POST KATRINA HEALTH CARE IN THE

NEW ORLEANS REGION: PROGRESS AND

CONTINUING CONCERNS—PART II

HEARING

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND

INVESTIGATIONS

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

AUGUST 1, 2007

Serial No. 110–62

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POST KATRINA HEALTH CARE IN THE

NEW ORLEANS REGION: PROGRESS AND

CONTINUING CONCERNS—PART II

HEARING

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND

INVESTIGATIONS

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

AUGUST 1, 2007

Serial No. 110–62

(

Printed for the use of the Committee on Energy and Commerce

energycommerce.house.gov

POST KATRINA HEALTH CARE IN THE NEW ORLEANS REGION: PROGRESS AND

CONTINUING CONCERNS—PART II

COMMITTEE ON ENERGY AND COMMERCE

JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, JR., New Jersey

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

DIANA DEGETTE, Colorado

Vice Chairman

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

JANE HARMAN, California

TOM ALLEN, Maine

JAN SCHAKOWSKY, Illinois

HILDA L. SOLIS, California

CHARLES A. GONZALEZ, Texas

JAY INSLEE, Washington

TAMMY BALDWIN, Wisconsin

MIKE ROSS, Arkansas

DARLENE HOOLEY, Oregon

ANTHONY D. WEINER, New York

JIM MATHESON, Utah

G.K. BUTTERFIELD, North Carolina

CHARLIE MELANCON, Louisiana

JOHN BARROW, Georgia

BARON P. HILL, Indiana

JOE BARTON, Texas

Ranking Member

RALPH M. HALL, Texas

J. DENNIS HASTERT, Illinois

FRED UPTON, Michigan

CLIFF STEARNS, Florida

NATHAN DEAL, Georgia

ED WHITFIELD, Kentucky

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

SUE WILKINS MYRICK, North Carolina

JOHN SULLIVAN, Oklahoma

TIM MURPHY, Pennsylvania

MICHAEL C. BURGESS, Texas

MARSHA BLACKBURN, Tennessee

PROFESSIONAL STAFF

DENNIS B. FITZGIBBONS, Chief of Staff

GREGG A. ROTHSCHILD, Chief Counsel

SHARON E. DAVIS, Chief Clerk

DAVID L. CAVICKE, Minority Staff Director

(II)

(III)

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

BART STUPAK, Michigan, Chairman

DIANA DeGETTE, Colorado

CHARLIE MELANCON, Louisiana

Vice Chairman

HENRY A. WAXMAN, California

GENE GREEN, Texas

MIKE DOYLE, Pennsylvania

JAN SCHAKOWSKY, Illinois

JAY INSLEE, Washington

JOHN D. DINGELL, Michigan (ex officio)

ED WHITFIELD, Kentucky

Ranking Member

GREG WALDEN, Oregon

MIKE FERGUSON, New Jersey

TIM MURPHY, Pennsylvania

MICHAEL C. BURGESS, Texas

MARSHA BLACKBURN, Tennessee

JOE BARTON, Texas (ex officio)

(V)

C O N T E N T S

Page

Hon. Bart Stupak, a Representative in Congress from the State of Michigan,

opening statement ................................................................................................ 1

Hon. Ed Whitfield, a Representative in Congress from the Commonwealth

of Kentucky, opening statement ......................................................................... 3

Hon. Charlie Melancon, a Representative in Congress from the State of Louisiana, opening statement ................................................................................... 4

Hon. Diana DeGette, a Representative in Congress from the State of Colorado, opening statement ...................................................................................... 7

Hon. Michael C. Burgess, a Representative in Congress from the State of

Texas, opening statement .................................................................................... 8

Hon. Marsha Blackburn, a Representative in Congress from the State of

Tennessee, opening statement ............................................................................ 9

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 9

Hon. Jan Schakowsky, a Representative in Congress from the State of Illinois, prepared statement ..................................................................................... 11

Hon. Joe Barton, a Representative in Congress from the State of Texas,

prepared statement .............................................................................................. 13

WITNESSES

Ray Nagin, mayor, city of New Orleans, New Orleans, LA ................................. 15

Prepared statement .......................................................................................... 18

Frederick P. Cerise, M.D., secretary, Louisiana Department of Health and

Hospitals ............................................................................................................... 35

Prepared statement .......................................................................................... 38

Elizabeth Richter, acting director, Center for Management, Centers for Medicare and Medicaid Services ................................................................................. 61

Prepared statement .......................................................................................... 63

Answers to submitted questions ...................................................................... 296

Robert L. Neary, executive-in-charge, Office of Construction and Facilities

Management, U.S. Department of Veterans Affairs ......................................... 75

Prepared statement .......................................................................................... 77

Julie Catellier, director, Southeast Louisiana Veterans Health Care System ... 85

Prepared statement .......................................................................................... 87

Clayton Williams, director, urban health initiatives, Louisiana Public Health

Institute ................................................................................................................ 91

Prepared statement .......................................................................................... 93

Kim M. Boyle, chairman, health care committee, Louisiana Recovery Authority .......................................................................................................................... 96

Prepared statement .......................................................................................... 99

Diane Rowland, executive vice president, Henry J. Kaiser Foundation; executive director, Kaiser Commission on Medicaid and the Uninsured, Washington, DC .................................................................................................................. 146

Prepared statement .......................................................................................... 148

Mark J. Peters, M.D., president and chief executive officer, East Jefferson

General Hospital, Metairie, LA ........................................................................... 166

Prepared statement .......................................................................................... 169

Leslie D. Hirsch, president and chief executive officer, Touro Infirmary, New

Orleans, LA ........................................................................................................... 179

Prepared statement .......................................................................................... 181

Patrick J. Quinlan, M.D., chief executive officer, Ochsner Health System,

New Orleans, LA .................................................................................................. 198

Prepared statement .......................................................................................... 201

Page

VI

Gary Muller, president and chief executive officer, West Jefferson Medical

Center, Marrero, LA ............................................................................................ 222

Prepared statement .......................................................................................... 224

Mel Lagarde, III, president and chief executive officer, Hospital Corporation

of America, Delta Division, New Orleans, LA ................................................... 226

Prepared statement .......................................................................................... 228

Larry Hollier, M.D., chancellor, LSU Sciences Center; dean, School of Medicine ........................................................................................................................ 240

Prepared statement .......................................................................................... 241

Alan Miller, M.D., interim senior vice president, health sciences, Tulane

University Health Sciences Center, New Orleans, LA ..................................... 244

Prepared statement .......................................................................................... 246

Gary Q. Peck, M.D., American Academy of Pediatrics ......................................... 260

Prepared statement .......................................................................................... 263

SUBMITTED MATERIAL

Michael O. Leavitt, Secretary, Department of Health and Human Services,

letter of March 21, 2007 to Messrs. Stupak and Whitfield .............................. 287

Department of Health and Human Services news release of May 24, 2007,

‘‘HHS Announces Additional $195 Million in Grants for Gulf Coast Region’’ 289

Leslie Eaton, the New York Times, July 24, 20007, ‘‘New Orleans Recovery

is Slowed by Closed Hospitals’’ ........................................................................... 291

Committee exhibit binder ....................................................................................... 305

(1)

POST KATRINA HEALTH CARE IN THE NEW

ORLEANS REGION: PROGRESS AND

CONTINUING CONCERNS—PART II

WEDNESDAY, AUGUST 1, 2007

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,

COMMITTEE ON ENERGY AND COMMERCE,

Washington, DC.

The subcommittee met, pursuant to call, at 9:30 a.m., in room

2123 of the Rayburn House Office Building, Hon. Bart Stupak

(chairman) presiding.

Members present: Representatives DeGette, Melancon, Green,

Schakowsky, Whitfield, Walden, Burgess, and Blackburn.

Also present: Representative Jefferson, Delegate Christensen.

Staff present: Chris Knauer, Kristine Blackwood, Scott Schloegel,

John Sopko, Angie Davis, Kyle Chapman, Alan Slobodin, Peter

Spencer, and Garrett Golding.

OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. STUPAK. This meeting will come to order. Today we have a

hearing on Post Katrina Health Care in the New Orleans Region:

Progress and Continuing Concerns, Part II. This hearing, on the

eve of the second anniversary of Hurricane Katrina landfall, is a

follow-up to the subcommittee’s March 13 hearing, which examined

the immediate health care needs of citizens in the New Orleans region. Our hearing will touch on issues involving not just the immediate health care needs of the region but also some of the long-term

plans that Federal and State officials have for rebuilding the large

hospitals in New Orleans that were lost because of Hurricane

Katrina. The Nation has much to learn from the people of New Orleans about the long and difficult road to full recovery after a major

disaster. Katrina brought us the unprecedented experience of having a major American city health care system shatter overnight.

Surviving the disaster and its immediate aftermath, while difficult

enough, now appears less daunting than regaining a fully functioning and well-balanced health care infrastructure for the region.

Fortunately, hospital workers no longer have to pump IVs and

heart machines by hand to keep patients alive in a darkened hospital.

But the area’s health care system remains vulnerable and overwhelmed and much work remains to be done. Since our hearing in

March some progress has been made in the four Katrina affected

2

parishes known as region 1. Following our March hearing Health

and Human Services Secretary Leavitt released $100 million in

Deficit Reduction Act funds for public and not-for-profit clinics that

provide primary care to low income and uninsured regions of region

1, uninsured residents of region 1. This targeted infusion of funds

will help restore and expand access to outpatient primary care including medical and mental health services, substance abuse treatment, oral health care, and optomic health care. HHS also provided

an additional $35 million to Louisiana for workforce development

and retention and an additional $26 million direct funding to providers at acute hospitals, psychiatric hospitals, skilled nursing facilities, and community mental health facilities.

The subcommittee is still not clear as to exactly how these funds

will be distributed, and we look forward to flushing that issue out

in today’s questions. While we have had some improvements since

our March hearing there are still serious challenges facing local,

State, and Federal public health officials. A similar degree of focus

and effort needs to go towards stabilizing the graduate medical

education GME programs in New Orleans. The whole State of Louisiana relies on GME assistance for developing of its future health

care workforce. Louisiana State University historically trains 75

percent of all health care professionals in the State through its

medical school in downtown New Orleans.

Tulane University’s School of Medicine, also headquartered in

downtown New Orleans, trains much of the balance of the health

care workers for Louisiana. The Federal and State funds that support medical training are funneled through teaching hospitals like

LSU’s Big Charity and several other hospitals destroyed by

Katrina. Without their principal teaching hospital to provide the

necessary case concentration needed for accreditation, LSU and

Tulane have had to close some of their medical specialty training

programs.

At the same time, because of the cumbersome manner in which

Medicare reimburses hospitals for hosting medical residents at

their facility, the medical schools have had to enter into torturous

and expensive negotiations with other hospitals so that residents

may continue their training. Meanwhile, although host hospitals

receive relief from Medicare’s 3-year rolling average rule in the

first year after the hurricane that relief of the 3-year rolling average expired in 2006 causing reimbursement shortages. Until LSU

can build a new training hospital these other hospitals should be

able to host medical residents without incurring a financial penalty.

I again urge the Secretary to engage academic and public health

officials in the State to develop a fair way to insure that medical

training can continue in the region at an adequate level. Likewise,

I urge Secretary Leavitt to meet with the representatives from the

local private hospitals who will testify today. Hospitals in the four

Katrina-affected parishes report that they are incurring substantial

increased costs of doing business that continue to disable the system and limit patient access to reliable health care. Hospital representatives will tell us of the financial pressures they face due to

labor costs driven up by serious shortages of nursing and other personnel.

3

I am concerned that this labor shortage may have multiple weakening effects on an already fragile system. For instance, LSU has

reported that it is difficult to open additional hospital beds at its

rehabilitative university hospital facility due to lack of nurses. This

in turn increases the burden on private hospitals and independent

providers who are already treating unprecedented numbers of uninsured since Big Charity’s closure. These challenges deserve the

attention and leadership from our public health officials, and I

hope the Secretary will lead efforts to address structural imbalance

in the health care economy in the New Orleans region.

Finally, we have seen plans to build two of New Orleans’ most

important facilities, LSU’s Academic Medical Center and the VA

Hospital, mired in emotional and political debates. I believe the

community in the New Orleans area needs as much clarity and

transparency with respect to decisions being made regarding these

two hospitals as soon as possible. It is difficult enough for low income and uninsured members of the community and veterans in

the region to obtain convenient and consistent hospital care without these critical facilities up and running. Their wait should not

be made harder by unnecessary delays and backroom politics.

In closing, I would like to thank the Republican members and

the staff for their continued bipartisan approach to this investigation. I would also like to mention the leadership of my vice chairman of this subcommittee, Mr. Melancon, for his tireless effort to

insure that rebuilding the health care system of New Orleans remains a priority for this Congress. You have my personal assurance that this subcommittee will continue to monitor the progress

and push wherever necessary to see the region’s health care needs

are met. That concludes my opening statement. I next turn to my

friend, the ranking member of the subcommittee, Mr. Whitfield,

from Kentucky for an opening statement, please.

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

Mr. WHITFIELD. Chairman Stupak, thanks very much. All of us

are quite excited about this third hearing on health care needs and

the situation in New Orleans and the surrounding area as a result

of the devastation of Katrina. I remember last March when we had

this hearing it was some 18 months after the storm, and hundreds

of millions of dollars had been sent to the region and at that time

there was still a lot of gridlock and stagnation. I remember I

walked away from that hearing with the impression that there had

been so much focus by different advocates on what reforms needed

to take place in health care that the immediate needs were sort of

placed on the back burner. I think we have 15 witnesses, and we

genuinely appreciate all of you for being here because you are the

ones involved in the trenches trying to address these problems. I

know that people are always skeptical and scared when the Congress comes forth and says what can we do to help you, but that

is really why we have these hearings for you all to give us some

idea of how we can we be helpful and what can we do.

And I know after Chairman Stupak’s March hearing, as he said,

we were quite excited that Secretary Leavitt came forward and did

4

release about $160 million to help strengthen community health

centers and primary care facilities as well as to support health provider recruitment and retention and to aid the hospital’s financial

situation. It is my understanding that we will hear this morning

that there have been policy developments toward improved coordination of future care delivery, and most of the key State and regional players have developed a common vision for long-term rebuilding, which should help expedite the recovery and will encourage more health professionals to return to the region.

And by all accounts this is welcome news, positive news, and we

are excited about that. But we also are quite concerned about these

stories and about how the hospitals are facing dire financial needs

and have continuing significant losses and then the stability and

medical educational situation and the challenges faced by private

practice physicians and the overall shortage of health care providers. So we want to be sure that the Federal Government, the Department of Health and Human Services, and the Congress is responsive. And as Chairman Stupak said, this is and has been a totally bipartisan effort because all of us want to do everything we

can to help improve the health delivery system in New Orleans.

And once again, I want to thank all of you for being here. As I

said, you are the ones in the trenches. You are the ones facing

every day problems. Constituents come to you with their complaints, and we look forward to hearing your testimony and hopefully can help move us down the road to solving this problem and

having a more effective health care delivery system. And I yield

back the balance of my time.

Mr. STUPAK. I thank the gentleman. Mr. Melancon for opening

statement, please.

OPENING STATEMENT OF HON. CHARLIE MELANCON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA

Mr. MELANCON. Thank you, Mr. Chairman. We are now on the

eve of the second anniversary of Hurricane Katrina. Nearly 2 years

later we find ourselves in this room with much work still ahead.

This committee made a commitment that it would continue to examine the collapse of the health care system in the greater New

Orleans region, and this is the next installment towards that effort.

As Chairman Stupak, Chairman Dingell, and previous chairman,

Mr. Whitfield, said before: this body will work hard to show the

people in the Katrina affected area by insuring that this government move things forward and see to it that the relevant Federal

agencies continue to provide the necessary relief. This hearing is

part of that process.

The testimony at our March 13 hearing on this topic revealed the

landscape with citizens of the New Orleans region struggling to use

a health care system comparable to what one might find in a developing country. Those without insurance were forced to wait in long

lines at city sponsored health care fairs or volunteer clinics just to

see a doctor and dentist. Health care workers told committee staff

of families sleeping in cars outside the clinics to insure placement

on a waiting list. Examples such as a diabetic being able to access

even a few days worth of insulin were reported regularly. The comVerDate 11-SEP-98 08:59 Oct 22, 2008 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 Q:\DOCS\110-62 SCOM1 PsN: SCOM1
5

mittee was told how those with complicated chronic ailments, such

as heart disease or a mental health condition, had almost no

chance of locating a specialist if they lacked insurance.

Private hospitals were receiving large numbers of uninsured patients and were unsure how they would avail those costs or continue providing such services. Private physicians that were trying

to rebuild their businesses were finding it almost impossible to do

so because they were not being paid for the care they rendered.

The major hospitals that took care of the poor and uninsured and

the primary hospitals treating veterans remained closed. The University Hospital, the small Charity Hospital were so overwhelmed

with patients it was often on deferral. In fact, when our staff visited that hospital in March much of the emergency room was dedicated as a holding area for individuals needing critical psychiatric

care.

What we are doing today remains crucial to rebuilding the region. As recently reported by the New York Times just last week,

restoring health care services may be the most important factor in

restoring this region, and I would urge you to read this article for

New Orleans reviving health care systems or said city’s future. Today’s hearing will attempt to highlight not only what has been accomplished but also what more we need to do in order to bring

health care back to the region. I am pleased to report that some

progress has been made since our last hearing on resolving key

health care issues.

For example, HHS recently released nearly $135 million in DRA

dollars to the greater New Orleans region with the objective of recruiting and retaining health care workers and provide some relief

to the many primary care clinics which may play a key role in providing access to health care. From what we have been told, this

should allow them to operate for about 3 more years. This is a very

positive development and I thank the Department for making this

money available. We look forward to hearing from HHS, Louisiana

Public Health Institute, and Secretary Cerise regarding how this

money will be spent and what they hope it will accomplish.

Nevertheless, while funding primary care claims is a particularly

positive development, we are a long way from restoring adequate

health care for the region. As you will hear today, many vexing

health care challenges remain. These will require the attention of

policymakers at the State and Federal level as well as this Congress.

Let me briefly summarize what appears to be among the most

pressing. First, due to high labor costs and labor shortages the region’s top five private hospitals report that they are collectively losing considerable sums of money and that these losses could ultimately result in a reduction of services. Collectively, Ochsner, East

and West Jefferson, Tulane, and Touro report to our staff that they

expect a combined loss of $125 million in 2007. We are told this

loss is expected to go to over $400 million over the next several

years.

As reported to staff, these losses are due to extraordinary high

labor costs associated with staffing hospital beds and continued uncompensated care costs. The solution to this problem remains unclear. At a minimum, however, I believe that this concern must be

6

investigated to understand its potential impact on the region’s

health care services. I will ask representatives from both the State

and Federal Governments what they know about this claim and

how it should be evaluated or verified. I will also explore with key

agencies what kind of relief might be made available to these hospitals should these claims hold merit. I will ask the U.S. Government Accountability Office, HHS, Office of Inspector General or

some other objective third party entity to evaluate the concerns

voiced by the five private hospitals that will testify today.

What they will describe is a potential new storm on the health

care horizon for this area. It is a problem that deserves a thorough

review and I look forward to hearing from my witnesses on how to

best approach this. Second, the region’s two primary teaching

schools, Tulane and LSU, continue to struggle to keep their medical programs alive, and much of this relates to the current structure of the graduate medical education payments made by Medicare. Prior to Katrina both Tulane and LSU were both training

residents at several regional hospitals. The one site where both of

these schools had the largest concentration of residents, however,

was the Medical Center of New Orleans, commonly referred to as

‘‘Charity.’’

According to both universities during this period of total and partial closure after Katrina, the medical schools remained responsible

for the education of the residents and for paying the salaries and

benefits of the residents despite being unable to receive reimbursement from the closed hospital. This ongoing arrangement has created a number of financial difficulties for both Tulane and LSU.

Given that the bulk of all of Louisiana health care workers are

trained in these two institutions, it is critical that we explore with

HHS ways to remedy at least some of the burden placed on the

universities by current GME rules. These rules are extremely complicated.

I will look forward to discussing with CMS what tools might be

made available that may provide both flexibility and relief to these

two institutions, at least until a new medical center is built. The

third major problem we hope to examine is the continued debacle

of rebuilding a major public hospital to replace Big Charity and determine the new location of the VA’s proposed hospital, which may

or may not be part of that deal. Unfortunately, both appear stymied by endless politics and debate. As we all know, Big Charity

once served many of the regions working for it. Since its destruction many have had to pursue a patchwork of options when seeking

medical care.

As plans were being made to rebuild Charity, the VA, who also

lost its regional hospital in the flood, entered into an Memorandum

of Understanding with LSU to explore the possibility that two hospitals would be rebuilt as a collaborative project. While it was understood by certain stakeholders that this project would soon be

underway and that the VA would locate its facilities downtown and

in close proximity with LSU’s replacement facility, the plans for

this project still remain unclear. Currently, the VA is considering

both the downtown site, which is close to the existing health care

facilities, and a site located in Jefferson Parrish. I believe it is time

for the VA and the State to resolve this deal and to begin building

7

a hospital. Neither the citizens of Louisiana nor the veterans are

being served by this continuing delay. I intend to explore with the

VA and LSU the status of this proposal.

Moreover, because this project has been mired in continued confusion and controversy, I am asking that the VA formally brief this

committee once a month as to the status of this project. For all parties involved, I believe that both LSU and VA’s plans for building

these two hospitals must be made clearer than they have been thus

far. Not a shovel’s worth of dirt has been lifted towards either hospital’s construction and that I find totally unacceptable. I would

like to conclude by first of all thanking my colleagues on this committee for the continuing work they and their staffs have done and

provided to us helping torebuild this region.

