Growing Pains

John Commins, for HealthLeaders Magazine , September 10, 2008
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Where in the nation would organizations vie for the chance to build a hospital that will likely lose money? Only in New Orleans.

Most provider organizations wouldn't think of spending the enormous time and resources required to build a new hospital if they knew that facility would lose money in the short term and faced shaky prospects beyond that. But such is the reality for healthcare organizations in post-Hurricane Katrina New Orleans, where hospitals are still struggling to strike a balance between crafting a financially viable strategy for themselves and reaching out to aid the region's broader recovery.

Both New Orleans-based Ochsner Health System and Baton Rouge-based Franciscan Missionaries of Our Lady Health System are attempting to build the first hospital in suburban St. Bernard Parish since Katrina swept through southeast Louisiana three years ago. But the two organizations say for the most part their motives for building the facility are not financial ones—largely out of necessity.

"Because of the significant number of indigent patients who no longer have a safety-net hospital, the financial numbers don't show that a hospital in St. Bernard Parish could be sustainable financially," says Redfield Bryan, MD, a retired urologist and Franciscan's special consultant on the St. Bernard hospital project. "We have taken on this project from a mission point of view and not from a business point of view. It is the greatest local disaster in the history of this country. We are 100 miles north of there in Baton Rouge, and we suffered no consequences, so we feel like we have an obligation to help."

Three-quarters of St. Bernard Parish is surrounded by water, and its western edge borders New Orleans. When Katrina barreled into the Mississippi Delta on Aug. 29, 2005, it destroyed the privately owned Chalmette Medical Center, leaving the parish without a hospital. Since then, the parish's 15,500 remaining residents (down from 67,200 residents before Katrina—a drop of 77%, according to the U.S. Census Bureau) have been served by a makeshift clinic in an abandoned Wal-Mart parking lot that is operated by the five-hospital.

Our Lady Health System and skeleton-staffed by five physicians, a part-time specialist, and a handful of nurses.

Franciscan has proposed building a 40-bed hospital, which would cost between $60 million and $65 million. The proposal has the option, however, to add a second floor with an additional 20 beds for future use, which would bring the total cost to an estimated $70 million to $75 million. The plan would use $25 million from federal community block grant money, $17 million in loans, and $17 million in state grants—$3 million of which would be used to build a medical office building. An additional $9 million to $14 million is still needed.

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