LSU Health Announces Strategies to Meet Budget Reduction

BATON ROUGE – LSU System officials on Friday announced $329 million in spending measures designed to address the cuts made to the state's Medicaid budget.

Earlier this month, the state's disaster-recovery Federal Medical Assistance Percentage (FMAP) rate was cut from 71.92 percent to a projected 65.51 percent, the lowest reimbursement rate Louisiana has had in more than 25 years.

For Fiscal Year 2013, the decrease equates to a total impact of approximately $859.2 million, which equates to approximately $287.1 million in state general funds (SGF). Of that, the LSU Health System is responsible for eliminating $126.9 million SGF from its budget, which amounts to a total reduction of $329.2 million when federal funds are considered.

LSU developed a series of immediate steps to offset the reductions with the ongoing cooperation of the Louisiana Department of Health and Hospitals (DHH) and Division of Administration. The steps are designed to preserve the state's safety-net public hospitals while protecting residency-training programs threatened by budget cuts.

Robert “Bobby” Yarborough, chairman-elect of the LSU Board of Supervisors, said, “This is our opportunity to improve operations of the LSU Health System while strengthening its mission of expertly training and educating Louisiana's next generation of health care professionals. We are committed to providing health care and medical education at the best possible value for Louisiana taxpayers.”

Under the plan, spending reductions will be made at each of the LSU System's 10 hospitals while keeping the hospitals and emergency rooms open, preserving residency-training programs not only at LSU hospitals but also for Tulane University and Ochsner Hospital residents at the Leonard Chabert Medical Center in Houma.

Dr. William Jenkins, President of the Louisiana State University System, said, “A tremendous amount of thought and deliberation went into this plan, and I am confident it prepares our system for the realities of a rapidly changing health care economy. We have a duty to ensure that LSU stands on steady ground and that our programs are sustainable. This plan does that, and we must now focus on strengthening our educational mission and exploring new models to continue to provide Louisiana citizens with reliable, accessible, first-rate health care.”

Interim revenue-generating options being explored would mitigate some of the reductions.  These include using up to $40 million in operating cash to generate federal matching funds as a way to offset cutbacks.  

In addition, at LSU Health Shreveport, LSU will redirect funds associated with the management of grants and contracts as well as funds from physician practice revenues dedicated to research and in physician practice revenues devoted to support the medical school.  

Alternatives are being developed by the LSU Health Care Services Division, such as certified public expenditures (CPEs), Upper Payment Limit (UPL) arrangements and partnerships that ensure maintenance of graduate medical education in the LSU System. The board of supervisors previously identified as its priority maintaining services at health care facilities, especially graduate medical education programs.

Jenkins pointed out that the measures allow LSU to use public funds to draw down and retain federal matching funds, but offset only 80 percent of the budget reduction, resulting in the elimination of some services. Jenkins added that although the steps are not renewable, the financial measures could provide time for the development of the kind of fundamental change sought by LSU Board while at the same time preserving critical services and graduate medical education programs.  

Long-term approaches being explored include the sale or lease of LSU hospitals to private entities and other public-private partnerships.


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