This has been a continued effort and a continued bipartisan endeavor. I know that it will continue. I would also like to thank the

many excellent witnesses providing testimony. Many of you remain

in the trenches and are truly the heroes that are the most responsible for moving this effort forward. We are making progress, and

as tired and frustrated as we are at times, I believe we will be successful. I do want to renew that commitment that we have made

to you before. We will use this committee’s resources to continue

to examine this important area and assist you in what you are all

trying to do in any way legally possible. That concludes my remarks, and I thank you, Mr. Chairman.

Mr. STUPAK. I thank the gentleman. Mr. Walden from Oregon,

please.

Mr. WALDEN. Mr. Chairman, I am going to waive my opening

statement. I know we have got a busy day on the floor and probably a few interruptions so it would be nice to hear from the witnesses. Thank you, sir.

Mr. STUPAK. OK. Thank you. Ms. DeGette.

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO

Ms. DEGETTE. Thank you, Mr. Chairman. I just want to welcome

our witnesses today, particularly the mayor and others. Many of

you who I have been working with for the last 2 years on the

health care situation in Louisiana, as the chairman and the ranking member know, we went to New Orleans 6 months after the terrible tragedy, and we have been going back and we have been talking to people ever since. We are really committed to working with

you to try to rectify the terrible health care situation that followed

the hurricane. It really is an American tragedy what has happened,

and we need to work together to make sure that this situation is

rectified.

I have been frustrated, as my colleagues have, by the slow lack

of progress and lack of communication between various governmental agencies, including Federal agencies, and remain committed with the other members of this committee to insuring that this

problem is resolved and resolved quickly. Mr. Chairman, I want to

apologize. I won’t be able to stay for the whole hearing because I

am the chief deputy whip in charge of the SCHIP bill which will

8

be up on the floor momentarily, so I too want to hear the testimony

of the witnesses and yield back the balance of my time.

Mr. STUPAK. I thank the gentlelady for her statement. SCHIP,

the Children’s Health Initiative Program is on the floor today. All

of us have worked on that legislation. It came through our Energy

and Commerce Committee. The bill is on the floor, and I am sure

members on both sides of the dais will be going down and making

their comments, conclusions, whatever they would like, on the bill,

but we appreciate everyone being here. So we will be moving in

and out. No disrespect to our witnesses. Mr. Burgess, I am sure

you want something to say on what I had to say or else at least

an opening statement.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. BURGESS. I am going to forego saying something I wanted to

say on what you had to say. I am actually going to forego an opening statement as well. We have important testimony to hear today.

There is a lot going on on the floor, and I am anxious to hear from

our witnesses. I am glad to see Dr. Peters and Mr. Muller back

here from my first visit down to the area in October 2005 and understanding the problems that face them. Ms. DeGette called it an

American tragedy. I would say it is a bureaucratic nightmare. And

I still, frankly, do not understand where the logjam is. I don’t know

whether the logjam is here. I don’t know whether the logjam is at

the State. I don’t know whether the logjam is at some point in the

city. But clearly the work of this committee has to be to identify

and unwind that logjam and get the dollars going to the people

who need them.

At the end of the 106th Congress last year, we had put $100 billion towards this effort, and to find that we are still not receiving

dollars on the ground to me is a source of enormous frustration. I

go home and hear from angry constituents that you are spending

too much money, and then I come to this committee and find that

the money hasn’t been spent at all. And that leaves me with an internal state of perplexion that really has to be resolved quickly for

my continued good health. I want to work with this group today.

I am anxious to hear your stories, and I will yield back, Mr. Chairman, and would hear from the witnesses.

Mr. STUPAK. Thank you, Mr. Burgess. Ms. Schakowsky from Illinois.

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. I am going to put

my statement in the record. I just want to say I was able to go with

this committee to have a similar hearing, in New Orleans months

after the storm. I was shocked then, even more surprised now, that

not enough is done. I feel responsibility that the Federal Government has missed the boat here and that we have to do better. I

wanted to thank Mr. Melancon for all of his work for keeping this

issue on the top of the agenda here in Congress, and now I am

looking forward to some progress being made. And your testimony

will be very important to help us do that. Thank you. I yield back.

Mr. STUPAK. Thank you. Mrs. Blackburn, opening statement?

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OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE

Mrs. BLACKBURN. Thank you, Mr. Chairman. I do have a brief

opening statement I will submit for the record, but in the interest

of time, I do want to say welcome to our witnesses. I want to say

thank you to those that have worked since our very first hearing

that we did in New Orleans to address this situation. One of the

components of leadership is when you have a situation such as

what happened with Katrina, one of the things you have to do is

admit we did things wrong. And I think when you look at how the

health care situation was addressed in Louisiana the plans that

were not made, the things that were left undone as you looked at

a readiness plan, when you looked at how you were going to secure

your infrastructure, the admission of that as having been a mistake, and then the agreement and establish a health care network

that is going to be beneficial for your citizens. I think that is an

important step.

So as we move forward, I look forward to your continuing testimony, to your continuing work, and certainly to seeing all of

yourebuild a health care system that will deliver accessible and affordable health care for the citizens of Louisiana. I do say welcome

to the mayor. Some of us were here until about 3 o’clock this morning for the Rules Committee hearing for SCHIP, and I think we

would be wishing that you had brought along some beignets and

coffee with you to help us get through this as we take the SCHIP

bill directly to the floor as we see that happen today.

But some of us were here a little bit later, and Mr. Pallone was

also here through the evening, so we thank you and I yield back,

Mr. Chairman.

Mr. STUPAK. Thank you. That concludes the opening statements

by members of the subcommittee.

Any other statements for the record will be accepted at this time.

[The prepared statements follow:]

PREPARED STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF MICHIGAN

Today, we will hear from public health leaders and representatives from the New

Orleans area who are helping the brave citizens of that region rebuild their lives

and their communities. We should pay close attention to the lessons they can teach

us about the tenacity and creativity it takes for a health care system to recover from

a national disaster.

At our last hearing on this topic, I promised that we would focus on stabilizing

the health care crisis in the New Orleans area and that we would keep our focus

on that issue until the system is stable. This is the second in a series of oversight

hearings on these issues, and I assure you, it will not be the last.

Four and a half months ago, we heard testimony from doctors and clinic administrators about people lining up in their cars overnight, simply so they could get attention to basic health needs such as prescription eyeglasses and asthma medicine

from health care professionals working in tents with flashlights. Their stories described a landscape we might see in third world countries, not one we could imagine

here in our own country.

I am pleased that Secretary Leavitt took to heart the moving testimony we heard,

and released $100 million in discretionary Deficit Reduction Act monies to target

primary care in the greater New Orleans region. I thank the Secretary. These muchneeded funds will soon flow to clinics in the greater New Orleans area that provide

primary and preventive care—such as vaccinations, pre-natal checkups, and basic

first aid—to poor and uninsured patients.

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These funds will help fill in some—but certainly not all—of the holes in what is

left of a shattered health care system in the New Orleans region. As we will hear

today, that system is still precarious as we mark the 2-year anniversary of Hurricane Katrina. If the system were a patient, we might say it is still in the Intensive

Care Unit. We will hear from today’s witnesses that the area’s economic recovery

is stalled because the health care system remains fragmented and overwhelmed.

• There continue to be critical shortages of professional health care workers;

• Doctors are having difficulty sustaining their practices and are moving out of

a city that desperately needs them;

• Graduate medical education programs are struggling to survive so they can continue to train the State’s future healthcare workforce; and

• Private hospitals report they are hemorrhaging red ink in the post-Katrina economic environment.

Meanwhile, 2 years have passed since Veterans Affairs and the State lost their

major hospitals in downtown New Orleans. However, not a shovel of dirt has been

lifted to rebuild them. That is a simply outrageous situation for our country.

The people in the New Orleans region, and the wounded and maimed veterans

returning to their homes, deserve to have these vital institutions rebuilt and rebuilt

now. Likewise, the citizens of New Orleans need to have their public hospital rebuilt

and rebuilt now. The uncertainty, particularly with respect to the VA’s plans, is almost as damaging as the absence of the hospitals themselves.

I wish to thank our subcommittee chairman, Representative Bart Stupak, and our

subcommittee vice chairman, Representative Charlie Melancon, for their leadership

on these issues. Mr. Melancon has been heavily engaged in helping his own district,

which is adjacent to the four New Orleans parishes, recover from these storms. I

look forward to hearing from our witnesses today about the path ahead.

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Mr. STUPAK. Let me call forward our first panel of witnesses. The

Honorable Ray Nagin, mayor of New Orleans; Dr. Frederick Cerise,

Louisiana Secretary of Health and Hospitals; Ms. Elizabeth Richter, Acting Director, Center for Medicare Management at CMS; Mr.

Robert Neary with the Veterans Administration Office of Construction and Facilities, and he is accompanied by Ms. Julie Catellier;

Mr. Clayton Williams, Louisiana Public Health Institute; and Ms.

Kim Boyle, Louisiana Recovery Authority.

It is the policy of the subcommittee to take all testimony under

oath. Please be advised that the witnesses have the right under the

rules of the House to be advised by counsel during their testimony.

Do any of you wish to be represented by counsel? Everyone seems

to be shaking their head no.

[Witnesses sworn.]

Mr. STUPAK. Thank you. Let the record reflect that the witnesses

replied in the affirmative. You are now under oath. We will begin

with the opening statement of Mayor Nagin. If you would, please

begin your opening statement. We have 5 minutes for opening

statements. If it is longer, we will make it part of the record, but

we have a large panel here and if we keep it to 5 minutes that

would be great. Mayor, thank you and welcome.

STATEMENT OF RAY NAGIN, MAYOR, CITY OF NEW ORLEANS,

NEW ORLEANS, LA

Mr. NAGIN. Thank you. Good morning to the Chair, Congressman

Bart Stupak, Ranking Member Ed Whitfield, Vice Chair Charlie

Melancon, distinguished members and guests of the House Committee on Energy and Commerce Subcommittee on Oversight and

Investigations. Thank you for calling this hearing today on the

progress and continued challenges we face in providing basic and

quality health care to meet our citizens’ needs and provide what

they deserve. We are grateful for your support of our continued efforts during the last 2 years. And we thank the American people

and our friends throughout the world for their donations of resources, labor, prayers and positive thoughts as we continue to rebuild.

Most of all, I want to thank you for following up on the issues

and the needs discussed in your March hearing on this topic. The

attention you have brought to these issues has helped us to begin

to repair critical aspects of our health care delivery system, which

was decimated by Hurricane Katrina and the subsequent flooding.

Ladies and gentlemen of this committee, this is my 28th lobbying

trip and appearance before a committee since Katrina. I must

admit I was a little reluctant to come up today because I am getting pretty weary about continuing trips up here and testifying and

going over some of the same things over and over, but I think this

is a very important day to be up here to make sure that everyone

around the Nation, including this committee, continues to understand the challenges that we face. But I must be frank with you. I keep hearing about this $100 billion that has been allocated to the city of New Orleans. I keep

hearing about this $100 billion that has been allocated to the Gulf

Coast for recovery, but I have seen very little of that money in the

city of New Orleans. And in essence the city of New Orleans is sufVerDate 11-SEP-98 08:59 Oct 22, 2008 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 Q:\DOCS\110-62 SCOM1 PsN: SCOM1
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fering in many different ways. We are in recovery, and our citizens

are working in spite of the odds, but we are suffering, ladies and

gentlemen, from financial malnutrition, and we need an acute infusion of resources into our environment to help us to overcome this

incredible challenge that I don’t think many people still understand.

Our city was totally devastated after Katrina, and after 2 years

we are still trying to recover. It was unprecedented. But our citizens, as we sit here testifying and talking about this, they continue

to suffer. We have increased mortality rates. We have increased

stress levels throughout the city of New Orleans and the region,

and we have many compounded mental health problems that are

not being adequately addressed. A study by Dr. Kevin Stephens,

the city’s health director, documented a 47 percent increase in

deaths in the city of New Orleans. I repeat that, 47 percent increase in deaths in the city of New Orleans. The State has a smaller number that they have presented but whether you believe it is

20 percent or 47 percent deaths are up in the city of New Orleans

and it is growing at an alarming rate.

Our Orleans Parish coroner, Dr. Frank Minard, told the Associated Press he sees every death that happens in the city of New Orleans, that he has no doubt that Katrina, the after effects of

Katrina, is killing our residents. These deaths have taken the form

of pre-existing medical conditions that are made worse by the

stress of living here in the city and in this area after the storm.

It also is showing up in the elderly, many of them who are growing

weary and tired and exhausted and too defeated and they are just

giving up. Your committee has done some good work, and I must

continue to applaud you. After your last meeting, which was recently, Secretary of Health and Human Services Michael Leavitt

invoked his authority, you didn’t have to do anything, under the

Deficit Reduction Act of 2005 to make $100 million available to restore and expand access to primary health care for all those reasons.

But, guess what, that money has taken the normal route that it

always takes. It may or may not leave the Federal Government. It

may or may not hit the State government. And it definitely is having a long time getting to the city of New Orleans. And if there is

anything that this committee can do, and if there is anything this

Congress can do, you can put a speedway to getting funds directly

to the devastated areas, and this would help this recovery tremendously. We have been 23, 24 months of going through this dance

where money flows from the Federal Government to the State government and gets stuck and does not get to the people who need

the money.

I am off script and I know that is very damaging sometimes for

me. But this is my 28th trip to this Nation’s Capitol, a mayor of

a city that has been totally devastated, and I am getting really

upset about this because we are getting ready to go to the second

anniversary of the biggest natural and man-made disaster, and I

still do not have adequate health care in my community. Our hospitals are still shuttered for the most part. The one that is open

you have to wait hours and hours and hours to get emergency care.

There is no substantial mental health care happening in the city

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of New Orleans. There is very little substance abuse and many of

our citizens are self-medicating, which is a nice term I am going

to use, to take care of what they can’t handle, the day-to-day struggle of our city.

Now we are 300,000 strong. Our citizens are doing incredible

work in spite of not having the resources that they need but it

shouldn’t be this hard in the greatest country in the world. And I

am pretty sick of it. The VA hospital, if we can get a decision on

the VA hospital, that would stabilize the health care community in

our city, but we keep going around this dance with RSVP and now

the city of New Orleans is in a position where it is competing with

the surrounding parish for this facility. We wouldn’t be here if it

wasn’t for the failure of the Federal levee system that was supposed to protect New Orleans, and now I am sitting in the city of

New Orleans competing with the surrounding parish to bring a facility back that should be downtown in the city of New Orleans,

and I have to go through this ridiculous process.

That is what we deal with in the city of New Orleans and 47 percent more people are dying in the city of New Orleans because of

this thing that we are going through. I implore, I ask, I beg this

committee to really do something to help us. I am not sure where

my city is going to be at the end of the day. It is coming back but

I am losing people every day. Since I started talking, I probably

lost a citizen in the city of New Orleans, and we need this committee, we need this Congress to help us. Thank you.

[The prepared statement of Mr. Nagin follows:]

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Mr. STUPAK. Thank you, Mr. Mayor. Mr. Cerise, opening statement, please, 5 minutes.

TESTIMONY OF FREDERICK P. CERISE, M.D., M.P.H., SECRETARY, LOUISIANA DEPARTMENT OF HEALTH AND HOSPITALS

Dr. CERISE. Mr. Chairman and members of the committee, thank

you for the opportunity to testify on the status of Louisiana’s

health care system. I am Fred Cerise, Secretary of the Louisiana

Department of Health and Hospitals. Today my comments will center around three areas, new Federal and State commitment, continuing needs, and sustaining some of the momentum that has

begun with State and Federal relief. In the 2 years since Katrina

hit, New Orleans has accomplished much through local, Federal,

and State investments. Recent Federal actions include the allocation of the remaining DRA funds. Louisiana received $161 billion

which is targeted at workforce recruitment and retention, stabilization to hospitals, and primary care stabilization and expansion.

I will note that the workforce recruitment and retention effort is

ongoing. Out of the $50 million that has been allocated for that $11

billion in recruitment offers have been made. Over 100 people have

been recruited back to the area as a result of that work. There was

an award of $2.5 million in HRSA grants to increase access to

health care services in the area and the extension of social services

block grant funding to September 2009. Those are things we asked

of this committee and HHS, and you responded and we appreciate

the attention to those requests that we have made.

I think it is also important to note that Louisiana has stepped

forward with significant State investments in health care. Over a

billion dollars in new State and matched funds were dedicated to

programs including several proposals put forth by the redesign collaborative such as expanded insurance coverage to children, and individuals with disabilities, Medicaid rate increases to retain access

to services, health information technology investments building on

Federal grants, the establishment of a quality forum, and funds for

a medical home systems pilot program.

In addition, there is new funding to replace expiring Federal relief to expand and restructure mental health care delivery and to

replace an academic medical center in conjunction with the VA in

downtown New Orleans. The VA’s return to the city, as the mayor

mentioned, is a critical piece to the city’s recovery. Extensive planning among LSU, Tulane, and the VA has occurred over the past

18 months. In addition to providing high quality care to veterans,

this joint venture will save American taxpayers an estimated $400

million in long-term operational costs while serving as a centerpiece of a vibrant, academic teaching center and a bio-sciences research cell.

We need an expedient decision to rebuild on the land currently

being assembled in New Orleans so that both the LSU and the VA

can focus more directly on returning vital services to the region.

For the next few minutes, I will outline a few of our continuing and

new issues, those surrounding graduate medical education, hospitals, and care for the uninsured. In response to the previous

hearing, I convened a graduate medical education stakeholder

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group which the group identified as its major ongoing concern an

extension of the 3-year rolling average exemption for the medical

schools and hospitals which step forth to assist the residency program post Katrina. HHS advised that Federal legislation would be

required to address this issue. Estimates from the hospital place the cost of $10 million to $15

million over the next 4 years. This is a complex area, as many of

you know, in which we will need a commitment of solution oriented, active engagement by CMS in crafting a satisfactory resolution. In terms of the hospitals it, was made clear in the March

hearing that the hospitals in the New Orleans area were struggling

with uncompensated care. In response to that issue, the State revised its existing $120 million community hospital uncompensated

care pool to allow more funds to flow to the New Orleans area hospitals and has continued to support in this fiscal year through this

pool and through Medicaid rate increases.

However, the State has been notified by the hospitals that they

continue to have a significant need for additional funding beyond

UCC and beyond the previously estimated Medicare wage index

projections. The State has not conducted a detailed analysis of the

individual hospital’s profits and losses. I agree with Representative

Melancon’s recommendation that an independent third party, such

as GAO or some other party, conduct this detailed analysis to identify documented needs and identify ways to insure viability of these

important community resources. And then finally as the State continues to recover, please note that we are doing so with an eye towards long-term systems redesign.

Louisiana recently received notice, this was on July 23, so the

State is not sitting on these funds, we recently received notice of

the $100 million primary care stabilization grant. We believe this

large investment in primary care should be leveraged to result in

approved delivery system. If these funds are properly deployed, we

should expect to see significant relief on emergency departments in

the region and improved preventive services for residents. The

State, with its local partner, who you will hear from, hopes that as

we work through details with HHS the opportunity to place explicit

requirements for access, care coordination and quality, and IT will

be made available.

Above all, the State wants to insure that this Federal investment

is sustainable and coordinated with State programming. We know

that this increase in primary care, for instance, and the capacity

will generate more demand for specialty services for which there is

no ready funding available. We once again request the ability to

use Federal funds to support these physician services. The State

has been informed by CMS that flexibility in the use of the DSH

funds will be considered only in the scope of a larger waiver request that ultimately shifts DSH funds to the purchase of insurance for uninsured individuals. Although coverage is a desirable

goal of the State, we have done extensive analysis of this proposal

and concluded that we have insufficient funds in the DSH program

today to adequately cover the target population.

Currently, the State is criticized for supporting a centralized institutional base system of care. However, Federal rules dictate this

approach. The rule, which is waivable, paradoxically results in

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more patients relying on emergency rooms for non-emergent care.

DSH funds require a State match and have a Federal cap. This

simple waiver would require no additional Federal funds that is

not already available to the State today, and I urge you to prevail

upon the administration to allow the State to use DSH funds, up

to but not in excess of our cap, as a way to provide critically necessary physician services today. Along with traditional Medicaid,

this will allow us to sustain the care once the primary care grant

expires.

So I will end here. Thank you for the opportunity to testify and

for your ongoing commitment to the recovery of the region, and

Ilook forward to the discussion.

[The prepared statement of Dr. Cerise follows:]

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Mr. STUPAK. Thank you. Ms. Richter, 5 minutes, please, opening

statement.

TESTIMONY OF ELIZABETH RICHTER, ACTING DIRECTOR,

CENTER FOR MEDICARE MANAGEMENT, CENTERS FOR

MEDICARE AND MEDICAID SERVICES

Ms. RICHTER. Mr. Chairman and members of the subcommittee,

I am pleased to be here today to discuss post-Katrina health care

and the actions the Centers for Medicare and Medicaid Services

have taken to help rebuild the Louisiana healthcare system. I am

Elizabeth Richter, the acting director of the Center for Medicare

Management at CMS and I am pleased to be joined today by Rear

Admiral Kenneth P. Moritsugu, the Acting Surgeon General, to

help answer any questions you might have about broader Health

and Human Services actions.

I will focus on two issues the subcommittee asked CMS to address, which are graduate medical education payment, and the

Medicare area wage index. Since the first days after Hurricane

Katrina, CMS has worked diligently to address issues related to

medical residents displaced by the disaster. In particular, CMS has

moved quickly to provide flexible funding through all available

means of Medicare GME payment in three ways. First, the New

Orleans hospitals asked CMS for a way in which host hospitals

taking on displaced residents could receive payment for the training they were providing. In response, CMS immediately issued a

provision in the existing regulations which allows hospitals that

have closed programs to temporarily transfer their allotment of

full-time equivalent residents paid for under the Medicare Program

to the hospitals hosting the displaced residents.

