Federal Home Administration.

Last week, UMC chairman Bobby Yarborough said if the loan guarantee is not provided, the board would issue debt that could be rated below investment grade.

The letter to Jindal asked the governor to commission a study by Kaufman Hall & Associates of the substitute plan within 30 days.

A recent study by Kaufman Hall said the New Orleans medical market could not support a 400-bed hospital, which would require an estimated annual state subsidy of almost $100 million by its fifth year of operations.

In testimony to the Senate Finance Committee on Thursday, Dr. Larry Hollier, chancellor of the LSU Health Sciences Center in New Orleans, said the new proposal was “ridiculous.”

Dr. Fred Cerise, LSU’s vice president for health affairs, said he had not been contacted about the new proposal, which he called “a stunt” and “irresponsible.” The larger facility is needed to provide the specialized training of an academic hospital, according to Cerise.

Vitter said the new proposal had been developed without consultations or negotiations with LSU, Jindal, or other parties involved in the New Orleans hospital project.

“This is a more fiscally responsible plan that meets all the needs of an academic hospital,” Vitter said.

“There’s been too much talk already,” Kennedy said. “It is time to get something going.”

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