BATON ROUGE, La. — Louisiana will pay $5.4 million to the federal government to settle a debt tied to former Gov. Bobby Jindal’s privatization of the charity hospital system, far less than the $190 million federal officials originally said the state owed, under a settlement released Thursday.
The U.S. Centers for Medicare and Medicaid Services in 2014 ordered Louisiana to repay the money for pieces of the initial privatization deals that the Medicaid agency, known as CMS, rejected as improper.
Louisiana officials have been haggling over repayment terms ever since.
Gov. John Bel Edwards’ administration told The Associated Press a settlement had been reached that will have the state repaying $5.4 million during the current budget year. In addition, the state will receive slightly reduced hospital lease payments from the manager of the state-owned New Orleans charity hospital.
“This settlement to correct the prior administration’s mistake is being done with minimal impact to the state of Louisiana,” Edwards said in a statement.
Jindal privatized nine LSU-run hospitals and their clinics through no-bid contracts, with the earliest deal starting in April 2013. In most instances, the management company of a nearby hospital took over operations. Three contracts closed an LSU hospital — in Baton Rouge, Lake Charles and Pineville — and shifted its services to private hospitals.
The former governor said the contracts, estimated to cost nearly $1 billion this budget year, provide better health care for Louisiana’s poor and uninsured. But the Jindal administration didn’t first get federal approval for the arrangement before enacting the privatization deals, which rely heavily on federal Medicaid money.
That caused problems and led to the $190 million debt, called a “disallowance.”
CMS initially rejected financing plans for six of the deals. The Jindal administration rewrote the contracts in consultation with the federal Medicaid agency. But while federal Medicaid officials approved the rewritten arrangements, they had problems with “advance lease payments” the hospital managers paid upfront as part of their agreements with the state.
Jindal used the money to plug state budget holes in a state awash with financial problems. The Jindal administration described the advance payments as a sign the private companies were committed to the hospital management deals.
Federal officials said those payments appeared linked to higher Medicaid payments the private hospital operators received, reimbursement rates that were larger than what other private hospitals in Louisiana get for uninsured and Medicaid patient care. In 2014, CMS said the advances “are not usual and customary industry payment arrangements.”
CMS ordered Louisiana to repay $190 million in federal money it said was improperly tied to the advanced lease arrangement. Louisiana appealed the ruling and started negotiations with the federal Medicaid agency, trying to reach a settlement.
Under the terms of the four-page settlement, the Louisiana Department of Health acknowledges the state received some lease payments involving hospital facilities in Bogalusa, Lafayette, Lake Charles and New Orleans “in excess of fair market value” and will repay $5.4 million tied to that.
The Edwards administration also agreed to shrink the rental payments received for the New Orleans hospital facility by $1.2 million, adjusted annually for inflation over several years, to address concerns about the upfront lease payment made by the hospital manager. That will lessen the lease payments $12 million in total over the period, according to the health department.
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