As a result, host hospitals that were already training residents

at or above their cap could receive payment for training additional

residents displaced by the hurricane. Our second initiative in order

to provide relief where the programs have not or are no longer

closed was to use the rule making process to publish a new regulation to allow closed hospitals an adjustment to their FTE count.

The new rule allows the host hospitals to receive financial relief for

the additional medical residents they have taken on in the wake

of the disaster. The new regulations establish a new kind of emergency affiliation agreement to facilitate the sharing of residents between hospital situations where special waiver has been implemented in an emergency area during an emergency period.

As a result, Katrina-affected hospitals were able to temporarily

transfer residents anywhere in the country. Host hospitals were

then able to receive payment without regard to the otherwise existing rules that affiliations be limited by geography and we also relaxed the shared rotational arrangement requirement. Under usual

GME payment rules, a hospital is paid in the current year based

on a 3-year rolling average count of residents. Therefore, the third

action we took was to allow displaced residents from August 29,

2005 to June 30, 2006, to be excluded from the rolling average calculation.

As a result, payment will be made in full in 1-year for the period

when host hospitals would have expected the closed program provision to apply. CMS has been advised by our Office of General

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Counsel that the 3-year rolling average cannot otherwise be waived

without a change in the law, thus exhausting CMS authority within the GME rules. CMS has authority to conduct demonstrations

in cases where certain payment rules warrant the study to help

achieve more efficient and effective administration of the Medicare

Program. For example, there is currently an ongoing demonstration

examining the effect of managing resident slots at the State level.

Towards that end, CMS welcomes the opportunity to share information about the demonstration process.

In the meantime, CMS remains committed to providing technical

solutions within its authority to any concerns related to GME. I

have reviewed the paper submitted by LSU and Tulane, and would

be happy to comment in response to any questions you may have

about their particular GME concerns. CMS has also been responsive to concerns about providers’ requests for an increase in the

area wage index to be reflective of reported increases in wage rates

for health care facility staff. The wage index is a relative value

based on wage data reported from hospitals across the country.

There is a uniform national process for updating the wage index

that will not be based on post-storm data until fiscal year 2010.

Given the data collection, auditing, and budget neutrality requirements under the current wage index structure provides certain limitations, HHS recognized the rapid rise in wages in this affected area, and thus directed approximately $98 million of the

$160 million in DRA provider stabilization grants be made available to compensate Louisiana providers for higher wage cost before

the wage index is based on post-storm wage data. CMS would very

much like to understand the impact of the grant funds, and if they

are having their intended impact of offsetting the cost of persistent

higher wages in Louisiana, including how wage issues are impacting other payers, namely, Medicaid and private pay patients.

Due to the complex nature of the data issues across payers and

programs, CMS also recommends an outside entity lead a thorough

assessment of the issues the hospitals have raised across all HHS

programs along private payers.

In conclusion, since the March 13, 2007, hearing before this subcommittee, HHS has made $195 million in supplemental grant

funding for health care rebuilding and provider stabilization efforts

in the Gulf Coast region. Secretary Leavitt has made a personal investment and focus of energy on rebuilding of the Louisiana health

care system, supported by continuous technical expertise offered by

CMS and senior officials throughout HHS.

CMS will continue to make relevant expertise available to the

State as the two work together toward the goal of a high-functioning, sustainable health care infrastructure. Thank you, and Dr.

Moritsugu and I would be happy to answer any questions you may

have.

[The prepared statement of Ms. Richter follows:]

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Mr. STUPAK. Thank you. Mr. Neary, please, for an opening statement.

TESTIMONY OF ROBERT L. NEARY, EXECUTIVE-IN-CHARGE,

OFFICE OF CONSTRUCTION AND FACILITIES MANAGEMENT,

U.S. DEPARTMENT OF VETERANS AFFAIRS

Mr. NEARY. Good morning, Mr. Chairman, and members of the

committee, thank you. I am pleased to appear before the committee

today to discuss plans for the design and construction of a new VA

medical center in New Orleans. In broad terms, the VA intends to

construct a state of the art hospital in the New Orleans metropolitan area requiring approximately 1 million square feet to include

140 hospital beds, outpatient clinic capacity to receive 410,000 visits per year, a 60-bed nursing home, appropriate parking, and mitigation features to protect the medical center against natural and

man-made threats. The VA presently has been appropriated $625

million of which $300 million has been authorized by the Congress,

and we have requested the full authorization be enacted during

this session.

In February 2006 the VA and LSU entered into a Memorandum

of Understanding to establish a mutually beneficial relationship to

foster discussions regarding the future of VA and LSU medical

care. The MOU led first to the establishment of a Collaborative Opportunity Study Group in March 2006 and then a planning group

in September 2006. Work of the study group completed in June

concluded that there were potential cost savings associated with a

joint medical complex. The planning group then began to further

develop the degree to which VA and LSU should collaborate. The

planning group’s report is due in September 2007.

Subsequent to receiving that report, VA and the State will be positioned to make decisions on the extent of collaboration going forward in both programmatic and physical terms. We will then know

specifically what will be built and by whom. In March the Department determined that a review of alternative sites would be undertaken. That search identified two viable sites meeting all of the requirements. Ochsner Health Systems proposed a site of about 50

acres approximately 4 miles from downtown New Orleans. Later it

was determined that only 28 acres were available, however. The

New Orleans Regional Planning Commission in conjunction with

the city, State of Louisiana, and several parishes proposed acquiring approximately 34 acres downtown adjacent to the site of the

proposed LSU medical campus.

My full statement contains a map outlining the site search and

maps of the two sites. These two sites are currently under evaluation. Each site is rated according to established criteria, which includes such factors as proximity to affiliated medical schools, proximity to veteran population, access to highways and major streets,

site characteristics including wetland and flood plain status and

the existence of any environmental issues. In addition, VA has contracted to study the site from the perspective of suitability for construction and any characteristics which would impact the cost at

each location. We are particularly interested in the potential for future flooding and what steps could be taken to mitigate against a

repeat of the flooding of 2005.

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The VA is also required under the National Environmental Policy Act to assess the environmental implications of locating the new

facilities at each location. A consultant will complete the appropriate environmental studies in accordance with NEPA and the

Comprehensive Environmental Response, Compensation and Liability Act. The construction of these facilities is a high priority for

VA. This is a large and complicated project, however, that will take

time to design and construct. Our plan would enable construction

to begin in February 2009 with completion in July 2012. A graphic

of a more detailed schedule is included in my full statement.

That concludes my oral statement. I would like to add that Congressman Melancon, in his opening remarks, asked that the VA

commit to brief the committee on a monthly basis so I would say

that we would be pleased to do that as long as that served the committee’s purposes. Thank you very much.

[The prepared statement of Mr. Neary follows:]

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Mr. STUPAK. Thank you. Ms. Catellier, are you going to do an

opening statement?

TESTIMONY OF JULIE CATELLIER, DIRECTOR, SOUTHEAST

LOUISIANA VETERANS HEALTH CARE SYSTEM

Ms. CATELLIER. Mr. Chairman, thank you for the opportunity to

be here. We have made significant progress in the past 23 months

in meeting veterans’ health care needs. Three new clinics opened

in Slidell, Hammond, and St. John Parish, for a total of six permanent outpatient facilities. Eighty percent of our patients drive 30

minutes or less to receive their primary and general mental health

care, which are offered at every location. Patients requiring complex care are referred to other VAs or cares obtained within the

community. Plans are progressing to lease space for specialty care

and ambulatory surgery. The ability to perform in-house procedures and surgeries will significantly reduce our costs. This year

we will spend nearly $25 million for purchased care compared to

$2.4 million pre-Katrina, a 10-fold increase.

Laboratory services have been enhanced and currently are centralized in Baton Rouge. Pharmacy services exist at all our clinics

and a $3.5 million project for a new pharmacy in New Orleans will

be completed early next year. A diagnostic imaging center will open

in New Orleans this fall providing the full range of radiology services. Dental care has been expanded to two locations, and currently

there are no patients on the waiting list. In order to deliver patient

focus, family-friendly care, we tripled staff in our community and

home care program. This includes a unique hospital-at-home program where clinician teams visit patients in their home to both

shorten hospital stays or to avoid the need for hospitalization altogether.

The home-based primary care program has grown from an average of 95 patients enrolled on any given day to 125, a 32 percent

increase. This is one example of how VA is reinventing care to

meet the specialized needs of veterans post-Katrina. We recently

implemented a new program through an agreement with our affiliate which allows VA physicians to admit and manage the inpatient

hospitalization of veterans at the Tulane University Hospital. Veterans responded favorably to this initiative because it allows them

to remain near their families in their communities while being

treated by their personal VA team. In the past month, 45 patients

were admitted to this program. To the best of our knowledge, this

hasn’t been done elsewhere in the country.

Over half of our patients are diagnosed with a mental health disorder. Specialized mental health programs, including PTSD and

substance abuse treatment are currently provided, and we are still

acquiring additional space to expand those services. Psychiatric

beds in metropolitan New Orleans are critically limited. Therefore,

VA patients requiring inpatient care are most often transported by

ambulance to VAs in Alexandria and Shreveport. This year we expect to admit 225 patients for acute psychiatric hospitalization. A

significant challenge for our mental health programs is the loss of

nine psychiatrists or 41 percent of our pre-Katrina strength as a

result of relocation. Patients are grateful for the Government’s response and are seeking care with us in record numbers.

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We served over 30,000 veterans through June of this year. Of

those, over 4,000 were new. On average, 1,000 outpatients are seen

daily in our system. We project that by year end 35,000 will be

treated. That is 90 percent of our pre-Katrina level. There are currently 76 physician residents compared to 120 pre-Katrina. To

maintain the stability of our residency training programs and meet

our obligation to educate America’s physicians, we are working

with our academic affiliates to place medical staff and residents at

facilities throughout VISN 16 until our full clinical program’s return. I would be remiss if I didn’t address the issue of recruitment

and retention of professional staff.

As a direct result of Hurricane Katrina, 57 physicians and 70

nurses left our employment. These losses and the subsequent challenges and recruiting positions have resulted in delays in some of

our specialty clinics. Losses include 90 percent of our orthopedists,

over 60 percent of our otolaryngologists, half of our ophthalmologists, neurosurgeons, and rheumatologists. Lucrative recruitment

packages have been drafted in an attempt to attract qualified professionals. A recent offer for a physician to move to New Orleans

required a salary at the top of the pay scale, 3 consecutive years

of annual $30,000 recruitment incentives, and full moving expenses. The applicant declined.

Louisiana veterans have every right to receive high quality

health care they deserve and have come to expect, and it is my job

to deliver it. Thank you for allowing me this opportunity, and I

look forward to answering your questions.

[The prepared statement of Ms. Catellier follows:]

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Mr. STUPAK. Mr. Williams, for your opening statement, please,

sir.

TESTIMONY OF CLAYTON WILLIAMS, DIRECTOR, URBAN

HEALTH INITIATIVES, LOUISIANA PUBLIC HEALTH INSTITUTE

Mr. WILLIAMS. Mr. Chairman and members of the subcommittee,

thank you for this opportunity to provide an update on the stabilization and expansion of a coordinated system of primary care

clinics in the greater New Orleans region, and thank you for all

you have done thus far to support our rebuilding efforts. The Louisiana Public Health Institute or LPHI is a private, not-for-profit

organization with a mission to promote and improve the health and

quality of life in Louisiana through public-private partnering. As it

relates to the recovery of the health care delivery system, our focus

has been on working with health care providers with a mission or

mandate to provide access to everyone regardless of their ability to

pay primarily through its support of the partnership for access to

health care or PATH, which I have directed for the past 6 years.

If all the components of the health care system were rebuilt as

they were prior to Hurricane Katrina the people of greater New Orleans will likely be doomed to the same poor health outcomes that

we have historically experienced, nearly the worst in the country.

There is evidence that suggests we are even worse off than before

the storm in some areas which makes the situation even more urgent. Therefore, now is the time to get it right and perhaps in so

doing glean some lessons that will be of value for the rest of the

country. Working closely with its partners, LPHI is striving to

achieve a new health care system with a foundation of a network

of public and private primary care clinics to facilitate access to the

right care delivered in the right place at the right time to advance

quality and reduce the cost of care.

We don’t need to start from scratch towards this vision. In the

four-parish region there are currently 27 fixed site primary care

clinics of varying size and scope delivering discounted services to

everyone regardless of their ability to pay. The heroic group of

leaders that have managed to establish these critical community

resources in Katrina’s wake should be commended. Since January,

2006, these clinics provided for more than 120,000 patient visits.

While they have accomplished a great deal after Katrina, they are

still in need of much support as they expand to meet the growing

needs. We estimate that 35 additional primary care physicians will

be required to meet the needs of the uninsured in the four-parish

region. Since the March 13 hearing, the Federal Government has

done a remarkable job of addressing the need for primary care.

The announcement of the $100 million primary care access and

stabilization grant on May 23 is evidence of the extraordinary work

done by the subcommittee, HHS, including officials from CMS,

HRSA, and SAMHSA to address this concern. We offer our sincere

thanks to all in the Federal Government who made this happen.

After responding to a public announcement, LPHI was chosen as

the State’s local partner in administering the grant, and I serve as

the director of this program for LPHI. Since the announcement of

the grant, LPHI, DHH, and HHS have worked steadily and tirelessly to put the pieces in place.

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As a result, we anticipate that the first payments to stabilize

these clinics will be awarded by September of this year. The principal goal is to demonstrate increased access to primary care, behavioral health care, and related services. This grant represents an

opportunity to do much more than simply distribute funds to primary care clinics assuming we can work together to address the

many other areas of need. As the State’s local partner administering the grant, LPHI is committed to establishing robust administrative systems to insure Federal funds are spent appropriately,

working to advance the goals of the grant in an inclusive and

transparent way with all major stakeholders, maximizing opportunities to insure the grant program is designed as a bridge to a wellorganized and sustainable system of care and providing technical

assistance and incentives to advance quality and efficiency.

LPHI takes very seriously its role as steward of taxpayer dollars,

and therefore we will request an opportunity to share our proposed

fiscal controls for up front review by the HHS Inspector General.

And we and our partners have several areas of need that will have

to be addressedto insure our success in alleviating the health care

issues that persist in the region. LPHI will require assistance in

either gaining approval for use of grant dollars to establish necessary health information systems or in securing additional funding for this purpose. Robust, standardized, fully implemented and

network information systems need to be in place in the participating primary care clinics if we are to be successful in achieving,

measuring, and reporting results as required in the terms and conditions of the grant.

Despite this reality, health information systems are not allowable expenses under the grant terms and conditions. There are

other opportunities to build mechanisms into the grant to help

drive the development of a high quality, organized, and sustainable

system of care. LPHI, DHH, and our partners will require continued flexibility from HHS as these program components are developed, so we can maximize the opportunities to build in incentives

and performance requirements. Accessible and high quality primary care is an important part of a health system but good primary care must include linkages to timely diagnostic, specialty,

and inpatient services, and there are several looming concerns in

the health care system beyond primary care that I would like to

express.

We strongly emphasize the importance of continued and enhanced attention to helping alleviate critical health care workforce

shortages; No. 2. flexibility in establishing payment mechanisms

for necessary specialty care providers; No. 3, insuring the viability

of our community hospitals; and, No. 4, providing support for the

development of a new academic medical center to serve the region.

In conclusion, it has been an honor and a privilege for LPHI to participate in today’s hearing. Thank you for your outstanding leadership and responsiveness, and for your continued support of our efforts to rebuild a healthier, greater New Orleans. I welcome your

questions.

[The prepared statement of Mr. Williams follows:]

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TESTIMONY OF CLAYTON WILLIAMS

Mr. Chairman and members of the subcommittee, thank you for this opportunity

to provide an update on the stabilization and expansion of a coordinated system of

primary care clinics in Greater New Orleans, and thank you for all you and the

Congress have done thus far to support our rebuilding efforts.

I. LOUISIANA PUBLIC HEALTH INSTITUTE (LPHI) BACKGROUND

The Louisiana Public Health Institute was established in 1997 and is one of 25

Public Health Institutes nationally. LPHI is private not-for-profit organization with

a mission to promote and improve the health and quality of life in Louisiana

through public-private partnering at the community, parish and state levels.

LPHI maintains a population-level focus on health improvement, and recognizes

the relative importance of addressing all determinants of health through its programming—from social, to environmental, to the influences that can be realized

through the healthcare delivery system. LPHI places an emphasis on promoting equity and reducing racial and economic disparities in health outcomes.

As it relates to the recovery of the healthcare delivery system in Greater New Orleans, our focus has been on working with healthcare providers with a mission or

mandate to provide access to everyone regardless of their ability to pay. For the past

six years, LPHI has advanced its work in this area primarily through its support

of the Partnership for Access to Healthcare (PATH), which includes most of the public and private healthcare providers in the region that have historically provided

healthcare to people falling below 200 percent of the Federal Poverty Level.

Since the day after Katrina and the breaches in the levy system that caused catastrophic flooding throughout the region, LPHI has been very active in recovery. In

partnership with governmental, non-profit and private sector stakeholders at all levels, LPHI has:

• Convened the Greater New Orleans Health Planning Group which created the

first comprehensive framework for rebuilding the health system of the region

(Framework for Rebuilding a Healthier Greater New Orleans); • Created StayHealthyLA.org in partnership with the Louisiana Department of

Health and Hospitals; • Conducted operations for the Louisiana Health and Population Survey on behalf

of the LA Department of Health and Hospitals and the LA Recovery Authority, the

first household population survey of parishes most affected by hurricanes Katrina

and Rita (with technical assistance from the U.S. Census Bureau and the US Centers for Disease Control and Prevention); and • Following the immediate aftermath, supported the recovery of community-based

healthcare services (PATH and the Health Services Recovery Council), school-based

health centers (School Health Connection) and behavioral health services (Behavioral Health Action Network).

II. PRIMARY CARE RECOVERY AND EXPANSION IN THE GREATER NEW ORLEANS AREA

If all components of the health system were rebuilt as they were prior to Hurricane Katrina, the people of Greater New Orleans will likely be doomed to the same

poor health outcomes that we have historically experienced—nearly the worst in the

country. Therefore, we agree with all previous major consensus planning efforts that

NOW is the time to get it right, and perhaps in so doing glean some lessons that

will be of value to the rest of the country. It is not too late to achieve this if we

stay aligned at the local, state and Federal levels in our pursuit of healthcare equity, quality and efficiency for the people of Greater New Orleans.

LPHI holds a fundamental belief in a healthcare system with a foundation of a

public/private network of neighborhood-based primary care clinics to facilitate access

to the right care, delivered in the right place at the right time to advance quality

and reduce the cost of care at all levels. These neighborhood clinics should be portals to diagnostic, specialty, and acute care, and be linked to other supportive services through a coordinated system, and be under-girded by robust information systems. Advancing this vision is central to our approach to rebuilding.

The Greater New Orleans region does not need to start from scratch to advance

towards this vision. In the four-parish region, there are currently 27 fixed-site primary care clinics, of varying size and scope, delivering discounted services to everyone, regardless of their ability to pay. Most have been participants in the collaborative efforts of PATH’s Regional Ambulatory Planning Committee which is staffed

and supported by LPHI. These clinics include federally Qualified Health Centers,

school-based health centers, hospital-based clinics of the Medical Center of LouisiVerDate 11-SEP-98 08:59 Oct 22, 2008 Jkt 000000 PO 00000 Frm 00101 Fmt 6633 Sfmt 6633 Q:\DOCS\110-62 SCOM1 PsN: SCOM1
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ana, university sponsored primary care clinics, private not-for-profit health centers,

and faith-based organizations.

The heroic group of leaders that have managed to establish these critical community resources in Katrina’s wake should be commended. Since January 2006, these

clinics provided for more than 120,000 patient visits.—In addition to primary

healthcare, they provide preventive health services, obstetrics and gynecology, behavioral health, and some specialty care. While they have accomplished a great deal

since Katrina, they are still in need of much support as they expand to meet the

growing needs of the people of the region. We estimate that 35 additional primary

care physicians will be required to meet the needs of the uninsured in the four-parish Greater New Orleans area.

III. LPHI’S ADMINISTRATION OF THE PRIMARY CARE ACCESS AND STABILIZATION

GRANT

The March 13, 2007 testimony to this Subcommittee from stakeholders at all levels emphasized the need for resources to support primary care for the people of

Greater New Orleans, with an emphasis on the low-income un- and under-insured.

Since those hearings, the Federal Government has done a remarkable job of addressing short-term stabilization needs and continuing efforts to expand existing

primary care clinics. On May 24, the Secretary of the Louisiana Department of

Health and Hospitals (DHH), Dr. Cerise, received a letter from the Acting Administrator of the US Center for Medicare and Medicaid Services (CMS), the Honorable

Leslie Norwalk, announcing the availability of $100 million to stabilize and expand

primary care clinics and behavioral health services. The announcement of the Primary Care Access and Stabilization Grant availability is evidence of the extraordinary work done by the Congress, this Subcommittee, and the Department of

Health and Human Services, including officials from CMS, Health Resources and

Services Administration and the Substance Abuse and Mental Health Services Administration to address this concern of the people of Greater New Orleans. We in

Greater New Orleans would like to offer our sincere thanks to all in the Federal

Government who made this happen.

By responding to a public announcement, the Louisiana Public Health Institute

was chosen as the State’s local partner in administering the grant, and I serve as

the director of this program for LPHI. Since the announcement, LPHI, DHH and

HHS have worked steadily to put the pieces in place, and we have reached the following critical milestones:

• LPHI was chosen as the state’s local partner in administering the grant.

• An application to CMS was completed and submitted by DHH with assistance

from LPHI.

• The Cooperative Endeavor Agreement between LPHI and DHH has been fully

executed.

• HHS issued the official Notice of Award on July 23, 2007.

• The eligibility screening process and methodology for determining initial base

payments to clinics has been finalized.

