Louisiana Plan to Privatize Hospitals With Federal Funds Rejected by Federal Agency


A plan to use significant federal funds to privatize some of Louisiana’s state-run hospitals has been rejected by the federal Centers for Medicare and Medicaid Services (CMS), reports the Associated Press.

Gov. Bobby Jindal’s administration had made deals involving the privatization of the state-run hospitals, but the agency informed the state on Friday that the deals do not meet federal Medicaid guidelines.

The state did not wait on federal approval to shift the management of the hospitals, which are now operated by Louisiana State University in New Orleans, Lafayette, Houma, Lake Charles, Shreveport, and Monroe. The deals, which will cost the state a reported $1.1 billion this year, relied heavily on expected funds from the federal government, including the $260.8 million that has been rejected by CMS. 

In a letter to the Louisiana Department of Health and Human Services, CMS Administrator Marilyn Tavenner notes that the rejection was in regards to “specific financial transactions related to the Cooperative Endeavor Agreements (CEAs) and the associated Medicaid payments.” The letter states that the rejection was not due to “how Louisiana manages its charity care system.” 

The governor’s office released a statement calling the ruling “disappointing” and claiming that the agency had “no legal basis for this decision.” The Department of Health and Human Services has 60 days to appeal the ruling, which the governor’s office indicated it will. Kristy Nichols, the agency’s commissioner of administration, said Monday that despite the setback the plans to privatize the hospitals will move forward. 

Privatizing the hospitals is expected to result in the loss of 6,547 jobs over three years, according to a report by the Louisiana Legislative Auditor. 

CMS oversees the federal Medicaid program, which is utilized by one in every four residents of Louisiana. The federal government pays for 60 percent of the Medicaid costs in the state. Gov. Jindal and Louisiana Republicans have repeatedly rebuffed attempts to expand Medicaid coverage under the Affordable Care Act, which would extend coverage to an estimated 242,000 residents.

In April, the Senate Health and Welfare Committee blocked a bill that would have allowed Louisiana residents to vote on amending the state constitution to include a mandate on expanding Medicaid coverage.

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