Reactions to late night federal “Dear John” letter

Because the letter rejecting the Jindal administration’s financing plan for the privatization of the state’s charity hospital came out so late Friday, many experts were unable to comment in time.

The U.S. Centers for Medicare and Medicaid Services, called CMS, questioned the Jindal administration’s use of $260.8 million in advance lease payments to prop up the deals involving six public hospitals, including those in New Orleans, Lafayette and Houma. If the decision stands, the state would have to find another way to cover those payments.

Prepared statements via emails came pouring in over Friday night and early Saturday. Much of the commentary was of the “told you so” variety.

For instance, state Rep. Robert Johnson, D-Marksville and possible candidate for the U.S. Congress this fall, wrote that Gov. Bobby “Jindal’s reckless pursuit of using federal Medicaid funds in an ill-conceived scheme to privatize state-run hospitals has backfired and now the people of Louisiana will pay a dear price.”

Democratic candidate for governor in 2015, state Rep. John Bel Edwards, of Amite, released a statement Saturday: “The lack of transparency and oversight in this process, from the unanimous approval of the LSU Board of Supervisors of privatization contracts containing dozens of blank pages, to the legislature’s absurd refusal to look at the contracts and examine the proposals has been disturbing and irresponsible, to say the least.”

Edwards, who heads the House Democratic Caucus, stated that the Legislature is going to have to account for the setback as it considers the bills that would enact the state’s proposed spending plan for the fiscal year that begins July 1. Hundreds of millions of dollars are at issue and the impact could extend to every state service, including higher education, K-12 education, public safety and transportation infrastructure, Edwards wrote.

“A large portion of higher education funding for this fiscal year depends on $70 million dollars of hospital lease payments that Treasury has not yet received,” state Treasurer John N. Kennedy said Saturday. “If we are not going to receive these payments, the state has a very serious problem THIS fiscal year.”

Don Gregory, health care advisor to the Public Affairs Research Council of Louisiana, issued a statement late Friday saying the decision could blow a huge hole, possibly as large as $440 million, in future state government budgets.

“While we hope, for the sake of the citizens of Louisiana and to avoid an extraordinary budget impact, that the administration is successful with its appeal, state leaders at this point should face the reality of this potential shortfall and start planning how we will deal with this problem in our current development of the fiscal year 2015 state budget in the Legislature,” Gregory wrote.

Jindal’s aides also have been busy responding to a late night federal decision.

Early Saturday, one of the governor’s aides sent an email insisting that media coverage use the bureaucratic language, such as “deferral notice,” rather than plain English, which is that the federal government is considering disallowing the state’s spending.

Another of Jindal’s aides emailed late Friday saying that CMS officials indicated their willingness to meet with DHH officials this week and “that critical point … needs to be included” in any articles about the decision.

In the letter released late Friday, Marilyn Tavenner, the administrator of the Centers for Medicare and Medicaid Services, wrote that federal authorities had trouble with how “specific financial transactions” are organized. CMS is the federal agency that oversees the Medicaid program, which helps pay healthcare providers for services rendered to the poor and uninsured. The federal government picks up about 60 percent of the tab, while state government pays the rest.

In the move towards privatizing the operations of the state’s charity hospitals, the private hospital companies lease the LSU facilities and agree to pay a larger proportion of their long-term leases with the state upfront. This results in paying lesser amounts towards the end of the contracts.

Tavenner wrote the arrangement amounted to Louisiana trying to get extra federal Medicaid dollars to repay private managers for those advanced lease payments, which is not allowed under federal rules.

Jindal said in a prepared statement that the state would appeal the CMS decision.

In a December 2013 report, PAR wrote: “It is not known how federal Medicaid regulators will view these rental payments with regard to providing matching federal funds. The Centers for Medicare and Medicaid Services (CMS) will have to determine whether the payments violate regulations prohibiting donations from providers. There is potential for a significant disallowance in Louisiana’s Medicaid program if CMS determines any portion of these rental payments is not permitted.”

In early April, CMS had warned the state that it might disallow $307 million in Medicaid reimbursement the state had billed as associated with the private hospital deals. CMS urged the state to make financial adjustments accordingly.

Kliebert said the state has provided “clear evidence that the leases were based on independent, third party appraisals.”

Even after the April letter deferring $307 million in Medicaid payments, Kliebert and other state health officials remained optimistic that the plans would be approved by CMS.