HCA charges Jeff councilman with bias in hospital bids
11th November 2013 · 0 Comments
By Christopher Tidmore
The battle over the management of East and West Jefferson Hospitals escalated last week as Hospital Corp. of America executive Mel Lagarde accused Parish Council Chairman Chris Roberts of “appalling” conduct. HCA is in a battle with Ochsner and Children’s Hospital to win the management contracts of both hospitals.
Members of the West Jefferson hospital board have reportedly favored the Children’s bid, and according to insiders, Roberts has also spoken sympathetically, despite the fact the Jeff Council had yet to decide on the final awarding of the contract.
Lagarde, HCA’s MidAmerica Division president wrote to Roberts in an October 25 letter, “[Y]ou have gone well beyond expressing an opinion and are attempting to discredit our organization and our employees, partners and medical staffs.”
Lagarde’s argued that Councilman Roberts had violated a non-disclosure, releasing a proprietary draft letter of intent to the news media, and, throughout the process, had ducked meetings with company representatives to discuss HCA’s proposal, despite the fact that five other members of the Jefferson Council had agreed to the consultations with HCA.
“The manner in which you’ve attacked our corporate integrity, endeavored to undermine the bid process by leaking our Letter of Intent, and refused to consider our hospital proposal objectively is appalling,” Lagarde wrote, later saying that Hospital Corp. attorneys will meet with Inspector General David McClintock’s office to discuss the purported leak. Originally, HCA’s lease proposal included a purchase option, which would require a public referendum under parish and state laws.
HCA later amended its proposal, and Roberts claims no leak ever occurred. The Councilman sent the letter over to Jefferson Parish District Attorney Paul Connick for review.
Regardless, the furor of the debate rests in many of his colleagues favoring the HCA bid on financial grounds. Roberts and many West Bankers have reportedly leaned in favor of Children’s Hospital, so much so that an independent recommendation suggested splitting the contract. HCA would run East Jefferson, and Children’s-Touro West Jefferson.
Both parties seek the complete contract, and HCA’s spokesman Kristian Sonnier argued the superiority of her firm’s bid. “First of all, we believe strongly that these decisions are not just about the money,” she explained in an interview with The Louisiana Weekly. “We place a very high value on our long tradition of providing high quality, patient centered health care. Highlights of our industry leading Quality scores as well HCA’s commitment to the local community which we have been a part of for nearly 40 years can be found by selecting from the topics listed on our website: www.hcanola.com.”
The essence of the debate rests in HCA deep pockets. As Sonnier admitted, “In terms of financial benefits to Jefferson Parish, the cash proceed that would be generated by HCA’s pre-paid lease and the taxes we would pay on investments made in the community over the term of the lease exceeds the next nearest bidder’s offer by more than $300,000,000. Specifically, our pre-paid lease is $132,000,000 higher than the next bidder, and the new property taxes we anticipate paying over the life of the lease, which no other bidder will be paying, are estimated at a present value of $183,000,000.”
“To provide the citizens, businesses and leadership of Jefferson Parish with a sense of confidence that HCA will live up to all of their commitments, HCA has proposed the creation of a multi-level governing board structure, with each board being comprised of no less than half of appointments made by the Jefferson Parish Council and always having the board chair being appointed by the Council. Further, we propose the creation of a special compliance committee of the health system board that will be made up entirely of Jefferson Parish Council appointees and tasked with the responsibility of auditing HCA’s actions to insure they are abiding by their lease and capital commitments. Findings from their audit will be shared with the public in a report posted at a frequency to be decided by the committee (quarterly, bi-annually or annually) on a website.”
Of course, HCA’s major weakness is that it is a national firm, whereas its competitors are closely associated with the metro New Orleans area. Sonnier turned that criticism on its head, though. When asked if she believe it mattered if the company winning the hospital bids was locally based, she replied, “We think it does, which is why we have had our Louisiana and Mississippi Division headquarters located in New Orleans since the mid-1990s, and have committed to relocate the office along with its staff of nearly 40 executives and support staff to Jefferson Parish with a year of completing the East and West Jefferson hospital deal.”
Her firm has been unfairly painted as an outsider, she maintained. “HCA has been operating hospitals in Jefferson Parish since the early 1970s when we began running Lakeside Women’s Hospital (now Tulane-Lakeside Hospital), and has operated hospitals in Orleans Parish (Tulane), St. Tammany Parish (Lakeview Regional Medical Center), the Acadiana Region (Women’s & Children’s Hospital of Lafayette and The Regional Medical Center of Acadiana), Central Louisiana (Rapides Regional Medical Center in Alexandria, LA) and Gulfport, MS (Garden Park Medical Center) for decades.”