• LPHI released the Request for Applications to participate in the grant on July

27th, and a public meeting to address questions about the grant program and application process is scheduled for August 3, 2007.

In the midst of the State’s Legislative Session, the DHH staff worked tirelessly

with LPHI to put critical elements in place to ensure timely distribution of funds

to stabilize the primary care providers of the region. It is anticipated that the initial

base payments to clinics will be announced by September of this year.

The principal goals of the Primary Care Access and Stabilization Grant are to

demonstrate increased access to primary care, behavioral health care, and other related services; and to ensure greater numbers of low income un- and under-insured

individuals are being served in Orleans, Jefferson, St. Bernard and Plaquemines

parishes.

In its role as the State’s local partner in administering the Primary Care Access

and Stabilization Grant, LPHI has committed to: Establish robust administrative

systems and controls to ensure the Federal funds are spent appropriately by all subrecipients to achieve the goals of the grant;

• Work to advance the goals of the grant in an inclusive and transparent way

with all major stakeholders;

•Pursue complementary resources to maximize the impact of Federal grant funds

towards improving the health of the people of Greater New Orleans as they return;

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• Maximize opportunities to ensure the grant program is designed as a bridge to

a well-organized and sustainable system of care for the people of Greater New Orleans;

• Provide technical assistance and incentives to advance quality and efficiency

among participating sub-awardees; and

• Regularly convene forums among sub-recipients for region-wide health planning

and coordination.

This grant represents an opportunity to do much more than simply distribute

funds to primary care clinics. Working closely with the healthcare providers in the

region and DHH, we are committed to building in mechanisms that will help create

an organized system of care that continue to serve the people of the region well beyond the three year grant period (granted, many other areas of concern for the

healthcare system must be successfully addressed concurrently if we are to be successful).

With this in mind, LPHI intends to use a portion of its administrative budget and

other complementary resources to establish a Scientific Advisory Committee made

up of local and national experts to anchor this program in best practices as the program is designed and implemented. In addition, we will continue to convene a stakeholder group to provide a mechanism for input on critical program decision-making,

allow for regular communication among sub-grantees, and provide a forum for datadriven planning as sub-grantees grow primary care capacity in the region.

LPHI takes very seriously its role as steward of taxpayer dollars. Therefore, we

will request an opportunity to share our proposed fiscal controls and program integrity plans for up-front review by the Department of Health and Human Service’s

Inspector General. As a responsible public health agency, we believe a pinch of prevention is worth a pound of cure in administration as well as healthcare delivery.

IV. MOVING FORWARD

We have several areas of need that will need to be addressed to ensure our region’s success in alleviating the healthcare issues that persist in the region:

We will require assistance in either gaining approval for use of grant dollars to

establish necessary health information systems, and/or in securing additional funding for this purpose. Robust, standardized, fully implemented and networked information systems need to be in place in the participating primary care clinics if we

are to be successful in achieving, measuring and reporting results as required in the

terms and conditions of the grant. Despite this reality, health information systems

are not an allowable expense under the grant terms and conditions.

There are at least two more opportunities to build mechanisms into the Primary

Care Access and Stabilization Ggrant to help drive the development of a high quality, organized, and sustainable system of care for the uninsured in the region. One

is the development of the sub-contracts between LPHI and the participating clinic

sub-awardees, and the other is the design of the methodology for making supplemental payments to them. LPHI and DHH will require flexibility from HHS as

these program components are developed so we can maximize the opportunities to

build in incentives and performance requirements that will help us improve access

to sustainable high quality and comprehensive primary care.

Accessible and high quality primary care is an important part of a high performing health system, but good primary care must include linkages to timely diagnostic,

specialty and inpatient services. There are several looming concerns in the

healthcare system beyond primary care that I would like to express. We strongly

emphasize the importance of: 1) continued and enhanced attention to helping Greater New Orleans alleviate critical healthcare workforce shortages; 2) flexibility in establishing payment mechanisms for necessary specialty care providers; 3) ensuring

the viability of our community hospitals; and 4) providing support for the development of a new academic medical center to serve the region.

It has been an honor and privilege for LPHI to participate in today’s hearing.

Thank you for your outstanding leadership and responsiveness in the months since

the March hearings, and for your continued support of our efforts to rebuild a

healthier Greater New Orleans. I welcome your questions.

Mr. STUPAK. Thank you. Ms. Boyle, your opening statement,

please.

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TESTIMONY OF KIM M. BOYLE, CHAIRMAN, HEALTH CARE

COMMITTEE, LOUISIANA RECOVERY AUTHORITY

Ms. BOYLE. Chairman Stupak, Ranking Member Whitfield, members of the subcommittee, at this critical time in the rebuilding of

the great city of New Orleans, it is an honor and privilege for me

to testify this morning as a volunteer member of the Board of Directors of the Louisiana Recovery Authority as Chair of the LRA’s

health care committee, but also as a life-long resident of New Orleans. Thank you for the opportunity to bring to your attention the

most pressing issues to address as we all work with your critical

assistance to rebuild a sustainable health care system in the New

Orleans region. Consistent with Congressman Melancon’s inquiries,

I cannot stress enough the monumental importance of the planned

joint Medical Center of Louisiana in New Orleans and the Veterans

Affairs medical center in downtown New Orleans to the sustainability of our health care system to the delivery of quality health

care services to our citizens, and to the overall recovery, and more

importantly rebuilding of our community.

Second, we continue to need your help to address the immediate

barriers that continue to plague the comprehensive restoration of

health care services in the New Orleans region. As all of you are

aware, Katrina was by far the single most devastating disaster in

American history and Rita ranks third on the all time list, 1,500

lives lost, 1.3 million American citizens displaced, 200,000 homes

destroyed, and 64,000 people who remain in FEMA trailers. The

storms and the failure of the Federal levee system caused an estimated $100 billion in damages to homes, property, businesses, and

infrastructure in Louisiana alone. Federal investments in Louisiana’s recovery have been generous and crucial, and I would like to

personally thank all of you and the members of the subcommittee

for your persistent and consistent support of Louisiana’s recovery.

However, considerable needs remain unfunded. Federal commitments total $110 billion for recovery and rebuilding in five of the

Gulf Coast States that were impacted by Katrina, Rita, and Wilma.

Out of this $110 billion a little over $60 billion was committed to

Louisiana but half of that was used to fund immediate disaster relief services and insurance payments to policy holders under the

National Flood Insurance Program. $26.4 billion is available to

Louisiana for rebuilding critical services and infrastructure. Unfortunately, that is far short of our needs in such an unprecedented

catastrophe. Therefore, I am here today to address what we can

and should do to get the New Orleans region’s health care system

on its feet. I do not believe that anyone can dispute that the health

care system’s speedy, comprehensive, and sustainable recovery is of

paramount importance to the future of the city and to south Louisiana itself. Uncertainty and blunt concerns about health care access

has slowed our recovery, as well as rebuilding an undermined public confidence about the ability to return home.

Business owners will not bring investments and employees to a

city without available health care services. The citizens will not

bring their children, elderly parents and family back absent available health services. As all of you are aware, the LRA’s mandate

from the beginning is building a stronger, safer, and better Louisiana, and the plans for a joint MCLNO as well as be a medical cenVerDate 11-SEP-98 08:59 Oct 22, 2008 Jkt 000000 PO 00000 Frm 00104 Fmt 6633 Sfmt 6633 Q:\DOCS\110-62 SCOM1 PsN: SCOM1
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ter in downtown New Orleans is a recovery project without peer

and is without question the best option for the people of our city

and the surrounding region. Congresswoman Blackburn referred to

an agreement to move forward. The joint medical centers are integral to three critical elements of community recovery and the benefits of their co-location are innumerable.

First, to address Congressman Melancon, the joint facilities will

serve as critical providers of high quality, primary and specialty

health care, and the MCLNO will also offer the region’s only level

1 trauma center, and will be home to inpatient psychiatric care

that is accessible by veterans. As a member of the LRA and as a

resident of New Orleans where I grew up and I continue to live

today, I am very concerned that not relocating the VA to downtown

New Orleans will negatively impact the citizens of our region including our veterans, who do not have the means to travel to other

areas for treatment.

I am also concerned that relocating the VA could be destructive

to the quality of care and diversity of treatments available at each

institution by eliminating the sharing of LSU, Tulane, and VA physicians that were so prevalent before Katrina. The Louisiana American Legion specifically recognized veterans who have been the

beneficiaries of the close proximity and the walking distance between the MCLNO and the VA downtown, as well as beneficiaries

of their joint medical research and teaching. The facility, second,

will anchor the region’s medical education including the LSU and

Tulane medical schools, graduate medical education, which many of

you have addressed, and research programs dependent on shared

clinical space in MCLNO and the VA.

Relocation of the VA would have a devastating impact on medical

education and research as well as the economy of the city of New

Orleans. Third, consistent with our philosophy of rebuilding better

and stronger the long-term economic revival and diversity of the

New Orleans region is dependent upon the MCLNO and VA facilities serving as the clinical cornerstone of the emerging downtown

biomedical district. This will stabilize this area. The plans include

the development of a 60,000 square foot biomedical research incubator and an $86 million Louisiana cancer research center, which

is a collaboration between LSU, Tulane, and Xavier, which will be

located adjacent to the new joint hospitals.

Now let me paint a different picture. The failure of the VA to return as a partner in the downtown biomedical district could condemn a viable economic engine to an embarrassing urban blight of

abandoned empty buildings and have a devastating impact on our

economy. Losing the VA medical center as a cornerstone of the biomedical district downtown will leave central New Orleans with a

dark future. For all the reasons I have listed, what matters is that

the pertinent leadership, a broad range of stakeholders, and the

citizenry at large agree on what is best. Governor Blanco and the

legislature have made good on their commitment to this project

and a diverse set of community leaders have joined these State officials in strong vocal support for this project which include the

American Legion, the Secretary of the Louisiana Department of

Veterans Affairs, the New Orleans Regional Planning Commission,

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as well as the mayor, the Council, the Chamber, and many, many

other groups.

The citizens of New Orleans have also independently identified

the joint medical centers as critical to recovery and have prioritized

this initiative in the UNOP Plan, Unified New Orleans Plan, the

Louisiana Speaks Regional Plan. Finally, I cannot emphasize

enough what damage would be inflicted on the progress of community recovery and the public psyche and confidence if this partnership falls through. Our citizens are focused on rebuilding, not

building back what was there before these devastating hurricanes,

but rebuilding stronger, safer, and better to benefit the community.

It is clear that rebuilding the VA medical center downtown would

have the best and most positive impact on community recovery and

public confidence in the future of this great city and state. Mr.

Chairman and members of this committee, thank you for your time

and attention today. I look forward to working with you as we advance the resurrection and rebirth of one of America’s treasured regions. Thank you.

[The prepared statement of Ms. Boyle follows:]

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Mr. STUPAK. Thank you. I want to recognize the delegate, Donna

Christensen, who is with us. She is not a member of our committee

but she has been an ardent supporter of rebuilding the Gulf Coast

regions, especially in the area of health care. She is a member of

the Democratic task force. We appreciate your interest and being

here with us today. Gene Green was here. He had to leave. Again,

we are going to be going back and forth because we are in SCHIP

on the floor today. Right now we have two votes. It is probably

going to take us about 15 minutes. Let us recess for 15 minutes.

We will be back and then we will start with questions with this

panel. Hopefully it is not a day where we are going to be bound

around all day because of procedural votes on the floor and we can

get to our questions. Fifteen-minute recess. Thank you.

[Recess.]

Mr. STUPAK. For questions, Mr. Melancon is going to start off, 5

minutes, and we will probably go more than one round. Go ahead.

Mr. MELANCON. Thank you, Mr. Chairman. Let me start, if I

could, with Mr. Neary. If you would, the first thing I need to ask

you, and there has been politics being played with this VA Charity

mess and what is going on with the site location and all; I would

like to ask you very honestly, have there been people from the Hill,

senators or representatives, that have called and injected their

opinions as to how the VA should be proceeding in any way, shape

or form, to your knowledge?

Mr. NEARY. Mr. Melancon, there has been a significant interest

from the Louisiana delegation, of course, urging the VA to proceed

as rapidly as possible to reach a conclusion. And other members of

our oversight committees, I think have in hearings and by letter,

I think, have urged the VA to take action to move as swiftly as possible to replace the VA medical center.

Mr. MELANCON. Has there been any one specifically directing or

trying to instruct you as to what to physically do with that facility?

Mr. NEARY. Not that I am aware. I am not aware of any specific

effort to direct us what to do with the facility.

Mr. MELANCON. I would appreciate it if you would check with the

people in your office and find out. I don’t think that is necessarily

and totally true, that no one has been interjecting. You outlined

that the VA is currently evaluating two sites, one in downtown

New Orleans and the other in East Jefferson. On pages 5 and 6

of your testimony you outline a number of criteria that would be

used to evaluate those two sites. Nonetheless, how does the VA intend to measure the cost to the psyche of the city if you choose to

abandon the downtown location and move to a different parish?

Isn’t there significant value that must be ascribed to the decision

to locate downtown? Doesn’t this send a positive message that the

Federal Government is willing to commit to rebuilding in the city?

Similarly, what is the cost associated with moving the hospital to

Jefferson Parish? Aren’t you really saying you don’t have faith in

the city, the levees, maybe the Corps of Engineers or their ability

to rebuild if you make that decision? And how are you accounting

for the costs associated with the message that such a choice would

send to the community? And let me preface before you say that I

had not really intended on injecting myself into this debate but the

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aster to start stripping the economic engines out of the heart of

New Orleans.

I have a lot of respect for the people and the elected officials and

such of Jefferson Parish. They were very fortunate in a comparative way than were Orleans, and I just don’t think that we ought

to be playing political politics with a facility as important as the

VA hospital. If you could respond to my question, please.

Mr. NEARY. Certainly, Mr. Melancon, thank you for that question. I think the best way for me to respond is to say that I am

certainly not an expert in urban development and what contribution or project in the downtown area might make, but I certainly

respect the opinions of a number of people who are here today who

express the view that this project is critical to be in the downtown

area. We do not have a cost or a value at this point that we think

would contribute negatively or positively to a decision to locate

elsewhere other than the downtown site, but we certainly recognize

the value as has been said by others here of our association with

the medical schools, Tulane, Louisiana State University, and literally medical schools all over America where we have close affiliations. We understand that value to the VA and will not lose sight

of that as we move forward.

Mr. MELANCON. I have a letter here to Mr. Nicholson from the

Governor, the legislature, the mayor, university presidents, and on

down the line in Louisiana stating what they want. That is why

I am still questioning why we are still debating it. Ms. Boyle, do

you have any comments on what is going on with it?

Ms. BOYLE. Thank you, Congressman. I guess my primary comment would have been to focus on the letter that you have. I think

that is the July 27 letter that is signed by Governor Blanco, Mayor

Nagin, members of the city council, but more importantly for purposes of what the relevant stakeholders actually want is the fact

that the American Legion, in its June convention, unanimously

passed a resolution saying that they wanted the downtown site because of the synergy between the VA hospital as well as LSU and

Tulane being there, as well as the fact that Major General Hunt

Downer, who is head of the Louisiana’s Department of Veterans Affairs, has signed on to that letter as being critical.

So I think if you look at what the citizens of New Orleans want

as reflected in the UNOP plan what members of the State citizenry

wants as reflected in Louisiana Speaks but more importantly as

what the elected leadership appoints leadership and people actually represent what veterans want, I think the downtown site

makes the most sense from every shape, form or fashion economically, delivery of quality health care, and more importantly the

synergies that exist between those two medical graduate education

programs, the VA hospital, and then the upcoming Louisiana Cancer Research Center.

Mr. MELANCON. What message do you think would be sent by not

putting the facility down there?

Ms. BOYLE. I think the message that will be sent to the citizens

of New Orleans will be extremely damaging and devastating. The

citizens believe that this is something that needs to happen. And

I know you are aware of this fact, Congressman Melancon, but in

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ority. That was the only thing that was unanimously agreed upon

by the thousands of citizens who participated in that neighborhood

planning process that we needed to have the VA in conjunction

with Tulane and LSU downtown. And I think if the VA bluntly

pulls out and moves to another parish, it will be extremely damaging to our public confidence in rebuilding the city to our psyche in

rebuilding the city, and it will be very detrimental to the economic

vitality of the city of New Orleans.

Mr. MELANCON. Mayor, I have let you sit quietly too long. What

are your comments about this?

Mr. NAGIN. Congressman, it is obvious that this is a significant

economic tool for the city of New Orleans, and for the reason if they

were to leave and not come downtown, I think it has the potential

to cause a domino effect that would threaten maybe LSU’s need for

a teaching hospital downtown, which could further threaten Tulane

University’s will to stay downtown. It could start a domino effect

that could decimate our medical district. Just the construction costs

of this facility alone are estimated to be at least $600 million.

And the combined LSU and VA hospital could create 20,000 jobs.

If LSU and the VA leave, I think there are estimates that there

are at least 4,000 to 5,000 related families that would move from

the downtown area. It would be devastating, and it would be very

counter to the President’s pledge in Jackson Square that said he

would do everything it took to rebuild the city of New Orleans.

Mr. MELANCON. Thank you. Mr. Neary, this letter that was addressed to the VA from all the players that are affected, or not all

of them but the major players in Louisiana are saying this is what

we want. There was, I understand it, at one point some question

about a plan or putting up the money, the State has put up their

money, so they put their money where their mouth is. How soon

can we move to get this thing started and why do we need to keep

studying?

Mr. NEARY. Sir, as I indicated in my statement, we are required

by law to complete environmental due diligence. We are doing that

now and——

Mr. MELANCON. If you were building a new facility, not replacing

a facility.

Mr. NEARY. This facility that we are planning to build, whether

we build it on the original 37 acres that LSU and the State had

identified, whether we were to build it on the adjacent parcel that

has been proposed or elsewhere, we are required to comply with

those environmental laws and are in the process of doing that.

Mr. MELANCON. So how long before you are going to get that

completed so you can break ground?

Mr. NEARY. That takes about 4 months to complete.

Mr. MELACON. So that will put us about January when you will

be ready to break ground?

Mr. NEARY. Well, no, sir. The facility will require design. First

of all, there needs to be an acquisition of the property.

Mr. MELANCON. I will take just an announcement in January

then.

Mr. NEARY. I would hope that there can be an announcement before January personally.

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Mr. MELANCON. That would be better. We look forward to an October hearing maybe. Thank you.

Mr. STUPAK. Mr. Whitfield, questions?

Mr. WHITFIELD. Thank you. Mayor Nagin, I know that you and

Ms. Boyle both stress that the No. 1 priority that you would have

is locating the VA hospital in downtown New Orleans. And we all

certainly understand the sense of frustration that you have had as

the mayor and other people have had working on this issue in New

Orleans. But if you were asked to list two or three things in addition to locating a VA hospital in New Orleans that you think would

be most beneficial and helpful to improving the health delivery system in New Orleans, what would those be?

Mr. NAGIN. To improving the health care delivery system?

Mr. WHITFIELD. Yes.

Mr. NAGIN. Besides the VA and the LSU complex, I am very concerned about our private hospitals, and their inability to get uncompensated care done on a timely basis and at a reasonable compensation level. That to me is threatening the entire system in a

different way but it is equally as devastating because many of our

private hospitals are funding this care on their balance sheets. The

second area that I would also ask for assistance is if there was a

national call out to physicians and experts in the medical field that

could come down and provide the critical services and fill the gaps

that we would need on a year or 2-year basis and if there was some

type of program to accommodate that.

Mr. WHITFIELD. So when you say on a timely basis you are really

referring to the fact that there are not enough physicians or health

care workers there to actually see people today?

Mr. NAGIN. Yes, sir.

Mr. WHITFIELD. So there are not enough providers to meet the

needs right now?

Mr. NAGIN. Yes, sir.

Mr. WHITFIELD. Now, Ms. Boyle, would you agree with the assessment, if I were to ask you to list two or three things that need

to be done immediately to help improve the situation other than locating the VA hospital in New Orleans, what would you say?

Ms. BOYLE. Yes, Congressman Whitfield, I would agree with the

mayor’s assessment, and I guess I would phrase it as such. The

labor shortage, I think, is extremely dramatic. I think Dr. Cerise

spoke about that a little bit during his testimony, and I think on

the second panel that will be discussed in more detail, but the

labor shortage is really the root cause of the deficient capacity as

well as the mounting financial pressure that plagues the region’s

health care system. And it is a problem on all levels. Many of our

elderly people, and I have elderly parents who are back in the city

with me, many of our elderly citizens are having a hard time accessing good quality health care, not through any fault of the hospitals that are providing care. I think they are doing a yeoman’s

job and they are going almost above and beyond the call of duty,

but there is a very, very strong labor shortage.

The mayor talked about the UCC issue. There is also the issue

of community-based primary care which Mr. Williams can address

certainly in more detail than I can, but for many of our citizens,

I think that is going to be critical to rebuilding because, as you

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know, prior to the storm many of our citizens had to access emergency care through what is called the Charity, and we need to

move away from that system into having the community-based primary care system and the graduate medical programs which obviously Dr. Miller and Dr. Hollier will talk about on the second

panel.

Mr. WHITFIELD. Now how many community health centers are

operating right now in New Orleans?

Ms. BOYLE. I am going to defer to Mr. Williams on that number,

sir.

Mr. WILLIAMS. In the four-parish region there are 27 primary

care facilities, and there are mobile units as well.

Mr. WHITFIELD. How many community health centers?

Mr. WILLIAMS. How many federally-qualified centers?

Mr. WHITFIELD. Yes.

Mr. WILLIAMS. I need to get back to you with that exact number.

Mr. WHITFIELD. OK. Now, Mr. Williams, your organization is the

one really responsible for the dispensing of the $100 million in

DRA funds, is that correct?

Mr. WILLIAMS. In partnership with the Department of Health

and Hospitals, yes.

Mr. WHITFIELD. And how does the disbursement work? Have you

received the $100 million yet or is it in dribbles?

