An arbitration panel’s ruling that FEMA must pay Louisiana $474.7 million for hurricane damage to Charity Hospital paves the way for a replacement facility and boosts the state’s efforts to increase the physician workforce.

 

For decades, the old Charity Hospital drew young physicians for training and helped keep them in Louisiana to practice, said Dr. Larry Hollier, chancellor of LSU Health Sciences Center New Orleans. But after Hurricane Katrina destroyed the facility in 2005, the number of med school graduates who stayed and trained in Louisiana fell by 27 percent over the next three years.

 

“Since LSU trains 70 percent of the doctors that ultimately practice in the state, we need a magnet to get them here,” Hollier said. “This (new) hospital will serve as that. You need an academic medical center, and it needs to be one that is financially sustainable.”

 

Training more physicians is critical, Hollier said, particularly since the country faces a shortage of 100,000 doctors by 2020.

 

Dr. Fred Cerise, LSU vice president for health affairs and medical education, said in addition to re-establishing the health science center as a major academic center, the ruling will mean re-establishing healthcare services in the area.

 

Right now, those services are being provided at an interim hospital, he said.

 

The arbitration panel’s ruling also vindicates a lot of people, from the state Office of Facility Planning to LSU, Cerise said.

 

“There were a lot of doubters, a lot of critics claiming that the state was just trying to rip off the federal government, or that LSU was just dreaming, that none of this stuff was real,” Cerise said.

 

The Federal Emergency Management Agency argued, for years, that Charity Hospital suffered only $124 million in damage. But the three-member arbitration panel took less than 10 days to rule in Louisiana’s favor. A New Orleans Times-Picayune editorial described the award as “a gigantic step forward” for the city’s recovery.

 

Hollier said the new Charity Hospital and the U.S. Department of Veterans Affairs hospital will be a major economic boon to New Orleans and the region.   

 

Combined, the two facilities represent more than $2 billion worth of construction – Charity is $1.2 billion of the total – and will generate an estimated 6,000 construction jobs and 17,000 other jobs to support those workers, Hollier said.

 

Cerise said the state has been working on the hospital design and is already purchasing property for the facility. By the end of the year, site work could be underway, he said.

 

Still, a number of hurdles remain, including creating an LSU-affiliated not-for-profit that will govern the new hospital and borrowing the $400 million-plus needed to complete the facility, Cerise said. There are a lot of technical and legal steps that must be taken to establish the affiliate.

 

A similar process was used for the LSU football stadium, Cerise said, and a number of medical schools around the country have used comparable models.

 

“You just have to have some more flexibility, and so it’s a very common model of public medical schools, affiliating with private not-for-profits to do this work,” Cerise said.

 

The not-for-profit, once established, will have to demonstrate a workable business plan to the financial markets in order to borrow the $400 million, Cerise said. However, financial advisers have said that having $800 million worth of equity – the state Legislature has already appropriated $300 million for the hospital – is a very good head start.

 

Cerise said he is confident the plan will come together.

 

Hollier said that once built, the new Charity Hospital could help turn New Orleans into a multidisciplinary hub known for its excellence in neurosciences, transplantation, cardiovascular disease treatment and healthcare disparities research.

 

The University of Alabama at Birmingham helped transform a coal mining- and steel mill-based city to one centered on the medical and biotech industries, he said. M.D. Anderson began as a county hospital but is now a nationally and internationally recognized cancer treatment center.

 

Something similar could happen in New Orleans.

 

“We need to have a facility that is of modern design, with state-of-the-art equipment, so that we can attract teachers and researchers to help build this enterprise,” Hollier said.

 

The LSU System has just chosen a vendor for the electronic health records that will connect its two Health Science Centers and 10 public hospitals, Hollier said. The EHR will really facilitate the system’s ability to do research.

 

Louisiana residents have some of the highest incidences of diabetes, hypertension, heart failure, and other chronic diseases in the country, Hollier said. The public hospital system manages those types of diseases very well, but few people realize that.

 

Most people think the charity system plays a role in Louisiana’s abysmal ranking in Medicare-based health report cards, Hollier said. The state has some of the highest Medicare utilization rates and costs but lies at or near the bottom in terms of quality.

 

The reality is that only 5 percent of the charity system’s patients are enrolled in Medicare, he said. If the quality care indicators are applied to the uninsured population, Louisiana would rank in the Top 10 in virtually every category.

 

The charity system has the ability to put patients with chronic diseases in strict management protocols and really improve their outcomes, Hollier said. The EHR will give the charity system the ability to demonstrate this on a statewide scale.