New Hospital St Bernard Parish

St. Bernard Parish to break ground on new hospital Friday;
some funding questions remain, though

Published: Thursday, July 15, 2010

Chris Kirkham, The Times-Picayune

As St. Bernard Parish government officials mark a long-awaited ground-breaking on the parish’s first post-Hurricane Katrina hospital Friday morning, questions over long-term financing still loom large while the initial phases of construction move forward.

The biggest unknown is how the proposed 40-bed hospital will pay for operating costs once construction is complete. The Parish Council will likely soon consider whether to put a dedicated tax on the November ballot that would help cover an estimated $16 million in operating shortfalls during the first few years the hospital is open.

Within days, contractors are expected to move forward with preliminary site work on the donated land across from the Chalmette Battlefield, including filling the area with sand in order to begin laying a foundation. That process will take at least two months, and full construction is not expected to begin until fall.

St. Bernard Parish has been without a hospital since Chalmette Medical Center was swamped by Katrina’s waters in 2005, and the lack of a full-service health care institution has been seen as a critical roadblock to the parish’s recovery.

St. Bernard’s hospital board recommended this week that the council consider putting an 8-mill tax, lasting 10 years, on a ballot for residents to vote on later this year. Board Chairman Wayne Landry said the tax would pay down a $16 million dollar loan to pay salaries and other expenses up front and convince investors that the hospital will be financially viable once construction is complete – estimated now in early 2012.

“We’re going to have to do something to demonstrate to the investors that we have something to operate it,” said Landry, also chairman of the Parish Council. “The easiest, or the most financially sound or viable way to do that would be to pass the 8-mill ad valorem tax.”

To get a sense of how that would fit into St. Bernard’s tax structure, the library millage is set at 3.59 mills, the Lake Borgne Basin Levee District at 11.10 mills and the school district at 45.84 mills.

The $69 million hospital and medical office building project is being built with several pots of state and federal money, each with differing requirements and separate agencies that oversee the distribution. All of the money is nailed down except an anticipated $10 million that will come from a U.S. Treasury tax credit program that requires outside investors to partner with the parish.

Phil Wendling, a project executive with the Hammes Company, the parish’s hospital program manager, said some potential investors have brought up questions about the operating costs.

“When we open the doors and start seeing patients, no matter what reimbursement is there at that time – if it’s through insurance, Medicaid, Medicare – at best you’re six, nine months, maybe a year from being reimbursed for those expenses,” Wendling said. “So somehow you’ve got to have money to pay your employees, your supplies, pay your bills, do everything to keep the hospital in operation, even though you’ve got no money coming in.”
Parish Councilman Ray Lauga said he is hopeful for the future of health care in the parish, but is critical that the project has increased in cost over the past year, with the addition of the medical office building.

“I just think it’s gotten too big. It’s overbuilt, and it’s wishful thinking,” Lauga said. “I would have preferred them to scale down the size of the project so it doesn’t go back to the citizens of St. Bernard.”

The hospital board has already chosen a contractor, The Lemoine Company, for the initial site work phase of the project. In order to put the major construction phase of the project out to bid, the hospital board must still present the state with a written agreement among all the different investors for the project.

Landry said the combination of funding mechanisms for the project and different oversight agencies naturally require more approvals at every phase.
“We’re setting a path that, because of the funds we’re using, has basically not been done before in Louisiana,” he said. “It’s requiring an enormous amount of work, an enormous amount of effort and an enormous amount of information.”

Chris Kirkham can be reached at ckirkham@timespicayune.com or 504.826.3321

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