Mr. WILLIAMS. We received the notice of grant award, or the

State received the notice of grant award, from HHS on July 23. So

next week, and we have already publicly announced it to the providers of the region. We are having a public meeting on Friday. We

will have all of the applications for eligibility by the end of next

week, and hopefully have funds to those providers by September.

Mr. WHITFIELD. But the official announcement was only on July

23?

Mr. WILLIAMS. The notice of award from the Federal Government

was on July 23. There was quite a bit that had to happen behind

the scenes in order to make that possible.

Mr. WHITFIELD. Thank you.

Mr. STUPAK. Thank you, Mr. Whitfield. Mr. Neary, if I may go

to exhibit No. 18 in the black book. This is the July 27, 2007, letter

that Mr. Melancon mentioned that we have been talking about

here. It seems like it is signed by every leader in Louisiana saying,

‘‘put this VA hospital downtown.’’ My question is, who is going to

respond to this letter, and who makes the decision whether or not

the VA hospital goes downtown?

Mr. NEARY. When we complete the environmental review work

and we have——

Mr. STUPAK. No, no. Who makes the decision whether the VA

hospital goes downtown?

Mr. NEARY. The Secretary of Veterans Affairs.

Mr. STUPAK. So right now that would be Mr. Nicholson, right?

Mr. NEARY. Yes, sir.

Mr. STUPAK. So we should be going after Mr. Nicholson to get

this thing moved, right?

Mr. NEARY. And I have spoken with Mr. Nicholson recently. He

is very anxious to move this project forward as quickly as possible.

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Mr. STUPAK. Then why are you looking at two sites? Why aren’t

you just looking at the downtown site for your environmental aspect? Why do have to look at two sites and waste money? Everyone

is telling you to put it downtown but you are looking at a different

site.

Mr. NEARY. Sir, there was a point in time when the site at Canal

and I–10 that had been identified by the State prior to the storm,

it became evident that that site was simply not workable. It doesn’t

have sufficient——

Mr. STUPAK. That was before the storm. We are talking about

after the storm.

Mr. NEARY. After the storm——

Mr. STUPAK. They are all saying go downtown, so why are we

looking at another site?

Mr. NEARY. The studies that are going on both in terms of——

Mr. STUPAK. That is just wasting time. If everyone says you go

downtown why don’t you study downtown and see if you can go

there. If it doesn’t work, then go. If I follow your timeline the soonest we are going to have a VA hospital in New Orleans, is 5 years,

and that is if everything goes well. We know how quickly the Government moves. So it will be more than 5 years. It will probably

be 10 years. So why don’t we just cut to the chase, why don’t we

start studying this site that everyone agrees upon. The State of

Louisiana has said we will put up the $300 million because the

CDBG money last time when we were in New Orleans having our

hearing in January 2006 HUD started screwing around with the

money there. So New Orleans said we are sick of this game. We

will give you the 300, we will put down the 300. We are willing to

build it. We want it downtown. So why do we have these continual

delays?

Mr. NEARY. Under the law the Secretary is not permitted to

make that decision——

Mr. STUPAK. But the law doesn’t say the Secretary has to look

at two sites. He can look at one site if he wishes.

Mr. NEARY. Agencies are strongly encouraged to look at all available options when——

Mr. STUPAK. The law doesn’t say strongly encourage. The law

doesn’t say you have to look at more than one site, does it? They

just have to do a NEPA study on the proposed site, correct?

Mr. NEARY. That is correct.

Mr. STUPAK. When will that NEPA study be done?

Mr. NEARY. Approximately 4 months.

Mr. STUPAK. All right. It can’t be done any sooner than that?

Mr. NEARY. The studies normally take 6 to 8 months, and we

have it on an accelerated basis.

Mr. STUPAK. All right. Let me ask Mr. Williams. Mr. Williams,

you said there is $100 million that was pledged to this area for the

Louisiana LPHI. That is what you run, right?

Mr. WILLIAMS. Louisiana Public Health Institute, LPHI.

Mr. STUPAK. LPHI. You said they should be seeing some of that

money by September?

Mr. WILLIAMS. Yes, if we stay on the schedule.

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Mr. STUPAK. When the mayor says I haven’t seen any money, the

$100 million he is talking about, it is coming through your organization, right?

Mr. WILLIAMS. That is correct.

Mr. STUPAK. So after September 1, 30 days or so, the mayor

should see some money, right?

Mr. WILLIAMS. Yes. They are already determined eligible.

Mr. STUPAK. Do you anticipate any roadblocks, any problems

with moving that money?

Mr. WILLIAMS. No.

Mr. STUPAK. Is it real money or is it funny money? Do you actually have it coming to you or do you have to start applying for paperwork as of September 1 to get the money?

Mr. WILLIAMS. We have a contract with the State, and the notice

has come from the Federal Government. We need to get the State

legislature to budget the money through their process, and that is

going to happen in the middle of August. Then we need to establish

a contract with the city of New Orleans and there shouldn’t be any

further delay. They have $4 million carved out of the $100 million

that they are already determined eligible for us, so it shouldn’t—

I don’t anticipate any roadblocks.

Mr. STUPAK. OK. So September 1 we should see some money

flowing to the mayor. Ms. Richter, there has been some testimony,

and there will be some later today, in particular one CEO has provided written testimony to this committee regarding the impending

financial pressures they are facing, and in that statement they say

due to the continued closure of Charity Hospital, as well as several

other hospitals, these five hospitals provide 95 percent of the hospital-based services in the metropolitan area. The five hospitals expect a combined loss of $135 million in 2007. This loss will grow

to $405 million in 2009. What does Secretary Leavitt think of those

numbers?

Ms. RICHTER. I think, as I said, we are concerned about that. We

want to understand better——

Mr. STUPAK. You are concerned, but what are you going to do

about it? We are all concerned. But you have some power to do

something. What are you going to do?

Ms. RICHTER. Our short-term response really was in the provider

stabilization grants that we already——

Mr. STUPAK. That was short term. We are 2 years out from this

hurricane. What are we doing to help alleviate this? You have

talked increased costs. Have you provided more money for increased labor costs? Nurses are more expensive, physicians are

more expensive, insurance to even insure the hospital has gone sky

high. Have you looked at any of these to do something? You mentioned in your testimony there are waivers that could be given but

you haven’t provided any other than the initial waivers. Why can’t

we continue these waivers? This area is still being devastated.

Ms. RICHTER. Are you referring to the GME waivers?

Mr. STUPAK. GME, a couple others you had, the DSH hospitals,

all these waivers that HHS controls. It seems like it is pulling

teeth every time you come here. You say you look at it. We get a

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pens, and now you see hospitals losing $405 million by 2009. They

can’t stay open like that.

Ms. RICHTER. I myself can’t speak to Medicaid disproportionate

share issues that were raised.

Mr. STUPAK. How about the area of wage index. According to

your testimony, it will be fiscal year 2010 before it will be updated.

Now, can’t we waive that because it costs more money to provide

services in New Orleans, because it is a premium to have a nurse

or a doctor down there so the area wage index which they base

their reimbursements on you say won’t be updated until fiscal year

2010? That is 3 years from now. Can that be waived? Can’t you do

that sooner?

Ms. RICHTER. Medicare is designed as a national program——

Mr. STUPAK. Yes, but what is the Secretary’s proposal in helping

out with this shortfall?

Ms. RICHTER. Well, again, as I said the short-term response that

was within the Secretary’s ability was the provider stabilization——

Mr. STUPAK. I know the short-term, but we are 2 years out now.

What is his long-term response?

Ms. RICHTER. I think as far as other things that could be done,

we will have to get back to you on that.

Mr. STUPAK. Well, what about GME? You wanted to talk about

GME, the 3-year rolling average.

Ms. RICHTER. Yes.

Mr. STUPAK. Yes. You waived it for 1 year. You stopped it in

2006. Why can’t you waive it again? We are still having this trouble with the GME.

Ms. RICHTER. We have talked extensively with our Office of General Counsel, and they say that the——

Mr. STUPAK. But the mayor is getting tired of talking. He has

been here 28 times. He hears this talk.

Ms. RICHTER. I understand, Mr. Stupak.I am sorry about

that,but the statute is very clear about the 3-year——

Mr. STUPAK. But there is a waiver. There is a waiver in that

statute, and you have a right to exercise it if you wanted to.

Ms. RICHTER. There is no explicit waiver within the 3-year rolling average portion which was why——

Mr. STUPAK. Under emergency circumstances you can waive it.

Ms. RICHTER. Just for closed programs, programs that are completely closed.

Mr. STUPAK. You would agree with me medical service in New

Orleans is still an emergency situation, isn’t it?

Ms. RICHTER. That is not the way the statute or the regulations

are written.

Mr. STUPAK. I am not asking about the statute. I am asking you,

do you believe the medical situation in New Orleans is still an

emergency situation?

Ms. RICHTER. Yes, but——

Mr. STUPAK. Great. Now it is an emergency situation. I have established that. Now you can get a waiver, can’t you, if you yourself

believe there is an emergency situation. You got a waiver under

GME, that 3-year rolling.

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Ms. RICHTER. The emergency provisions are limited to entirely

closed programs. That is the only situation we can——

Mr. STUPAK. Has the Secretary brought forth any legislation to

address the issues, whether I need a 3-year waiver on the GME,

I need a waiver on this wage index, have they proposed any of

these if the waivers are only for a short period of time to correct

the inequities we are seeing in Louisiana so they have a full working health care system? Has the Secretary brought forth any legislation like that?

Ms. RICHTER. Not legislation. We have discussed extensively with

various representatives of the interests in Louisiana, both the hospitals, the medical schools, with Dr. Cerise and with others the

possibility of doing a Medicare demonstration that could in a budget neutral way that could alter some of them.

Mr. STUPAK. We don’t want demonstrations. We want health

care. We have 3 minutes left to vote. I hate to do this to you but

we are going to have to run and vote. We will be right back. It is

only one vote, and when we get there they will spring another surprise on us, right? So we will be back as soon as we can. We will

be in recess. We will be right back. Mayor Nagin, I know you are

dying to answer some of these questions. I will give you a chance

as soon as I get back.

[Recess.]

Mr. STUPAK. Let me again apologize for the interruptions. While

these procedural games are being played on the House floor today,

they are frustrating to us, but they are pale in comparison to the

frustrations you must feel in New Orleans so we thank you for

your patience, and I assure you that we will continue this hearing

and get through this, and despite our continued interruptions we

are going to stay with this issue no matter how long it takes. Congressman Jefferson, he is here. As you know, he has been at every

other hearing we have had. He knows too well the problems you

are facing, and we appreciate him coming to the hearing and sitting in. Thank you.

I was ending with Ms. Richter and I talked about how she was

going to talk about a demonstration project. We will get to that

later because my time is up, as Mr. Burgess informed me, but I

know Mayor Nagin wanted to say something either on the VA hospital or on that $100 million that is going to come to you by September. Not all of it, right, Mr. Williams? But some of it is going

to come. You wanted to say something, and I said before I broke

that I would give you an opportunity.

Mr. NAGIN. The only thing I want to say is if the check is in the

mail, we look forward to receiving it.

Mr. STUPAK. Very good. The check is in the mail from the Federal Government. OK. The gentleman from Texas, Mr. Burgess,

please.

Mr. BURGESS. Thank you, Mr. Chairman. I scarcely know where

to start. Let me start with you, mayor, since you spoke last. I referenced a logjam. You said you are stuck. Can you put your finger

on where the problem is? If we are going to exert maximum congressional committee authority to fix the problem, where do we exercise it?

133

Mr. NAGIN. Well, I think there are many good people, good, competent people, working on these problems, but unfortunately many

of the laws are not written in a way that allow the flexibility that

is needed for a disaster of this magnitude, so I would advocate a

look at the laws associated with emergencies and making sure

those laws are written in a manner where the Secretary can exercise some latitude in expediting funds. The second thing I would

also point out is that there is this route that money must travel,

and once you get it through the Federal bureaucracy then you are

dealing with the State bureaucracy before you even get to a local

bureaucracy. And those three elements tend to slow down the delivery of resources because government is traditionally not built for

speed.

Mr. BURGESS. Yes, how can you straighten out that route? How

can you take all the curves out of there?

Mr. NAGIN. Well, there are several ways that are already written——

Mr. BURGESS. Let me ask you this. Do you have Mr. Melancon’s

private cell number? Can you just call him up and say, ‘‘I am having trouble with this, can you fix it?’’

Mr. NAGIN. Yes, I can call him. I can call his wife. I know how

to get him. Absolutely. I have both cell phones. So that helps.

Mr. BURGESS. Are you doing that?

Mr. NAGIN. Oh, yes. Yes.

Mr. BURGESS. OK. And they have been responsive to you?

Mr. NAGIN. He is very responsive.

Mr. BURGESS. I just got to tell you. I am a public servant, you

are a public servant. I depend upon my constituency for the continuation of my employment as do you. I frankly don’t understand

why no one in an elective office has been held accountable. We beat

ourselves up up here. We will beat up the Federal agencies some

more in just a minute which is appropriate but at the same time

from just the grass roots phenomenon, I don’t get it.

Mr. NAGIN. Well, you are not alone in not getting it. And the only

thing I can point to is nothing like this has ever happened before

so we all are inventing solutions but unfortunately whereas we invent solutions, we always go back to laws that were created prior

to a disaster like this.

Mr. BURGESS. Well, let me go to Ms. Richter. Let us talk about

the laws just a little bit. You reference the wage index relief or the

mayor did, through the wage index relief through the Deficit Reduction Act, but that was broadly dispensed throughout the State,

maybe a little too broadly, and then went to some areas that

weren’t in as big a crisis as the Orleans parish, so do you need—

does the Secretary need—the mayor said the Secretary may need

some legislative fix, some latitude. Does the Secretary have all the

tools he needs in order to get the money where it needs to be and

not broadly disbursed to areas that are less in need? Do you need

something from us in order to be able to do that? The other reference was made to this will be 2010 before there is more latitude.

Is there anything we can do to condense that time frame? Is there

anything we can do again to straighten out the curves in the road

so the Secretary can get the money where it is needed?

134

Ms. RICHTER. I think I will say that we will probably have to respond to that for the record for HHS issues broadly. Certainly I

think understanding the cost structure now, the summary data

that the hospitals had in their testimony is a good starting place,

but I think as several people have mentioned today having a better

understanding of what is driving the costs and how the costs vary

across the different payers to what extent it is a Medicare issue,

to what extent it is an uncompensated care issue, to what extent

it is something else I think would be very helpful to understand

better where healp would be best targeted, and so I think that is

a critical piece as well.

Mr. BURGESS. Well, I do look forward to that response in writing.

And let me just ask you this. I know HHS is not a business and

doesn’t function as a business, but if it were a business and wanted

to go to its customer and ask how are we doing, who would the customer be? Would the customer be Mayor Nagin? Is the customer

us up here? Who would the customer be? How would you gauge

whether or not you are doing an effective job?

Ms. RICHTER. I think we have a lot of customers. I think first

and foremost the Medicare beneficiaries as far as our program,

Medicaid——

Mr. BURGESS. OK. The Medicare beneficiaries.

Ms. RICHTER. The beneficiaries, the providers that would work

with——

Mr. BURGESS. Would the Medicare beneficiaries in the city of

New Orleans, how would they respond to the question are we doing

a good job?

Ms. RICHTER. I would not presume to answer.

Mr. BURGESS. I wouldn’t either but I think we can impugn an answer to that, and I don’t think it is good and that pains me and

I am sure it bothers people at the agency, and I do want to see us

do our jobs better. Still no mistake about it, I think there is a lot

of inertia on the ground and I heard a lot of talk about the discussion about the VA hospital, and I know Charity wants to build a

new facility. Are we sacrificing the short-term improvement for

what is happening with these larger projects? Are we sacrificing

taking care of the patients for the sake of economic development

in downtown New Orleans? Does anybody have an answer or a response to that? Dr. Cerise, do you have a feeling about that one

way or the other?

Dr. CERISE. Are we sacrificing care of patients for economic development?

Mr. BURGESS. Well, postponing being able to do—here I have got

a piece of paper that says there was $101 million left on the table

end of fiscal year 2006. That doesn’t sound like a good thing to

leave money on the table here. We have been force feeding you dollars up here. Again, I get criticized for that back in Texas, and yet

you guys aren’t getting the help you need, and there is money left

on the table. And why is there money left on the table? I don’t

know the reason but I am hearing today that, well, we are working

about different sites and competing sites with the VA, we are worried about what Charity is ultimately going to look like, what it

resurrects from the ashes, but are we sacrificing what we should

be doing in the short term for what may happen in the long term

135

and as a consequence are patients suffering because we have our

eye more on economic development or economic redevelopment

rather than on patient care.

Dr. CERISE. I don’t think so. I think those things are happening

in parallel. I am not familiar with the $101 million number. I know

that there are some grant funds. For instance, we got an extension

in the social service block grant funding that we asked for assistance with and you all helped us with that. That is a factor that

you have heard people talk about workforce here, and having funds

and then getting those funds out to people. For instance, we have

got mental health dollars in the city that we will have unspent because of workforce issues because we are trying to—you just can’t

go hire 300 social workers tomorrow.

Mr. BURGESS. Let me ask you about the workforce since that was

brought up in the remaining time I have left, Mr. Chairman. How

are you going to staff a new VA hospital and a brand new Charity

Hospital if the workforce issues are so critical? What are you going

to do to be able to overcome that? We build these gleaming new

towers to medical science and if no one fills the halls that is a problem.

Dr. CERISE. Yes, that is a good question. There is going to be—

first there is a significant period of time when that construction is

going to happen and their expectations of population coming back

and rebuilding the infrastructure. In addition, a fair amount of

that space, and I think LSU could probably talk to this better, is

going to be transitioned over from their interim hospital or temporary facility, at least on the State side of that facility, so some

of that activity will move over.

Mr. BURGESS. And where do you get the people to put in the clinics and the offices to take care of the patients?

Dr. CERISE. And that is the work that is ongoing right now, the

$50 million in workforce funds that we all are spending in the past

3 months. $11 million of those have been committed to over 127,

I think about 127 positions, so they are just active trying to get

people back into the area.

Mr. BURGESS. It is a long-term solution. Are you actively going

into the high schools and colleges and trying to identify those people who would like a health care career whose families live in the

area who aren’t going to be pulled out by outside interests?

Dr. CERISE. Absolutely. A great point. Funds have been put into

our allied health programs to train more of our own nurses particularly but other allied health programs also realizing that we are

not going to be able—everybody in the country is struggling with

the workforce not to the same degree so we are not going to be able

to pull them all in. We have to do a better job of growing our own

and that work is underway.

Mr. STUPAK. The gentleman’s time is expired. Mr. Melancon for

questions. We are going to go a second round here.

Mr. MELANCON. Mr. Burgess, I guess that is one of those things

if you build it, it will come. But being serious, let me ask, Ms. Richter, where is the Secretary today?

Ms. RICHTER. He is in New Orleans for a long-standing commitment; he had to make a presentation.

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Mr. MELANCON. Does he have any policy people down there with

him?

Ms. RICHTER. He does, I believe.

Mr. MELANCON. I just wondered. We heard in your testimony discussion of the GME program and how it functions. Unfortunately,

what does not come across in your testimony is a clear understanding of that the region’s concerns are regarding this program and

what options are available to address them. Now it is my understanding that the Secretary has a point person that is constantly

on the ground to deal with ongoing health care issues, Sonya Madison, maybe, is that correct?

Ms. RICHTER. She is with him.

Mr. MELANCON. OK. So she is with him and you aren’t. So what

is Ms. Madison or whoever the Secretary has appointed saying to

CMS are the main concerns of the med schools involving GME, and

moreover what is this point person suggesting as policy approaches

to address the GME issues in that region?

Ms. RICHTER. I think the information that we are getting about

the concerns of the medical schools especially are very consistent

with the white paper that they submitted to the subcommittee.

They are very concerned about the 3-year rolling average again as

I stated. Our general counsel believes we have no flexibility in that

area so we understand their concerns but we don’t believe we have

any flexibility within the GME program to address those. They are

also very concerned about the affiliation agreements that they need

to sign in order to reallocate their residents to the hospitals where

they can best serve folks from the hospitals that are either closed

or partially closed.

A lot of those requirements really are an artifact of the fact that

our——

Mr. MELANCON. Sorry to interrupt you, but I keep hearing the

reasons why we are not moving forward. What you first need to do

is go back and lock the ******* attorneys in a room and start

talking to each other, the people that are policy people, and what

it is that they brought you and suggest and what it is that the program doesn’t allow you to do and find out how you solve the problem, and if you can’t solve it you need to bring it to us here in the

Congress and say this is what it is going to take to move things

forward. We have been 2 years. Nobody is doing that. Mr. Cerise,

have you all had any discussions where they said, OK, sit down

with us and let us see if we can find some common ground to make

it work?

Dr. CERISE. We have certainly had discussions about this. We

haven’t been able to solve this 3-year rolling——

Mr. MELANCON. And when you come back, basically you come

back with some answers or suggestions or just technical gobbley

gook of how the program runs.

Dr. CERISE. This one certainly is complex. We don’t have a good

pathway to how to solve this.

Mr. MELANCON. I am looking, Ms. Richter, at your testimony and

on page 2 and on page 3, would you please bring that to the Secretary and ask him to read it and tell him if he can tell me exactly

what it is that is in there because I will be damned if I can figure

it all out. The Government and this Congress and the people that

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are here serving in Washington are here to take leadership. We

have got a catastrophic event that occurred 2 years ago, and if

there are some people that don’t want to rebuild New Orleans or

don’t want to rebuild the VA or don’t want to rebuild the Charity

or anything else, please stand up and tell us and quit playing

games with the people in Louisiana, and you can send that message straight back to the Secretary because we have had enough

time to move things forward and to find some common ground or

at least to bring us some suggestions of what we can do legislatively to try and solve the problems.

