Legislature raises questions on proposed LSU teaching hospital in New Orleans

Legislators weigh price tag for new LSU teaching hospital in New Orleans
by Jan Moller, The Times-Picayune
Thursday January 22, 2009, 10:03 PM

BATON ROUGE -- Members of a legislative budget committee grilled state officials Thursday about the financing for a proposed New Orleans teaching hospital and the decision to ignore potential alternatives that could prove less costly and less disruptive to existing neighborhoods.

It's unclear whether the seven hours of testimony will have any effect on the state's ongoing effort to build a replacement for Charity Hospital, as Gov. Bobby Jindal's administration has given no indication of backing away from its plan to build a $1.2 billion academic medical complex in lower Mid-City.

But the hearing by the House Appropriations Committee provided lawmakers with their most extensive look at a plan offered by the Foundation for Historical Louisiana that calls for gutting the old Charity Hospital building and refurbishing it into a first-rate teaching hospital.

Steve McDaniel, an architect with the New York firm RMJM Hillier, said the state could shave $283 million from its expected costs by doing a gut-rehab. That includes money saved by not having to acquire land, and more than $100 million in savings through federal and state tax credits that would not be available should the state build a new facility.

"The question isn't whether we want state-of-the-art care, but how we get it, " said Sandra Stokes, executive vice president of the historical foundation.

State facilities director Jerry Jones disputed the cost estimates, and said the preservationists' plan could actually prove more expensive than what the state is proposing. He said the gut-rehab plan does not account for the cost of medical equipment, parking, information technology and an ambulatory care building that the state included as part of its figures.

The preservationists found a receptive audience among legislators, some of whom appear to be growing increasingly concerned about the cost and timetable of building a new hospital and the prospect of uprooting existing homes and businesses. The state's plan calls for spending $54 million to buy hundreds of properties inside a 70-acre footprint bordered by Canal Street, South Rocheblave Street, Tulane Avenue and South Claiborne Avenue.

"It just doesn't make much sense to me to tear up this entire neighborhood, " said House Speaker Jim Tucker, R-Algiers. Tucker said the state already owns land along Tulane Avenue, west of Interstate 10, that could be put to a medical use without affecting private property owners.

Bobbi Rogers said she and her husband are among several neighborhood residents who received taxpayer-financed Road Home grants to rebuild properties that were destroyed by Hurricane Katrina, only to face the prospect of having them taken by the state.

"These are the people that make New Orleans work, " Rogers said.

But Pam Perkins, the general counsel for the state Division of Administration, said the vast majority of property owners in the area have indicated a willingness to sell their property. "They are very eager to get on with their lives, " Perkins said.

Tucker joined several legislators in questioning the financial underpinnings of the project.
State officials have $450 million committed, and are counting on FEMA recovery dollars and a future bond issue to cover the rest. But there is no guarantee that the federal dollars will be forthcoming, and the shaky credit markets have made it difficult for many large-scale projects to obtain financing.

"I am very leery about getting halfway pregnant in this process and not being able to complete it, " Tucker said.

There is also the matter of the state's constitutional limit on borrowing. The Jindal administration plans to structure the bond issue in a way that the money doesn't count against the cap. But there is no guarantee that the bonds could be issued without a state guarantee, and state Treasurer John Kennedy said taxpayers would likely be on the hook if the hospital can't pay back the bonds.

Dr. Fred Cerise, who oversees health-care services for Louisiana State University, said the state's plans to build adjacent to the new VA hospital would save $400 million over 25 years by allowing the two hospitals to share certain functions.
"I think we lose critical financial and clinical efficiencies" by not building next to the VA, Cerise said.

Rep. Kevin Pearson, R-Slidell, said the state could solve the proximity problem by building a Disney World-style rail system to shuttle doctors and medical students between the two facilities.

House Speaker Pro Tem Karen Carter Peterson, D-New Orleans, said LSU needs to do a better job of reaching out to Tulane University, Xavier University and other institutions that will be using the new hospital to train medical students and allied health workers.

"There needs to be a different level of engagement and commitment to other stakeholders, " Peterson said, adding that a failure to do so could result in a loss of support for the project from New Orleans legislators.
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