With resounding voter approval this weekend for their purchase of East Jefferson General Hospital, LCMC Health officials now face the task of turning around the fortunes of a venerable Metairie institution that had slid towards financial insolvency in a shifting New Orleans health care market.
For years, the 420-bed east bank public hospital has won praise for the quality of its care while at the same time earning demerits for its grim financial situation. While other area hospitals joined larger networks, at East Jefferson losses crept into the millions of dollars per year and its bondholders threatened foreclosure if a private operator or purchaser couldn’t be found.
Into that grim scenario stepped New Orleans-based nonprofit hospital operator LCMC Health, armed with an influx of cash and a strategic playbook it has used in other similar deals, such as those for New Orleans East Hospital, University Medical Center and West Jefferson Medical Center. The latter is Jefferson Parish’s other public hospital, which LCMC leased in a deal that closed in 2015.
LCMC also operates Children’s Hospital and Touro Infirmary.
The continued expansion has helped LCMC and Chief Executive Greg Feirn compete with Ochsner Health System and its ever-growing network of doctors and hospitals. The purchase of East Jefferson, which could close as soon as Sept. 30, would help extend LCMC’s strategy of allowing its community hospitals to provide general care while also serving as a source of patients for its specialists.
And while operational changes are likely to take place behind the scenes, executives on Monday sought to assure patients and residents that there will be no disruption in the quality of care.
“They will still see the same team that they have seen before,” EJGH Chief Executive Gerald Parton said of patients who come to the hospital. “We have worked hard with insurance companies to make sure there is no change in coverage.”
Similar efforts are underway to create a smooth transition for employees, he said. LCMC has pledged to retain the hospital’s staff. Employees won’t have to fill out applications to work in the new company; just a single form giving LCMC permission to access their records will be needed, Parton said.
For Jefferson Parish, closing the sale allows officials to remove a financial albatross. In return for the hospital, the terms of the deal require LCMC Health to kick in $90 million that will be combined with EJGH’s current reserves, which included $81 million in cash and short-term investments at the end of last year. The total will be used to pay off $135 million in bonds and will also go towards funding $50 million in pension obligations.
LCMC Health has also promised to spend $100 million in capital improvements over the next five years.
Once the deal is officially closed, LCMC officials will begin meeting in earnest with EJGH’s medical staff and officers about what projects should be done first, said Feirn. Some of the money will be spent on technology upgrades and long-deferred maintenance. LCMC leaders will also sit down with officials from EJGH to figure out where the remainder can be best spent, he said.
The goal will be to maintain a high quality of care while finding ways to trim costs that weren’t available to EJGH as a standalone hospital. For instance, Parton said in February that moving one of EJGH’s information systems to LCMC’s subscription would save several million dollars per year.
If there was any doubt about the public’s support of the plan, that was erased on Saturday. East bank voters in Jefferson Parish approved it by a historic margin, with “no” votes adding up to around 1,500, or 5% of the nearly 31,000 votes cast.
Given that there had been no significant organized opposition, voter approval of the deal was not a surprise. But the margin was, said Feirn.
“That had me smiling from ear to ear,” he said. “To me, the 95% said we have a lot of confidence in the team at East Jefferson and at LCMC Health.”
By a huge margin, voters on the east bank of Jefferson Parish approved the long-sought sale of East Jefferson General Hospital, a venerable Me…
Jefferson Parish Councilwoman Jennifer Van Vrancken, whose district includes EJGH and who has been one of the deal’s main champions, said the large margin was a gratifying sight.
“This was truly a mandate,” she said.
The vote is the culmination of years of effort by parish government to divest itself of the hospital. It was first offered as part of a package deal with West Jefferson Medical Center nearly a decade ago.
In 2015, LCMC closed a deal to lease only the west bank hospital for around $500 million in rent and capital improvements. That left EJGH struggling in a market crowded with larger competitors. In 2018, talks with Nashville-based hospital operator HCA Healthcare Inc. broke down. Soon after, LCMC stepped in and began talks that were kept quiet until earlier this year, when the hospital’s board approved the deal.