Do we have any suggestions from the Department? Has the State

given any suggestions to the Department?

Ms. RICHTER. I think the main suggestion that we have made to

people that I mentioned in my opening remarks is that it may be

appropriate for discussing whether a Medicare demonstration could

address some of the regulations and rules that right now seem to

be standing in the way of the situation, and we have already—I

have already asked folks to make sure that that happens quickly.

Mr. MELANCON. How long have we been having those discussions

within the Department?

Ms. RICHTER. We have had discussions on this issue internally

and with people in Louisiana and the affected areas for a long time

about demonstrations.

Mr. MELANCON. A year?

Ms. RICHTER. We have taken different——

Mr. MELANCON. Would a year be a reasonable time to say?

Ms. RICHTER. I think it may have been longer than that. I think

that Dr. Cerise said——

Mr. MELANCON. You can have a baby in 9 months. What legislation do you think the Secretary will support? Does anybody have—

do you all meet with him, do you advise him? What is he saying?

Ms. RICHTER. We would have to get back to you on that. We

would be happy to.

Mr. MELANCON. When do you need to get back to me? Can you

get back to me next week? I would ask you to go back and ask the

Secretary when he can get back to us, please, with a formal letter

and to give us an explanation what it is that the Department is

doing. I would like some timelines on it, and I would like to know

precisely what our expectations can be or should be. I think I have

overrun my time. I yield back.

Mr. STUPAK. By nodding your head that was a yes, and then, Mr.

Melancon, you will get a letter back to him?

Ms. RICHTER. Yes. We will talk to people when we get back about

timelines and things and get back to you quickly about that.

Mr. STUPAK. Mr. Whitfield for questions, please.

Mr. WHITFIELD. Mr. Neary, back in February 2006, Secretary

Nicholson issued a report to Congress about among other things

the VA hospital in New Orleans, and in that report it said the VA

believes that a new facility can and should be built within the city

proper. Could you tell me if that position has changed at the Department or not?

Mr. NEARY. I think, as you know, we have narrowed the potential opportunities, potential sites, that we are looking at to two; one

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of them is downtown, one of them is in Jefferson Parish just across

the line from Orleans Parish.

Mr. WHITFIELD. We are assuming since they said this in the report that that must still be their goal to have it in the city of New

Orleans. That was in the report to Congress in 2006. Ms. Richter,

Mayor Nagin and Ms. Boyle and others who live in New Orleans

talk about the lack of health care providers, and he talked about

a national call to bring physicians in and not able to provide health

care on a timely basis. What about the public health service, are

there physicians being sent there to assist in this effort or what is

the situation on that?

Ms. RICHTER. If I could ask Dr. Moritsugu.

Mr. WHITFIELD. OK.

Mr. STUPAK. Doctor, before you answer you have to be sworn in.

[Witness sworn.]

Mr. STUPAK. Go ahead, Doctor. If you would spell your name,

please, and then answer the question.

Dr. MORITSUGU. Yes. My name is Kenneth Moritsugu. I am the

Acting Surgeon General of the United States, and I understand the

question, sir. Thank you very much, Congressman, for the question.

As you are probably aware, the United States Public Health Service leaned forward and responded on behalf of the Department during the immediate crisis situation. We have continued to have presence within New Orleans although on a much lower level because

the intent of the United States Public Health Service Commissioned Corps was never meant to be a longstanding presence in

large numbers within the area. If anything, one might argue that

that would be counter productive to the economic recovery of the

area because by having external providers in the area, we would

probably be taking services or providing services that otherwise

private sector individuals would be providing.

And so we have been very careful in terms of providing that recovery assistance but not necessarily being there in large numbers.

Mr. WHITFIELD. But since everyone is saying that they don’t have

enough health care providers, can you on your own initiative provide additional physicians there for a period of time without any

legal problems for the health service?

Dr. MORITSUGU. It is possible for us to assign health care providers to areas within the authority of the United States Public

Health Service, sir.

Mr. WHITFIELD. And so why haven’t you done that?

Dr. MORITSUGU. Well, again, working together with the local and

State leadership, we have been trying to make sure that we balance what I described earlier was coming in and otherwise undercutting the strategies to develop a robust community of providers

who would settle there and remain there. If I might, sir, there are

other resources obviously that might be available in addition to the

Commissioned Corps of the United States Public Health Service

that I think the Secretary and the mayor and the local communities have also been looking at.

For example, the medical reserve corps who are a number of volunteers in the immediate area who in fact respond——

139

Mr. WHITFIELD. Well, I know there are a lot of options but there

does not seem to be the number there to meet it. Secretary Cerise,

this has got to be one of your priorities. How do you address it?

Dr. CERISE. Well, I appreciate the approach that was described

because early on we did run through a transition phase where we

had local providers who wanted to come back, and it was this balance between having people come in to provide the services and

then being able to pay our own people to come back. We are at a

different point right now. In fact, just over the past week or so we

restarted the conversations with the Public Health Service to look

if it is possible to deploy some teams to help provide some immediate relief while we take advantage of the workforce development

grants that we have got to recruit people in, so as we grow our own

and kind of replace those teams because we are in this position

where we continue to have the workforce shortage.

So I think it is something that we have begun to re-explore. We

went through that phase where you had a lot of bodies on the

ground. We thought we could transition to local providers, but we

continue to have a gap in a number of areas and so I appreciate

Jean Bennett in your office, who has been with us over the past

week talking to us about how we might do that.

Mr. STUPAK. The gentleman’s time has expired. If I may just follow-up on that, Mr. Under Secretary, you heard the mayor testify

there is a 47 percent increase in the deaths in New Orleans. Senior

citizens have just given up and are dying. There is increased stress

and increased mental health problems. Mr. Secretary, wouldn’t you

consider that a public health issue?

Dr. CERISE. There is no doubt that we have got gaps in the delivery system down in New Orleans so we do have a public health——

Mr. STUPAK. Dr. Moritsugu, could you answer that? It is a public

health issue in New Orleans, is it not?

Dr. MORITSUGU. Yes, it is, sir.

Mr. STUPAK. Well, would you consider it an emergency health situation with 47 percent increase in deaths since before?

Dr. MORITSUGU. I would consider it an emergency situation, sir.

Mr. STUPAK. OK. Then in an emergency situation can you go to

the President or the Secretary of Health and Human Services to

get some of this red tape cleared up to get the services they need

down in New Orleans?

Dr. MORITSUGU. If you are talking about the assignment of Commissioned Corps officers to provide short-term relief, that is certainly possible at the request of the local communities.

Mr. STUPAK. OK. So Mayor Nagin would just have to request you

to bring in more mental health people to help out with the mental

health aspect of it?

Dr. MORITSUGU. Assuming we had those resources that we could

bring in, sir.

Mr. STUPAK. Do you have mental health resources? We heard

testimony that nine people left in one mental health facility here

at the VA. Do you have those resources available?

Dr. MORITSUGU. We have mental health resources. I am not exactly certain the extent of the absolute need but would be willing

to enter into discussions with Mayor Nagin and with the Secretary.

Mr. STUPAK. OK. We don’t like long discussions.

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Dr. MORITSUGU. I understand, sir.

Mr. STUPAK. OK. Very good, very good. Thank you. Ms. Richter,

you said for the last year you have been discussing about doing a

pilot program or demonstration project. Why can’t you use your

demonstration project you used in Utah when they had problems

for graduate medical education, GME, you ended up allowing—

CMS allowed the States to receive the money and then they disbursed it to the hospitals. Why can’t that system work here in Louisiana?

Ms. RICHTER. That is certainly a model that we would be prepared to discuss with the hospitals.

Mr. STUPAK. I don’t want discussions. You have been talking

about it for a year.

Ms. RICHTER. Demonstrations are voluntary under the Medicare

statute and the hospital——

Mr. STUPAK. OK. So if Mr. Cerise would ask that, you would do

that, use the Utah model? You already got it demonstrated. It

worked in Utah. Why can’t it work in Louisiana?

Ms. RICHTER. The hospitals would have to agree to particpate in

it and there are differences. Utah, for instance, has one medical

school and so there are different issues in Louisiana because of the

two medical schools and the interrelationship between them.

Mr. STUPAK. But the money wouldn’t be going to the medical

schools. It would be going to the State to reimburse for the residents so we don’t have to have this 3-year rolling average because

they are at different hospitals who have not been part of this GME

before. That is what happened in Utah. Why can’t it work in Louisiana? Mr. Cerise, could it work in Louisiana?

Dr. CERISE. We have had discussions of that. There are potential——

Mr. STUPAK. So you talked about the Utah plan?

Dr. CERISE. We had someone from Utah come down and speak

to folks in Louisiana.

Mr. STUPAK. So it won’t work?

Dr. CERISE. There are issues with hospitals that own slots right

now that would be put at risk with a model like that so you would

have to have broad agreement to do that. And so what is being proposed on this 3-year rolling average is something that is less—I

would say less risky for the hospitals and much more straightforward, and that is for a limited time period give relief of these

partial payments as residents move from one site to the other.

Mr. STUPAK. It could be tweaked. It could be worked out, right?

The issue is the money going to the hospital that doesn’t have established GME, therefore, they are on a 3-year average. They get

about one-third of the money they should be receiving so why can’t

we just give it to the State like you did in Utah where they have

a program and you just send it to the hospitals? The hospitals are

willing to do this but they don’t want to do it at two-thirds hit.

Dr. CERISE. We are certainly open to solutions that will allow the

3-year rolling average issue to be adequately addressed in the program. If the State can play a role in that, we would welcome the

ability to do that.

Mr. STUPAK. Ms. Richter, Dr. Cerise testified at our last hearing

that the State has been seeking a waiver so it can use the DSH

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money that I talked about earlier, mentioned that to you earlier,

that otherwise would go through the State’s public health system,

and it uses this DSH money to support physicians seeking to keep

their practices open in the area. Why can’t CMS work with the

State on making that happen?

Ms. RICHTER. I really don’t have the ability to respond to that

right now. It is not a Medicare issue, but I would be happy to get

you a response.

[Ms. Richter responded for the record:]

Although HHS has made considerable strides in addressing the continued health

system recovery problems in the greater New Orleans area, the Department is currently not in favor of approving the use of Medicaid disproportionate share funds

for physician reimbursement in region 1 because such funding is not consistent with

the Medicaid statute.

Section 1923(g)(1)(A) of the Social Security Act imposes a cap or hospital-specific

limit on the amount of DSH payments that may be made to a hospital in a fiscal

year. This annual payment is equal to a hospital’s uncompensated costs of furnishing hospital services to persons eligible for Medicaid or who have no source of third

party coverage. The components of the hospital-specific DSH limits were further

clarified in a 1994 all-State Medicaid Director letter to include the unreimbursed

costs of allowable inpatient and outpatient hospital services. A recent decision from

the Departmental Appeals Board (Docket No. A–06–05, decision No. 2084, May 18,

2007) upheld this definition of allowable hospital costs under the hospital specific

limit. This decision upheld a disallowance taken against a State that included physician costs in their calculation of DSH eligible costs.

Generally, physician services are not recognized as inpatient or outpatient hospital services. They are usually separately billed and reimbursed under a fee schedule for physician professional services. Moreover, under Medicare cost and payment

principles, physician services are recognized as professional costs, nit hospital costs.

Because of these statutory limitations, Louisiana may not use DSH funding to pay

for uncompensated physician costs or other uncompensated costs eligible under the

hospital-specific DSH cost limit.

Mr. STUPAK. OK. Who would be the person we would direct this

to? Whose desk does it fall on?

Ms. RICHTER. The Director of the Center for Medicare and Medicaid State Operations is Dennis Smith. The Acting Deputy Administrator is Herb Kuhn. The Secretary would also be an appropriate

person.

Mr. STUPAK. OK. So Secretary Leavitt would be able to answer

that for us?

Ms. RICHTER. I would assume technical help——

Mr. STUPAK. He is in New Orleans today, right, the Secretary?

Ms. RICHTER. Yes, he is.

Mr. STUPAK. Is it true that today HHS just announced changes

to the inpatient perspective payment system? Do you know if they

did that today, Health and Human Services announced changes in

perspective payment system?

Ms. RICHTER. It is imminent, yes.

Mr. STUPAK. Believe me, they did, and that provides a major

source of Medicare revenue for the hospitals. Is Louisiana going to

take about $2 million, $3 million, $100 million, hit underneath this

program? Is the Secretary down there announcing that program?

Ms. RICHTER. He is not announcing the inpatient perspective

payment system rule, I don’t believe.

Mr. STUPAK. So places like Louisiana are going to be cut, right,

underneath this new system?

142

Ms. RICHTER. I think you are referring to the proposed rule. I

don’t believe that the final rule has been announced yet, and I can’t

really comment on——

Mr. STUPAK. A proposed rule takes place, right, takes precedent

there over the current rule?

Ms. RICHTER. The current rule is modified in response to the

public comment and we can’t really say what is in it until it is announced.

Mr. STUPAK. Well, take it back to the Secretary if they put in the

inpatient perspective payment system as proposed today that is a

$300 million hit for Louisiana, it goes contrary to the President’s

promise to restore this area. Mr. Melancon, you had a question?

Mr. MELANCON. Yes, I just needed to ask, is Ms. Madison the

person that is on the ground that is supposed to be the person that

is working between Louisiana’s hospitals and medical center, the

VA, and whoever else to solve the problems?

Ms. RICHTER. She is certainly the Secretary’s representative, yes.

Mr. MELANCON. Does she not talk to you all?

Ms. RICHTER. We talk.

Mr. MELANCON. Do you talk about Louisiana?

Ms. RICHTER. Yes, we do, sir.

Mr. MELANCON. We are 2 years out. Is the sense of urgency

gone?

Ms. RICHTER. I don’t believe it is, sir. I think it takes time to

work something out as complex as the Medicare Program but I

don’t think it is for a lack of effort or lack of interest.

Mr. MELANCON. But I haven’t seen anything put forward. Local

hospitals have come up with suggestions and thoughts that they

wanted to bring the people at CMS but we don’t hear anything

after that. Are you all just—what actually happens when you get

an idea, when somebody brings you in a thought, a suggestion, an

idea of how to make something work? What is the process from

there?

Ms. RICHTER. I think we assess it both for policy reasons and for

legal reasons about what the appropriate response would be. I

would say that I think the Department——

Mr. MELANCON. Is there a step in there that says take action?

Would you please go back and see to get one in there. That seems

to be the problem. Bureaucracy wants to talk but we need to be

doing more than talking. In a statement from Dr. Quinlan with

Ochsner, he had addressed issues affecting the hospitals and longterm what our needs are. I don’t think this is a new piece at all,

and I just wonder have you seen it, have you read it, have you discussed it, have you taken any action on it?

Ms. RICHTER. I read it recently when I got a copy of it in the past

several days. I think we are aware of their concerns. We discuss

things frequently, both Ms. Madison and her staff, working through

the entire Department, not just the Medicare Program to address

issues of concern to health care providers in Louisiana. I think that

the provider stabilization, the workforce fulfillment, all the DRA

grants are an example of the Department taking action and aggressive action within its capabilities to respond to some of the crises

in the area. The $100 million primary care grant that was announced on July 23 is an example of that.

143

Mr. MELANCON. A while ago we talked about responding. What

I would like for the Secretary to respond to is the red ink that is

bleeding at these hospitals and what it is that the Department proposes to do or suggests that we do, or help to do so that we can

solve this problem. We have to solve the GME, and I would like

to see in writing what it is that he suggests we do or hope that

we do and give that to us in writing, and with the DSH dollars to

compensate physicians. You ought to bring the folks down here to

meet with our staff. They seem to move more in 6 months than the

Department has moved in 2 years, and I would hope that if maybe

you can meet with them, we could help you all find ways to solve

the problems or to suggest to us ways that we can help solve the

problems, so if you could take those suggestions. And, Mr. Chairman, I would like to ask that that be given back to us within probably some time in September and if you would consider an October,

November hearing with the Secretary.

Mr. STUPAK. We will certainly look forward to another hearing

on this whole issue, and I am sure that HHS will get you those answers and that letter. Before I yield to Mr. Burgess, Mr. Mayor, the

Under Secretary indicated that if asked he would be able to provide

some services for you to cut down on that 47 percent increase of

deaths, the increased mental health, the stress, and other things

that senior citizens giving up down in New Orleans. Hopefully you

will take him up on that offer.

Mr. NAGIN. I heard an offer of sorts. I am not sure what the offer

is. It would be nice if we could get a letter from them outlining exactly what is available so that we could respond to it. If not, I will

send a letter of request but I heard if, maybe, possibly, we think

we can.

Mr. STUPAK. I would suggest, Mr. Under Secretary, if you would,

would you write the mayor and tell him what services you could

help out especially in the mental health area to cut down on these

deaths, 47 percent increase. We have to see what the cause. What

can we do? As you agree, it is a public health emergency. That is

what the corps is for. We should do it. Mayor, you may want to express your concerns there. And if necessary, the Energy and Commerce Committee, Subcommittee on Oversight and Investigations

will do a letter to try to keep you guys all talking together. With

that I will turn to Mr. Burgess of Texas for questions, please.

Mr. BURGESS. Thank you, Mr. Chairman. Is there anyone on the

panel who can speak to the state of the Louisiana State budget currently? Is it a budget that—is the State budget in crisis also or is

it doing OK? Are Federal funds the only source of funds to help

Mayor Nagin, help the hospitals? Are there any State funds available to restoration of health care in New Orleans?

Dr. CERISE. There was roughly over a billion dollars in health

care related appropriations in the past legislative session ranging

from pure State funds for things like mental health primarily to extend services not only in the New Orleans area but around the

State dealing with the Medicaid program and being able to pay

higher rates for providers of all sorts to be able to address some

of these issues that we are talking about today, extending insurance coverage to individuals, so there has been a significant investVerDate 11-SEP-98 08:59 Oct 22, 2008 Jkt 000000 PO 00000 Frm 00151 Fmt 6633 Sfmt 6633 Q:\DOCS\110-62 SCOM1 PsN: SCOM1
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ment of State funds coming out of this past legislative session as

well.

Mr. BURGESS. Our investment was $100 billion and the State

spent a billion. That is a startling ratio but is the State budget

itself, is it in balance? Is the State able to do the work that it is

going to be required to do as far as rebuilding?

Dr. CERISE. I am not the best person to talk to in terms of rebuilding. The State budget is certainly in balance.

Mr. BURGESS. Mr. Mayor, how is the city budget?

Mr. NAGIN. The city budget is in balance but it is primarily being

balanced by the continuous support from the Federal Government

through community disaster loans.

Mr. BURGESS. So the city is basically doing everything, all that

it can right now with the resources that it has available. We really

shouldn’t look to the city to be able to provide any additional help,

is that correct?

Mr. NAGIN. Yes, unless you want to buy some swamp land in

New Orleans east. We are using every available resource that we

have.

Mr. BURGESS. If it is packaged along with the kind of physicians

deal that we heard about earlier maybe so. Let me ask you this.

We are sitting here. It is August 1. And we are kind of in the middle of hurricane season, but we are just coming up to the worst

part of it. So I guess, Dr. Cerise, if I could ask you, as bad as

things are we all know they could be made worse by another bad

weekend so what are you doing currently to prepare for that? Do

we have some things that we have done differently now where we

won’t look to see this same sort of activity again? We have ways

to get people out of the hospitals that are there?

Dr. CERISE. Certainly there has been a large amount of work

that has been done at the local level, at the State level, and at the

Federal level, looking at the issues you are describing. There have

been laws enacted that put a different set of requirements on our

health care facilities in terms of how they will have plans in place

and report on those plans, more burden put on the State agencies

to monitor those plans to see if they are actionable, and each individual plan can be carried out and it is not relying on the same

set of resources. And HHS has given an enormous amount of support in this process as well with the State putting people on the

ground, looking at individual facilities, counting people, counting

assets that you would need, and so we are counting on the local

providers to have primary responsibility, the local government——

Mr. BURGESS. They are pretty stressed and you got a workforce

issue, right?

Dr. CERISE. What is that?

Mr. BURGESS. If you are counting on local providers you got a big

workforce issue.

Dr. CERISE. Right, and to complete, where there are gaps the

State is being asked to address those gaps, and where we realize

there are gaps too big for the State to address we are asking the

Federal Government to address those gaps. And so I do believe that

we are in a much better place and we have learned from the experience of Katrina, and I believe that we are in a much better place

if something were to happen this weekend.

145

Mr. BURGESS. I just have to tell you from the perspective of

someone who got a call in the middle of the night because a friend

of a friend who used to date someone who knew a mayor in one

of my towns called me and said, ‘‘Can you help us get patients out

of New Orleans who are ventilator patients?’’ And I asked aid

where are they and they said ‘‘I–10 and the causeway.’’ That didn’t

make any sense to me until I saw the news the next night and saw

indeed that there were ventilator patients at I–10 and the causeway. And I just have to tell you that can’t happen again.

I think in your position with the State, and certainly, I know

Mayor Nagin is sensitive to this as well, there has to be a way to

get the help to the people who need help because if the same thing

happens again your city is already in despair, and you would have

a lot more people who would need help getting out of the tough situation. We didn’t do a good job last time. Let us be darned sure

we are not caught in that same maelstrom again. And that would

be the only thing I would offer additionally, Mr. Chairman. I will

yield back. Thank you.

Mr. STUPAK. Thank you, Mr. Burgess. That concludes the questions of this panel. Let me thank each and every one on the panel.

Mr. Mayor, thank you for coming. I am sure we will be seeing you

again. We will keep on this issue. This panel is excused. I would

hope that Ms. Richter and the Surgeon General Moritsugu would

stay and listen to the second panel and answer any additional

questions that may arise and also to learn a little bit more of the

plight of these hospitals and providers that are on our second

panel. Thank you all for coming. We will have the next panel.

