N.O.-area hospitals bleeding red ink, federal report says

By Bruce Alpert
Times Picayune
July 19, 2008

Execs hope Congress will reconsider cuts

WASHINGTON -- The five major New Orleans area hospitals lost a combined $386.8 million between 2005 and 2007, and still face major financial hurdles despite lower losses projected in 2008, according to a congressional report released Friday.

Some hospital executives said they hope the Government Accountability Office report will persuade Congress to approve a stalled $350 million package intended to help hospitals in Louisiana and Mississippi deal with continuing post-Katrina cash-flow problems. The five New Orleans area hospitals would combine to receive $135 million under the package.

The GAO said that operating losses for the five hospitals totaled $212.5 million in 2005 -- the year Katrina hit -- dropped to $28.7 million in 2006 when some of the hospitals were struggling to reopen; shot back up to $145.6 million in 2007 and are projected to be about $103 million in 2008.

It also said that the reduced losses projected for this year aren't a sign of improving financial health because four of the five hospitals reported a decline in assets, meaning they are using the assets to pay for operating costs.

"We've been living off our savings accounts, assets that we've saved over the years," said Lawrence Van Hoose, senior vice president of Ochsner Health Systems. "We can't continue to do that."

GAO broke down the losses for the five hospitals:

-- Tulane University Hospital and Clinic lost $42.6 million in 2007 and is projected to lose another $37.6 million in 2008;

-- Touro Infirmary lost $36.4 million in 2007 with a projected loss of $15 million in 2008;

-- West Jefferson Hospital lost $5.8 million in 2007, and is likely to lose $3.5 million in 2008;

-- East Jefferson Hospital lost $29.6 million in 2007 and projects a loss of $23.9 million this year;

-- Ochsner Health Systems lost $31.6 million in 2007 and is projected to lose $23 million in 2008.

The GAO said three of the five hospitals lost money in the year before Hurricane Katrina, but far less than they did after the hurricane.

The post-Katrina financial problems are caused, in part, by the higher salaries being paid key personnel because of the shortage of nurses and physicians, the GAO said.

The GAO report had been requested by the leaders of the House Energy and Commerce Committee after hospital administrators testified last year that they couldn't sustain their operating losses much longer.

The Senate included the hospital bailout package in an emergency war supplemental spending bill last month. But the funds were stripped out following negotiations between House leaders and the White House.

Sen. Mary Landrieu, D-La., and other Louisiana lawmakers have vowed to try to get the financing approved as part of another emergency spending bill Senate and House leaders hope to take up in September.

Dr. Robert Lynch, CEO of Tulane University Hospital and Clinic, said Tulane is trying to cut costs as best as possible, but the report shows that federal help is required if area hospitals are to meet the growing medical needs as more people return from the devastation of Katrina.

None of the hospitals will discuss what specific cutbacks might result if the federal financing is not forthcoming.