Nashville, Tenn.-based HCA wants the ability to buy East Jefferson General Hospital and West Jefferson Medical Center at the end of a 30-year lease, according to a portion of the firm's proposal obtained Thursday by NOLA.com | The Times-Picayune. The contractual language that HCA is proposing appears to include its lease payments to the parish and capital expenditures in...
Nashville, Tenn.-based HCA wants the ability to buy East Jefferson General Hospital and West Jefferson Medical Center at the end of a 30-year lease, according to a portion of the firm's proposal obtained Thursday by NOLA.com | The Times-Picayune.
The contractual language that HCA is proposing appears to include its lease payments to the parish and capital expenditures in the ultimate purchase price, effectively treating these investments as credits against the hospitals' value. Parish Council members and hospital attorneys are seeking clarity as to whether HCA is seeking unilateral ability to acquire the hospitals. The proposed language appears to provide HCA with depreciation reimbursements if it does not exercise the purchase option.
"If HCA is looking to get paid back, that's going to make it real simple," said Council Chairman Chris Roberts.
Roberts spoke Thursday afternoon after HCA, along with two competitors, publicly stated their cases for the first time in a special Parish Council meeting. Roberts noted on Thursday evening that an acquisition without a voter referendum violates the parish charter, although consultant Kaufman Hall's solicitation to potential lease suitors in July 2012 specifically permitted such a transaction. The solicitation does not mention the charter clause.
Hospital highlights: Comparing proposals for Jefferson Parish
| Ochsner | Louisiana Children's Medical Center |
HCA | |
| Capital investment | $1.35 billion (30 years) |
$490 million (15 years) |
$1.35 billion (30 years) |
| Proceeds to Jefferson Parish | $372 million | $524 million | NA |
| Jobs created | 500 | 300 | NA |
| Headquarters | Jefferson | New Orleans | Nashville |
Read the presentations:
Roberts exposed the controversial provisions in questions after HCA's presentation, and the firm's executives replied that HCA expects to pay $285.5 million in property taxes over a 30-year lease if selected.
An HCA spokesman on Thursday afternoon did not respond to requests for information on what HCA is proposing.
In their presentations, executives with HCA, Ochsner Health System and Louisiana Children's Medical Center sought to emphasize perceived strengths and address potential weaknesses.
Ochsner, which presented first, claimed it is uniquely capable of positioning Jefferson Parish as the home of the largest health care organization between Houston and Atlanta. Ochsner's offer of a $372 million net payment to the parish is acknowledged to be the lowest, and CEO Warner Thomas opened his presentation stating the decision "shouldn't be made around money." Thomas then cited a variety of quality measures, including a stronger-than-average "risk adjusted mortality index" score, which measures quality in terms of patient mortality.
Thomas also sought to allay concerns that federal regulators might block a deal because of antitrust concerns. This includes a pledge of a $10 million direct payment to the parish if the government blocks the transaction.
The next suitor, Louisiana Children's Medical Center, highlighted what representatives described as a strong cultural affiliation with the New Orleans region. Executives then focused extensively on its recent financial performance to combat any concerns that it "can't run a good hospital," as Children's Chief Financial Officer Greg Feirn put it. For example, Children's posted a near-20 percent increase in operating revenue last year, according to slides it presented.
Closing out the meeting, HCA Senior Vice President of Development Joe Sowell said 5 percent margin increases typically result when their firm takes over nonprofit hospitals. The "next frontier" for HCA is to "manage our clinical initiatives and clinical agenda just as aggressively as we have historically our financial agenda," Sowell said. The firm's 20 million patient encounters accumulates vast clinical data, Sowell said, and this "data warehouse" gives HCA an edge in tying services to outcomes.
Council members met in closed session for about three hours following the presentations. Questions pertaining to HCA's proposed end-of-lease provisions "drew a lot of discussion," Roberts said afterward. Also discussed was the idea of the hospitals parting ways with separate suitors, a possibility that Roberts said is dim.
Roberts said the hospital boards will meet within a week, although it's not clear if they will provide council members with a recommendation. The council will vote on a suitor within three days of the hospital board deliberation, Roberts said, and is prepared to act without a recommendation if necessary. That's a departure from previous statements by Roberts and Councilman-at-Large Elton Lagasse that the council needs an informed recommendation upon which to vote.