“All of our hospitals have local management teams tasked with developing and executing on strategies to insure their hospitals are providing high-quality care, exceptional service, efficient access to care, and are a financially strong and equitable employer. The local hospital teams are supported by the Division office as well as the vast resources available throughout the HCA enterprise.”
Of course, Ochsner and Children’s argue that having other hospital companies, based nearby, creates a quality of care, by simple reasoning of economy of scale and availability. Sonnier countered, “HCA’s long term track record of volume growth, job growth and overall financial strength in this region and in regions across the nation is a testament to the concept that a well-organized system of care, including hospitals and a strategically placed network of clinics and outpatient facilities to provide easy access for residents of the communities served by the hospitals, all supported by a sophisticated operating platform of shared service centers that provide purchasing, accounting, billing, collecting, regulatory, compliance and other critical support functions is the best operating model for healthcare.”
“HCA has perfected this model in markets of similar size and make-up to metro New Orleans. And unlike some of our competitors who don’t have hospitals in Jefferson Parish at all or who are actively moving key healthcare services out of their Jefferson Parish based hospitals to their Orleans Parish based hospital, HCA, along with its partner Tulane, is in the process of moving its entire Hospital for Children to our Lakeside campus in Metairie creating the only hospital dedicated to caring for Women and Children in Jefferson Parish.”
“This move is expected to add hundreds of high paying jobs to Jefferson Parish. The estimated economic impact of new jobs, capital investment, spending on operations, revenues and taxes tied to this move is nearly $250 million over just the first five years of operation (or nearly $1.5 billion when you consider a 30 year impact period).”
One key element of the HCA offer is a higher pledge of infrastructure investment in the East and West Jefferson hospitals. “HCA has committed to spend no less than $450,000,000 in capital expenditures over the first 10 years of the lease. How the $450,000,000.00 is spent will be directed by the local HCA Division President, Mel Lagarde, based on input from the local Hospital Boards.”
“To jump-start the implementation of this capital expenditure commitment, during the first thirty days after closing, HCA will work with the East and West Jefferson Hospital Boards to develop a ‘spruce up’ budget for capital expenditures for the first year after closing to renovate and improve the East and West Jefferson Hospitals.”
For Orleanians, there have been questions of how the Jefferson bid would integrate with medical training and research in Orleans, specifically in the new medical corridor, with Tulane & LSU med centers, and UMC hospital facilities. Sonnier said not to worry, “In anticipation of a relationship with the Jefferson Parish Hospitals, HCA has worked with its partner, Tulane University and the Tulane University School of Medicine, to develop a detailed plan of how the new healthcare system we create in greater New Orleans, which will initially be comprised of West Jefferson Medical Center, East Jefferson General Hospital, Tulane Medical Center, Tulane-Lakeside Hospital for Women & Children, and Lakeview Regional Medical Center, would function in terms of teaching programs, service line strategies and allocation of capital resources throughout the market.”
“Those terms have been memorialized in a fully executed letter of intent which has allowed HCA to communicate to the Jefferson Parish Hospitals with confidence that potential conflicts of interest that could arise by the creation of a new health system comprised of East and West Jefferson hospitals, Lakeview Regional Medical Center and Tulane Medical Center have been addressed, and expectations have been established that will allow for a smooth integration of the hospitals and their medical staffs into a larger network.”
“Our understanding is that the existing relationship between the Tulane and LSU medical schools regarding teaching programs and research will remain unchanged, and agreements are in place between the schools regarding the go-forward relationship.
Concluding, Sonnier returned to the fundamental charge that Legarde had implied. She charged, “It strikes us that LCMC is not being subjected to the level of scrutiny being applied in the public arena to HCA’s proposal, capabilities and plans to make East and West Jefferson hospitals thrive. Why are LCMC’s supporters allowed to simply state that LCMC is the right choice for both hospitals because they are more local than HCA, are a not-for-profit healthcare provider and could be protected from financial challenges in the future by the State because they were selected to lease and operate the Interim LSU Hospital and new UMC, without being subjected to rigorous testing of those statements at a level consistent with what HCA is being held – which we agree is very appropriate because of the scale of this transaction?”
Similar questions have been dispatched to representatives of Ochsner and Children’s. No replies had come by the time this newspaper went to press. The Louisiana Weekly invites their perspectives.
This article originally published in the November 04, 2013 print edition of The Louisiana Weekly newspaper.