I will call our second panel of witnesses to come forward. Our

second panel, we have Ms. Diane Rowland, Kaiser Family Foundation; Mr. Mark Peters, West Jefferson Hospital; Mr. Leslie Hirsch,

Touro Infirmary; Mr. Patrick Quinlan, Ochsner Health Systems;

Mr. Gary Muller, West Jefferson Hospital; Mr. Mel Lagarde,

Tulane University Hospital, Chancellor Larry Hollier, LSU Medical

School; Dr. Alan Miller, Tulane University Medical School; and Dr.

Gary Peck. Would they all please come forward? It is the policy of

the subcommittee to take all testimony under oath. Please be advised that witnesses have the right under the rules of the House

to be advised by counsel during their testimony. Do any of you

wish to be advised by counsel? Seeing no one make an indication,

I take it you do not have counsel with you.

[Witnesses sworn.]

Mr. STUPAK. Let the record reflect all the witnesses answered in

the affirmative. We will hear from this panel. Before we do that,

I am going to have to run down to the floor. I have been asked to

come to the floor on SCHIP. I am going to ask Mr. Melancon to

take the Chair. I will be back as soon as I can but I have to run

down. And with that, Dr. Rowland, would you like to start with

your opening statement, please, 5 minutes. Your full statement is

part of the record. And please give your opening statement.

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TESTIMONY OF DIANE ROWLAND, EXECUTIVE VICE PRESIDENT, HENRY J. KAISER FAMILY FOUNDATION; EXECUTIVE

DIRECTOR, KAISER COMMISSION ON MEDICAID AND THE

UNINSURED, WASHINGTON, DC

Ms. ROWLAND. Thank you, Mr. Chairman, Mr. Whitfield, Mr.

Melancon, and members of the committee for this opportunity to be

with you today to focus increased attention on the health care

needs of the people of New Orleans. We have just completed an

analysis that looks at the health care challenges facing the population based on a survey we conducted in the fall of 2006 of 1,500

adults over the age of 18 in Orleans, Jefferson, St. Bernard, and

Plaquemines Parishes. It was clear from the survey responses that

the priority of the population of the city of New Orleans is to get

medical facilities up and running. It was their top priority after repairing levees. What we saw in this survey is that nearly half of

the residents report health care coverage and access problems; key

components of an accessible quality health care system are not

there.

One in four have no regular provider of care other than an ER.

Many face new health and mental health challenges and problems

since Katrina. One in 10 households with children reported to us

that they had a child in their home who was troubled or not getting needed medical care. Even though some of the most frail and

vulnerable may not have been able to return home to New Orleans,

the population in the city still faces physical and mental health

challenges that underscore the importance of improving the availability of services as well as improving access to both health and

mental health services.

Predominant among the health problems, health coverage remains a major obstacle to obtaining access to health care. One in

four non-elderly adults in the area is uninsured. In Orleans Parish,

nearly a third of the adult population is without health insurance

and 70 percent of those uninsured are African-Americans. There is

also a brighter story in Louisiana, however. The Medicaid and

LaCHIP programs have helped to provide coverage to children. So,

we see no difference between African-American households and

white households in the percent of uninsured children; less than 10

percent are uninsured documenting the importance of health care

coverage to both reduce racial disparities as well as improve children’s access.

For residents using the health care system, most report that they

had more difficulty with relocated doctors, fewer hospitals open,

and those open with strained capacity. One of their major worries

is that they will not be able to get the health care they need in

post-Katrina New Orleans. Many of the previous users of Charity

Hospital together with the broader uninsured and Medicaid population were disproportionately affected especially with the closure

of Charity Hospital, but they are not alone. What we saw was a

leveling effect of Katrina on all of the people of the New Orleans

region, reducing their access to health care services and further

creating barriers for them to obtain needed care especially preventive health services that are so important to maintaining health.

As the people struggle to rebuild their lives, establishing a health

care system that provides preventive and primary care services and

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specialty care when needed is essential to recovery efforts. Among

the things that can be done and should be considered are ways to

broaden coverage especially for adults to both promote their access

to care but also to reduce the uncompensated care burden, especially that physicians will feel. This will help bolster financing for

physician and clinic services as well as hospital care. We need to

be able to provide alternatives to health care for those now relying

on ERs. The health care payment policy needs to be used as a tool

to help reshape the way health care is delivered by allowing flexibility in the use of the Medicaid DSH funds for non-institutional

services and to reimburse physicians and by providing additional

support to rebuild the inpatient and outpatient mental health services that are now facing chronic shortages.

Obviously, investing in rebuilding a high quality health workforce is a critical component for the health care system. Facing the

higher labor costs, the need for GME reforms as so adequately discussed in the prior panel are critical to having a health care system

that will work for all residents of the New Orleans region.

Determining the future scope and role for the public hospital, the

VA hospital, and the academic health centers is essential both to

establish a source of care for the poor and uninsured as well as to

enable recruitment and training of health professionals so critical

to a future health care system.

I think, in closing, that we have learned many lessons from the

New Orleans experience, and one of them is that we are not prepared to deal with the aftermath of a major disaster such as the

Katrina event and the failure of the levees in New Orleans. We

need a program that can respond quickly and that can provide

more than short-term assistance. Cobbling together little solutions

from programs like Medicare and Medicaid will not respond to

some of the most immediate needs and the longer term needs that

the city of New Orleans continues to face. So the lesson that I take

away from our work is that we need to look in disasters at a way

when the health care system has been fractured to rebuild that

system perhaps with more demonstration authority and broader

use today even of the Medicare as well as the Medicaid waiver authority to get some of these services going. The needs are great,

and the time to fix them is not just 1 year, but 2 or 3 years, so

we need to look at long-term solutions but also to provide immediate care to address the needs of the population. Thank you.

[The prepared statement of Ms. Rowland follows:]

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Mr. MELANCON [presiding]. Thank you so much, Dr. Rowland. I

appreciate that. Mark Peters with the East Jefferson General Hospital.

TESTIMONY OF MARK J. PETERS, M.D., PRESIDENT AND CHIEF

EXECUTIVE OFFICER, EAST JEFFERSON GENERAL HOSPITAL, METAIRIE, LA

Dr. PETERS. Thank you. Good afternoon, Mr. Chairman and committee members. I am Dr. Mark Peters. I am the president and

CEO of East Jefferson General Hospital located in Metairie, Louisiana. I serve as the chairman of the Metropolitan Hospital Council,

as well as the current chairman of the Coalition of Leaders for Louisiana Healthcare. And I have been designated to present an overview of the specific problems facing five of the hospitals testifying

here today. East Jefferson is a publicly-owned, not-for-profit hospital on the east bank of Jefferson Parish adjacent to New Orleans.

We are a 450-bed tertiary care facility with more than 700 medical

professionals. We employ more than 3,000 people and are one of

the largest employers of the parish.

On behalf of the five hospitals represented here today from the

greater New Orleans region, East Jefferson, Ochsner Health System, Touro Infirmary, Tulane Medical Center, and West Jefferson

Medical Center, we appreciate the opportunity to speak to you

about the severe and continuing consequence of Hurricane Katrina

on our five hospitals. The region’s health care infrastructure was

decimated by Katrina and remains a very fragile shell. Due to the

continued closure of Charity Hospital, as well as several other hospitals, these three hospitals provide 95 percent of the hospitalbased services in the metropolitan area. We anticipate a combined

loss of $135 million in 2007. This loss will grow to $405 million by

2009.

Nearly 2 years after Katrina, we testify today to share with you

one very simple message. Our hospitals need your help. None of

these five hospitals are financially secure. We are all coping with

cash, cost, and staff issues on a daily basis. Our problems are similar even though we represent a broad spectrum of health care delivery. We stand together today to implore you to protect the patients in the New Orleans area from yet another crisis, one that

is immediate, preventable, and that you can help us address. Over

the past 2 years all five of our hospitals have testified before this

committee and numerous other Louisiana and congressional committees explaining the dire circumstances we face. We have all received some form of Federal and State assistance but that assistance is simply not enough to sustain us.

As the primary economic engines of the area these hospitals are

not only important because of the patients we serve but also the

people we employ and the economy we support. Without continuing

and sufficient Federal assistance these hospitals must all consider

making very difficult decisions that will negatively impact the quality of care and services we provide as well as employment to many

in our region. As you will see, on page 10 of my written testimony

when we compare the first 5 months of 2005 to 2007 for these five

hospitals, we have gone from a $13 million profit to a loss of $56

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million. That is a negative swing of $70 million. Of that $70 million

swing, $53 million went to labor costs alone.

Since the storm, our five hospitals have been working with Members of Congress, our State Department of Health and Hospitals,

specifically the Louisiana Redesign Collaborative and the U.S. Department of Health and Human Services, as well as Chairman

Donald Powell. I know that many members of this committee visited our area, some to provide direct assistance, others to learn, so

that what happened to us never again happens on American soil.

For these efforts we are extremely grateful. We are active and supportive partners in a long-term redesign effort. However, all who

have analyzed our region’s needs have reached the same logical

conclusion, redesign must first begin by addressing immediate

needs.

While we have asked Congress to either adjust current programs

for unique circumstances or for specific targeted funding neither

approach has resulted in our financial stability. Therefore, we five

hospitals have identified five problem areas and potential solutions

for Congress’ consideration that each of us will detail in turn. We,

of course, gladly welcome your creative assistance on these or other

funding sources. Relief from wage costs, help with rising non-labor

costs, suspension of the 3-year rolling average for graduate medical

education, nursing immigration relief and help recruiting and retaining nurses and physicians, and consistent, adequate funding for

uncompensated care.

The assistance from the Deficit Reduction Act for uncompensated

care and from CMS to alleviate the wage index inadequacy was

greatly appreciated. However, the funds were distributed equally

among 31 parishes and 65 hospitals. Some of the hospitals that received funds are having very profitable years while the hospitals in

the New Orleans metropolitan area struggle to remain financially

viable. If the current Medicare wage index is not extended to reflect actual costs, East Jefferson General Hospital will continue to

lose $2 million to $3 million per month. Using our current appropriate cost my hospital should see $18 million annually in wage

index assistance. Instead, we received a one-time, $5 million payment through the DRA.

Moving forward, we need a predictable, multiple year commitment to our region’s health care providers. Also, our Nation will be

1 million nurses short by 2020. The situation is much worse for us.

Before Katrina, East Jefferson had a 2 percent nursing vacancy.

Now it is 12 percent or some 90 positions vacant. In 2006 we hired

60 American-trained, Filipino nurses. Due to immigration caps and

stalls, we continue to wait for these new hires. These nurses will

save us $300,000 per month in labor costs or $3.6 million a year.

Filling all 90 positions would save East Jefferson $4.5 million per

year.

Every tragedy and disaster provides lessons to either avert the

next one or mitigate the consequences. This disaster is no exception. I am often asked by my health care colleagues throughout the

Nation, how can I help my hospital financially survive a disaster

like this, a hurricane, an earthquake, a floor or a tornado. I would

advise them that it is their best, long-term economic interest to

close their doors. Why would I offer this advice? It was in our comVerDate 11-SEP-98 08:59 Oct 22, 2008 Jkt 000000 PO 00000 Frm 00175 Fmt 6633 Sfmt 6633 Q:\DOCS\110-62 SCOM1 PsN: SCOM1
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munity’s best interest to stay open and provide services to desperately needed. However, considering our financial outlook my

hospital would have been better off closing than waiting for Federal

and State relief. This is an appalling dilemma to face. Choosing between providing care for people in their time of greatest need or

insuring the long-term viability of the hospital. Doing the right

thing for our community meant that our hospital and the patients

we serve may soon become victims of Katrina again.

I urge you to use the lessons learned from Katrina to not only

protect our fragile health care infrastructure but to adopt policies

that improve disaster response in the future for all Americans.

Thank you for the opportunity of speaking.

[The prepared statement of Dr. Peters follows:]

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Mr. MELANCON. Thank you, Dr. Peters. I appreciate it. Leslie

Hirsch with Touro.

TESTIMONY OF LESLIE D. HIRSCH, FACHE, PRESIDENT AND

CHIEF EXECUTIVE OFFICER, TOURO INFIRMARY, NEW ORLEANS, LA

Mr. HIRSCH. Mr. Chairman and members of the subcommittee,

thank you for inviting me to tell you about the continuing health

care crisis in New Orleans. Each of my colleagues here today will

speak to this crisis from their own perspective. Mine is that of the

president and CEO of Touro Infirmary, an organization that in its

155 years of existence has overcome such challenges as yellow fever

epidemics, Civil War, and the Great Depression. We are community

based and not-for-profit. But now Touro, along with the entire New

Orleans Hospital community, is facing a crisis unlike any other in

our history or for that matter in the history of American health

care.

Never before has the entire medical infrastructure of a major

American city been in danger of collapse but that is precisely what

could happen if we continue on the present course. After temporarily closing 3 days after Katrina and opening less than 1 month

later, we made the decision to forge ahead to restore Touro’s operations, irrespective of the economic consequences. People were, and

continue to be, in urgent need of medical care, and for us it was

then, and it is now, a matter of mission and doing the right thing.

That is our job and we are proud of it. But 2 years have passed

since the greatest natural disaster in American history devastated

the New Orleans area, and Touro and other continue to play a pivotal role in supporting New Orleans’ recovery but the cost is staggering and if unchecked puts our future viability in jeopardy.

Since Katrina, Touro’s operating losses have mounted totaling

many millions of dollars with no end in sight. Our bond rating has

suffered, increasing the cost of borrowing. We are depleting cash

reserves at an alarming and unsustainable pace. In post-Katrina

New Orleans, the economic fundamentals of the health care market

are broken. Our cumulative costs of uncompensated care, personnel, property and casualty insurance, and utilities have all dramatically increased and have outpaced any rate increases or onetime grants that have been provided. Touro’s property and casualty

insurance is up 342 percent. Utilities are up 48 percent, postKatrina. I believe, however, that the unprecedented rise in the cost

of health care personnel is the biggest challenge and the most costly. Recruiting and retaining nurses, physicians, and other health

professionals is a daily struggle for Touro and everyone else at this

table.

However, the nursing shortage has had the greatest impact postKatrina forcing us to heavily depend on contract labor, a very expensive form of staffing. And at Touro, for the first 6 months of

2007, our costs of contract labor increased by $4.6 million over the

same time period the year before. Our full time equivalent contract

registered nurse cost is dramatically higher than when they are

our own staff. Our costs went up 366 percent during that period.

The Medicare wage index methodology won’t recognize this as previously mentioned until 2010, but exacerbating the problem is that

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Medicare does not pay hospitals their full cost nor does Medicaid,

thus, our hospitals are not paid full costs to begin with and we are

falling that much further behind.

Graduate medical education has been discussed at length today,

and I will keep my comments brief here, and simply just say that

we stepped up during a time of need when we needed to protect

the graduate medical education system in New Orleans, and it was

the right thing to do, but we are paying a heavy price today. We

have reduced several residents, about 12 going into this academic

year, but even with that this 3-year averaging which must be addressed is still costing us nearly $4 million this year. During the

last hearing, some of you mentioned what has been done, and some

of those comments have been made here today. I would like to add

to what Dr. Peters just said about the provider stabilization grants.

In some respects it belies logic, and I think in retrospect if we

look at the present circumstance of our hospitals and the losses

that have mounted where was the logic and the methodology of distributing $90 million to hospitals, more than 60 of them in 31 different areas designated by FEMA, different parishes, and as was

stated some of those very hospitals are continuing to operate at a

surplus. I don’t begrudge them of that. They should. Every organization needs to operate at a surplus if it is going to continue to reinvest and move forward. But those monies would have been better

spent in New Orleans. Touro received some $3.6 million of that

money and for that we are very appreciative. Our annual need is

three times that amount.

In closing, I just would simply like to say that I agree, I won’t

repeat all the recommendations that Dr. Peters made, I agree with

everything that he said so I won’t be redundant in that respect. I

will just simply say that the present situation facing Touro as well

as the other hospital in Orleans and Jefferson Parishes is very critical. While I do not speak for the other institutions, I can say that

if some change in our financial condition does not occur soon, we

will be forced to re-evaluate the level of services provided to the

community. In the long term we simply will be unable to sustain

ourselves. Thank you for the opportunity to be here today.

[The prepared statement of Mr. Hirsch follows:]

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Mr. MELANCON. Thank you, Mr. Hirsch. I appreciate it. Dr. Quinlan, we have got one floor vote. It will probably be unless something changes about 15 minutes so we will take a break and then

we will have—one procedural vote so we should be back in about

15 minutes. Thank you.

[Recess.]

Mr. MELANCON. I want to apologize for the delays. We are having

on the floor SCHIP which I think I don’t need to explain to most

people in the medical field, and there is debate and ongoing motions or as we would say commotions, so I think Mr. Stupak is still

on the floor to speak and we will just go ahead and get started, and

if he comes back I will move out of the chairman’s way. I think

when we stopped Mr. Hirsch had given testimony, and Dr. Quinlan

was up to be next. And if you would, please, Dr. Quinlan.

TESTIMONY OF PATRICK J. QUINLAN, M.D., CHIEF EXECUTIVE

OFFICER, OCHSNER HEALTH SYSTEM, NEW ORLEANS, LA

Dr. QUINLAN. Thank you. We understand these things happen.

We appreciate your being here, and I want to thank the committee

members for their obvious interest and continued commitment. The

commitment is the part that I really feel that, and that means a

lot to us. And I would also like to recognize the staffers whose involvement who clearly searched for understanding and meaningful,

timeful action, and that is why they are recognized by the participants here. I would like to just edit my comments today. Obviously,

it is kind of a difficult time for everybody and rely on my submitted

testimony for much of the detail of which most of you are exquisitely already familiar, but I would like to take this time to focus

on the essential issues because often the more information we get

the more confusing things become, and I would like to redirect the

attention in the time we have to the plight of the five hospitals

that, as it was mentioned, take care of the bulk of people in New

Orleans, and I am talking about the region of New Orleans.

Please focus on our immediate needs. If you took home one statement that would be it, the immediate needs, the immediate needs

of our hospitals, the physicians and other health care professionals.

The system consists of more than the building. It is all the people

that work together to take care of people. The critical nature of the

short-term needs have been recognized since the beginning by everyone. Unfortunately, it has been more about words and deeds but

has been relatively lost in the search for long-term solutions. And

you saw it happen here today. Most of the efforts and energy was

expended about these long-term questions when we live with the

immediate needs on a daily basis, and the consequence of that misplaced focus, I think has been expressed by my colleagues amply

well rather than repeating it. The consequences are severe.

Please lead the efforts to correct this problem. I felt the emotion

that has to be focused around the things that we talked about or

others and as the staffers have rightly done focusing on what can

we do soon to make the effects felt immediately. Anything other

than that is actually a distraction from the immediate needs. We

were reminded that the hurricane season is upon us, and I promise

you that in the event there is another disaster the people sitting

here at this table, these three hospitals will be in the middle of it

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again. And unfortunately I hope that the same results don’t occur

for everyone. I did want to emphasize a few points that first there

is virtually no money at present that is available for clinical care

givers. Currently, and I will speak to my particular situation, currently we employ about 600 physicians and more than 120 licensed

mid-level health providers who receive no payment for the care of

the uninsured.

This acts as a significant drain for our health system because the

lack of funding for both hospitals and Ochsner physicians and is a

special problem for Ochsner. We have been successful in the recruitment of physicians and nurses. Currently we are bringing

about 40 physicians on towards the last half of the year so we continue to do our job in the absence of payment. Second, well intended money to help our hospitals is not reaching us on a timely

basis. That is a recurrent theme I know you have heard and will

act on. Specifically, only $21.9 million of the $1.4 billion allocated

by HHS and FEMA for Louisiana has reached the Ochsner Health

Care System, the largest system in the State with 9,000 employees,

and who was really one of the anchor points in the crisis and since

then for the region, and I emphasize region. Despite this generosity, we have experienced $65.5 million of additional un-reimbursed operating losses from Katrina, and that is

the other issue is about operating losses. The problem is that dollars intended to help us and the immediate folks around us have

gone to help a wide variety of providers who were not as impacted

by Hurricane Katrina as Ochsner and the other hospitals testifying

here today. These are important things for us. I will emphasize

that we need to address Katrina-related expenses, specifically the

cost of workers as it has been repeatedly emphasized. This cost has

exploded, as well as the cost of utilities and insurance. These are

direct operating costs of which we have no control and to which we

have not contributed to any of the problems. You have heard about

GME reimbursement.

Immigration assistance is a real issue for us. Our system has 300

open nursing positions. We too have hired additional foreign nurses

from the Philippines, and we have 100 now waiting for visas. So,

if we need special action to address the critical issue of increasing

the work pool, all we will do is aggravate the inflation spiral, which

is one of the major contributors to our economic crisis today. Half

of our expenses are worker related. We need to blunt that spiral

and new workers are the only way in number that will affect that.

And, finally, we need to consider new mechanisms for distributing

appropriations in a way that is tied to things that are clearly in

the public interest, to promote those kind of behaviors that are economically sound, and to and promote health for our patients. That

is it in brief. I do feel that in view of the effect of the distraction

of the downtown issues, I need to make a few comments.

With regard to the VA, health care and economic recovery is important to us all. All of us together. We must and we need to find

constructive solutions together rather than create an all or nothing

alternative. This should not be a contest as it was characterized

but I think in many ways it was accurately characterized because

we are the ones who represent those who are in the middle which

is the patients. It is easy to become energized about this. It is easy

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to become frustrated. We all have ample reason to be frustrated,

but I find in my own position frustration doesn’t make me smarter.

What I need to do is settle down and find solutions together. I

think Kaiser Family did an important study for us all, and you notice it is regional. New Orleans is a regional problem. The solutions

have to be regional in nature, not just in word but in deed, and

that is an essential issue here. Dollars and patients and disease do

not respect political boundaries.

We need to remember that because we are on the point. I chair

GNO, Inc. I live in New Orleans Parish. GNO, Inc. is a development group, and I have spent a great deal of scarce time to promote the development of the city in particular. And my sentiments

are simply that we have to learn to ask the right questions and

make sure our understandings are current so that we don’t find solutions that in fact don’t fit the problem, that don’t solve the problem. One of the few things I have learned as CEO is not that I

have to find solutions. The art is to find the right question so that

when it is addressed the problems are in fact resolved. So I would

ask us to re-examine the factual basis of all of these things to make

sure they are current and that what we do is consistent with those

goals for the region.

My major interest is in taking care of patients. That is what we

do, be they veterans or anybody else, so whatever solutions we

have need to go with those in mind. In particular with regard to

the VA it became evident to me as I was trying to unravel this

issue with everybody else that no one had asked the veterans what

they thought, so we did. Now we have been criticized for asking the

veterans. That escapes me. But that’s OK. I don’t mind that kind

of criticism because it is our duty when you have a captive population to find out what their needs are and meet them as quickly

as possible. I hear the need for speed, and we do it in a way that

would be as accurate as possible to remove bias, so we had two

independent surveys of 1,200 veterans asking them where they

wanted to get their care and from whom they would get it.

That is a legitimate question and it is a kind of thoughtful approach we need to engage in as we sort out these problems so in

terms of location for the VA which has become an issue in itself

what I would like to say is let us put it in proper perspective of

health care for everybody, economic recovery for everybody, but not

losing sight that they are all patients. In my business as we do in

our system is asking the patients of how we are doing, what their

interests and needs are, and making sure that is first. And I hope

that we can reboot here in a sense and become constructive together. The problem is too large and too complicated to attack successfully in a piecemeal fashion. We will live with those consequences long after we are all out of office and the consequences

of good decisions will be great, the consequences of poor decisions

will be lasting and destructive. So let us be constructive and let us

be current. Thank you.

[The prepared statement of Dr. Quinlan follows:]

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Mr. MELANCON. Thank you, Dr. Quinlan. Mr. Muller, if you

would be next, please.

TESTIMONY OF GARY MULLER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, WEST JEFFERSON MEDICAL CENTER,

MARRERO, LA

Mr. MULLER. Good afternoon. It is a pleasure to be here. I am

Gary Muller, CEO at West Jefferson Medical Center, and I feel like

I am with my family who is the committee and who is the staff of

the committee and who are my colleagues, every one of these people sitting at the table because we are 2 years post-Katrina and our

situation is getting worse and we are all in this together to try to

help to fix it. In the interest of time and not reiterating what a lot

of people have said, I am going to focus on some issues that are

specific to our common goal of the five hospitals and continuing to

focus on that because that is the issue that is the problem. We

can’t get off that.

West Jefferson was in good financial standing before Hurricane

Katrina, and I think your charts and the graphs you have seen of

the pre-Katrina numbers are specific to how good it was in terms

of making a business work before and how horrible it is today.

West Jefferson has had $48 million worth of operating losses since

Katrina and since this subcommittee met, in March we have had

$6 million more losses. If we were to meet again in 4 months, we

would have at least $6 million more. We cannot continue like that.

We are trying to solve our own issues as best we can. From a CEO

standpoint you can only control so much, and what we can do is

spend money wisely. We have implemented business improvement

plans. We have negotiated with doctors in win-win situations to

create cost savings programs. This month West Jefferson became

the first hospital in Louisiana’s history to receive the Energy Star

award for energy efficiency from the Environmental Protection

Agency.

We can only trim costs so far. We have all done that. We hope

not to do anything that affects patient care but what we need now

is additional grant dollars and payment increases in some of the

areas we have talked about today. I would like to explain to you

five of the issues that are really a financial crisis for Orleans and

Jefferson Parishes. Again, get your thinking down to the area. This

is not a Louisiana problem. It is Orleans and Jefferson. For example, high labor costs are specific to us. Immediately after the storm

we hired contract nurses, and we had almost 100 of them. We

spent $12 million that year. The previous year we had spent $2

million, so we were already in a negative $10 million, and we did

that to replace employees who left after Katrina but also to open

more beds. We felt that the public needed to have access to health

care. Nine hospitals closed. Three were left open. Several have

opened since then. But without us doing that, people literally

would not have been able to get care.

To keep the doctors and the nurses in New Orleans, we can only

do so much by hiring them but we are being put in a difficult position because it is also the levees, the schools, the businesses are

not opening. What we are doing to get more nurses in the future,

we are partnering with Our Lady of the Lake up in Baton Rouge,

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and they are going to open a nurse training program on our campus to groom our own nurses because we can’t go and hire enough

from the Philippines or from Texas and Kansas City to bring into

Louisiana. We need to grow our own. We can do that but we need

something like a wage index adjustment because the wages have

gone up 25 percent, and our recruitment costs have gone up also.

West Jefferson predicted that without operating income that our

bond insurance companies would be asking questions why you are

not making money, and it might seem sort of obvious to all of us

on the team here, but they are very focused on making sure bonds

get paid so they put us in technical default of our bonds at West

Jefferson, and they put a mortgage on West Jefferson. They actually have a mortgage. That is costing us money, at least a million

dollars in consultants and at least a million dollars in interest during the year, plus we don’t know what they are going to do next.

Now when they come in, they don’t provide services to the community. They cut costs. And we are trying to do the best we can, and

we continue to look at utilities, supplies, and all the other things,

so we are going to continue to do that, andhope that we can get

money to offset our operating losses very soon.

So we are sort of a little different from everybody else in that respect. We are under a lot of pressure. Non-paying patients, the primary care clinics in our region received the $100 million grant

which we support, but you need to be aware that this assistance

should greatly increase the number of clinic patients which is

great. You need to also realize that this will increase demand for

inpatient and outpatient specialty care services at our five hospitals and at LSU further adding to our financial losses. In other

words, if somebody comes in as an unreferred, we call them, uninsured patient to look for cancer care without insurance nobody else

in town has these services so we are the ones, we are going to get

into it even deeper with uninsured because of that.

Graduate medical education. We were proud to have opened one

of the two new teaching programs. The others continued, and I

think Touro expanded and others did. We are working with LSU

and Tulane to increase that, but we are losing money on that because of the 3-year rolling average, and you guys are focused on

how to maybe get CMS to re-look at that. I can tell you, we can’t

continue to take more residents without having the funds to do it

so we appreciate your help on that. Doctors, we made a commitment to keep doctors by giving them a subsidy after Katrina, and

we had $2.5 million coming out of hospital funds in those six. We

have also chosen to pay our doctors in full for their services in the

emergency room, but it comes out of West Jefferson’s budget, which

is not funded by anybody except the funds that we have for patients. So it is deepening our bottom line, but I think Dr. Burgess

continues to try to help us, but help doctors stay. We are doing all

we can but we are getting further behind but we feel that is a commitment to the community.

We are facing a category 5 financial storm which can result in

the same thing. I think if it came again during August or September this year it would be worse. Even if ground were broken today

on a new Charity Hospital, VA hospital, whatever, we are all talking 6, 8, 10 years to do something. We just can’t hold out much

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longer. Again, our losses continue every month as all the hospitals

do here. We want to continue to serve the community. We support

everything you guys can come up with. If we have other ideas, we

will continue to come up with those. I would welcome a GAO audit

tomorrow. It can’t be long. I would ask them also to look at the

funds that have previously been spent and why they are not focused on region 1. They went all over the State. A lot of the hospitals in the State are doing very well. Let us spend the Government’s money wisely and focus any funds that come on our region,

Orleans and Jefferson Parishes.

We really appreciate every one of you all, your staff, our colleagues here. We look forward to working into the future to solve

this problem. Thank you.

[The prepared statement of Mr. Muller follows:]

TESTIMONY OF GARY MULLER

Mr. Chairman and members of the subcommittee, thank you again for the opportunity to testify before you. Your continued support and dedication to our cause is

truly appreciated. We are thankful for the work of your staff to maintain conversation with us with concern for our deepening wounds. Thank you, and the other

members of Congress, for your visits to the area and your understanding of the full

and long-lasting consequences of the most devastating natural disasters in American history.

West Jefferson Medical Center is a 451 bed community hospital located 10 miles

from downtown New Orleans. After the storm, we were one of only three hospitals

in the entire area to remain open- several hospitals, including Charity Hospital, still

remain closed. West Jefferson Medical Center was in good financial standings before

Hurricane Katrina with a projected profit of $8 million in 2005. When I testified

before you in March, West Jefferson had incurred $48 million in Katrina-related operating losses. That number has since increased to $54 million- an additional loss

of more than $6 million in only 4 months.

I want to assure you that I am here today to offer the facts regarding the operations at West Jefferson Medical Center. Our numbers have nothing to hide, our

books are open and we are confident that we have done everything in our power

to run our hospital in an efficient manner. We continue to pursue that cause intensively. Currently, West Jefferson is operating at 2 percent under its 2007 budget

and loosing money daily.

In fighting to provide the best possible care for our patients while spending our

money in an efficient manner, we have implemented several business improvement

plans and negotiated with doctors to create cost-saving programs. This month, West

Jefferson Medical Center became the first hospital in Louisiana’s history to receive

the Energy Star award for energy efficiency awarded by the Environmental Protection Agency. We continue to make great strides in this direction.

Fortunately, The West Bank of Jefferson Parish was not flooded by Hurricane

Katrina and West Jefferson Medical Center was spared from extensive physical

damage. However, West Jefferson experienced a large increase in patient volume as

more than 1000 patient beds were closed in the New Orleans area. To compound

the problem with an increase in overall patient volume, our hospital has also seen

a 50 percent increase in patients that are uninsured. So even as we struggle to accommodate the increased patient load, fewer of these are paying patients leaving

us with much higher costs and more losses.

The healthcare situation in Louisiana has an uncertain future. However, these

five hospitals testifying before you today will continue to provide high quality services as long as our doors remain open.

The other four CEOs and I, and all of the patients we serve, are extremely grateful for Congress’s response on behalf of all America to Hurricane Katrina. However

not enough of this support has reached our hospitals, our doctors, our nurses, and

our patients to remedy our ongoing needs. We urge the congress to review these existing allocations made to Katrina Disaster Funds with the current healthcare crisis

uppermost in mind.

I’d like to explain to you five of the issues that count for some major financial

issues faced by these five hospitals from Orleans and Jefferson Parish.

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We continue to suffer losses due to higher labor costs. Immediately after the

storm, we were forced to hire contact laborers because so many of our healthcare

workers evacuated. At one time, we employed almost 100 agency or temporary, outof-region nurses to replace employees who left the area. In 2006 alone, these increased labor costs amounted to $12 million—double our costs in 2005. In summary,

our nurses are twice as expensive while the patients that we treat pay half the cost.

This is exactly why we continue to lose money.

In order to keep nurses and doctors from leaving a region still struggling to reopen its schools, its stores and restore its quality of life, we have had to boost recruitment and retention packages by 25 percent. West Jefferson is also opening a

new nurse training program on our campus as a long-term solution to the nursing

shortage. While we have received a one time grant to cover some of this additional

labor cost, we need an ongoing fix for this ongoing problem. As requested before,

we once again recognize the need for a Wage Index Adjustment to help us manage

the greatly increased cost of labor.

Non-labor costs present unique issues for West Jefferson Medical Center, but

similar issues are shared by all five hospitals. Because West Jefferson, as a public

hospital, remained open through the storm and immediately incurred millions of

dollars in losses, we received a Community Disaster Loan. I’d like to take this opportunity to thank Congress for the CDL that we received in February 2006 as it

enabled us to continue to provide services to the area. We’d also like to say thank

you for recent Congressional action allowing this loan to be forgiven. We now find

that FEMA regulations require us to wait until 2009, three full years after the

storm, to apply for forgiveness. We hope Congress will urge the Administration to

grant forgiveness immediately to relieve the burden of interest costs over the next

three years.

We have incurred further financial strains as West Jefferson Medical Center was

recently declared in default of its bond insurance requirements. As we predicted, the

operational losses since Hurricane Katrina, coupled with our unpaid business interruption insurance claim, have placed us in default with our bond insurers. This has

resulted in the insurers placing a mortgage on our hospital and implementing other

fees and restrictions on our operations. The impact of continuing to carry the CDL

interest and the default of our bond insurance has added more than $2 million a

year to our costs. In addition, with other businesses in the area we share increases

in insurance rates, utilities, supplies and more. The accumulation of these costs continues to contribute to our millions in losses.

My hospital has also seen a significant increase in non-paying Emergency Room

patients. With overall patient volume increases, Emergency Room wait time has

peaked at around 14 hours. In addition, the average length of stay for patients has

increased from 6 to 7 days in just one year which further increased costs. Primary

Care Clinics in our region received an additional $100 million grant recently, which

we support. You need to be aware that this assistance should greatly increase the

number of clinic patients. You need to also realize that this will increase demand

for inpatient and outpatient specialist care services in our 5 hospital, further adding

to our financial losses from the uninsured.

Another shared concern is reimbursement associated with Graduate Medical Education. West Jefferson Medical Center became a teaching hospital after the hurricane in response to the needs of displaced medical students in the region. We have

been supportive and understand the importance of our teaching program but, like

others, are being penalized by the current GME reimbursement rules. Again, we

lose money on every resident, but think it is vital to keep training medical personnel

in our region as we depend on the vast majority remaining here after they complete

their studies. We ask that the current reimbursement rules be reconsidered.

In line with strains felt nationwide concerning workforce issues, we also face a

similar but more severe problem. Although we have felt these strains from physician

shortages for many years, currently, physicians are leaving our area at a rapid rate.

Our hospitals have to offer large recruitment and retention packages to keep doctors

and staff from leaving, and even still, keeping those highly trained workers has

proven to be a very difficult task.

As mentioned earlier, West Jefferson is currently treating more than twice as

many uninsured patients than before the hurricane, while only being reimbursed for

45 percent of our costs. Every time an uninsured patient is admitted into our hospital, we lose money as West Jefferson Medical Center is only partially reimbursed

for the treatment of these patients. However, we have chosen to pay our doctors in

full for their services. This causes a deep and direct cut to our bottom line, but our

patients and community would suffer more without an adequate number of doctors.

As a public hospital it is our charge to serve all those who come in our doors—but

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unlike many public district hospitals that you may be familiar with, we receive no

dedicated revenue from our Parish government.

As chief executive officer of West Jefferson Medical Center, I am faced with these

and other financial issues everyday. While we continue to offer vital services to the

community, I struggle with meeting the financial demands that pull my hospital in

multiple directions. Roughly two years ago, Hurricane Katrina forced the closure of

more than 1,000 beds in New Orleans. We are now facing a Category Five financial

storm which could result in the same. Even if ground were broken today on a new

Charity hospital, our hospital would still have to wait three to five years for the

completion of this hospital until some of these costs are alleviated.

Since the 4 months since I came before you in March, West Jefferson has lost an

additional $6 million. If I were allowed to make a presentation before you again in

4 months, unless changes are made, my story would be the same- more losses. Our

hospitals can only serve the community so long while facing such mounting debt.

I will leave it up to you to consider what actions will need to be taken if this continues.

Once again, I offer many thanks to you, Mr. Chairman and members of the subcommittee for your attentiveness and understanding.

Mr. MELANCON. Thank you, Mr. Muller. Mr. Lagarde, if you

would.

TESTIMONY OF MEL LAGARDE, III, PRESIDENT/CEO, HOSPITAL

CORPORATION OF AMERICA, DELTA DIVISION, NEW ORLEANS, LA

Mr. LAGARDE. Mr. Chairman, members of the committee and

staff, good afternoon. My name is Mel Lagarde. I am vice chairman

of the Partnership Board and managing partner for Tulane University and Clinic, which is a two-hospital system with clinics and facilities in both Jefferson and Orleans Parish. Tulane University

Hospital and Clinic is a joint venture between Tulane University

and HCA. For over 160 years Tulane University Medical School

has provided innovative medical education, cutting edge research,

and quality clinical services to New Orleans. I was at the Tulane

downtown campus during Hurricane Katrina. I was directly involved in the complete evacuation of all patients and employees

from the facility.

After being closed almost 6 months due to damage from Hurricane Katrina, Tulane reopened our main campus in February 2006

and is providing services in the area most directly impacted by the

hurricane. As someone involved in the overseeing the rebuild, I appreciate the opportunity to come before you to discuss Tulane’s experience in providing health care to New Orleans after Katrina.

Despite significant progress during the last 2 years, the New Orleans health care system has not recovered from Hurricane Katrina.

Since then, these coalition hospitals have provided approximately

95 percent of the health care services in the New Orleans metropolitan area providing patients with essential health care services

despite significant challenges including constrained resources, damaged infrastructure, and significantly increasing cost.

After reopening one-quarter of our former size, we now maintain

306 of our 335 pre-Katrina beds that are downtown in Jefferson

Parish campus. To date we have spent more than $250 million repairing and restoring Tulane. This represents an important investment in the health of current and future New Orleans residents

and the recovery of the greater New Orleans area. Tulane is the

primary teaching hospital of the Tulane University Medical School.

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Tulane Hospital and its patients are essential to the education of

medical students, residents, and fellows who serve the New Orleans area. As the result of significant work, we are currently providing training for 100 percent of our pre-Katrina resident positions.

The success of the medical school is closely linked to the success

of Tulane Hospital, and we are committed to maintaining that connection into the future.

The reopening of Tulane has also provided access to health care

services for area veterans. After the Department of Veterans Affairs medical center closed due to flooding from Katrina, Tulane

has granted staff privileges to VA physicians and permits them to

treat VA patients at Tulane. We hope our support will permit the

VA to rebuild in downtown New Orleans. The coalition hospitals

play a vital role in the recovery of patient care needs in New Orleans and in the greater New Orleans area. Although the Federal

and State government have provided recovery funds they are not

adequate to address the challenges faced by hospitals serving postKatrina New Orleans. The coalition hospitals’ labor costs have skyrocketed as a result of city wide shortages of doctors, nurses, and

other health care professionals.

On an adjusted basis, Tulane’s salary expenses for the first 5

months of 2007 as compared to 2005 are up 57 percent and contract labor expenses are up 73 percent. Other expenses have also

increased for us. Our utility expenses are up 34 percent. Insurance

is up 33 percent. And interest expense as a result of borrowing in

order to fund losses is up an extreme 1,000 percent. Since we resumed operation in February 2006, Tulane has experienced operating losses every single month of our operations. In 2007 Tulane experienced $24 million loss for the first 5 months. All financial reports of Tulane University Hospital and Clinic, we willingly support a GAO audit. We have simply nothing to hide.

All the coalition hospitals have experienced similar losses as a

result of the critical shortage of help at providers and the higher

insurance and utility expenses, increased bad debt, and sicker patients in post-Katrina New Orleans. Since reopening net of business interruption insurance and the $5 million we received in Federal funding, we have incurred a loss of $173 million. On behalf of

Tulane and the other hospital systems on this panel, I respectfully

request that this committee financially support this coalition for

the next 3 to 5 years to permit the New Orleans health care sector

to recover. Specifically, I request that the committee support funding by, one, redirecting existing Gulf Coast recovery funds to our

needs, two, continue the current Louisiana uncompensated care

cost formula of which approximately 70 percent is funded by the

Federal Government, and, three, suspending the 3-year rolling average component for graduate medical education payments.

Thank you members of the committee and staff for your time and

attention. I will be happy to respond to any questions. Thank you.

[The prepared statement of Mr. Lagarde follows:]

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Mr. MELANCON. Thank you, Mr. Lagarde, I appreciate those comments. Chancellor Hollier from LSU, if you would, for 5 minutes.

TESTIMONY OF LARRY H. HOLLIER, M.D., CHANCELLOR, LSU

HEALTH SCIENCES CENTER AND DEAN OF THE SCHOOL OF

MEDICINE

Dr. HOLLIER. Chairman Melancon, Ranking Member Whitfield, I

am Dr. Larry Hollier, chancellor of the LSU Health Sciences Center and Dean of the School of Medicine. I represent the LSU’s

Schools of Medicine, Nursing, Dentistry, Allied Health, Public

Health, and Graduate Studies. I also represent the LSU graduate

medical education programs, the 10 LSU public hospitals, and 36

health care clinics spread across our state. When LSU representatives testified before this committee in March they expressed apprehension over the future of graduate medical education and

health care delivery. Now while obstacles remain and we look at

what needs to be done, my message is that solutions are evident,

but we need your help to implement them.

Nonetheless, we are finally moving forward. Two years after the

storm, emergency rooms are still overwhelmed by patients who believe they have no choice but to use the emergency room for primary care. In an effort to relieve this demand, LSU is deploying

satellite health clinics throughout the New Orleans area. These

clinics are expected to be operational by October. We also continue

to experience in New Orleans a severe shortage of mental health

beds. While LSU is adding 33 psychiatric beds in leased space the

lack of mental health facilities will not be substantially relieved

until a new academic medical center with a 68-bed behavioral

health unit can open.

Private medical education is also a continuing concern. In the

floods following Katrina, LSU lost seven of its nine teaching hospitals in New Orleans.

We had a desperate scramble then to find new places to train our

residents. We convinced very busy private hospitals to take in our

residents and become part of our academic teaching network. They

consented to do so in order to save our medical education system

in Louisiana even though they realized that they were undertaking

a financial burden for which they had not been able to plan. For

that year following the hurricane, CMS granted a waiver that gave

them full reimbursement for their GME cost. However, that was

only for 1 year. Since then they have been subjected to the 3-year

rolling average wherein only a portion of their GME costs are reimbursed. This adversely impacts our ability to secure adequate training slots for our residents.

We have repeatedly offered suggestions and requests to CMS regarding ways to fix this problem but to no avail. Perhaps this committee could urge CMS to give us a proposal to fix this problem by

some mechanism that is acceptable to them.

On another front LSU is participating in a medical home demonstration project in New Orleans that will provide coordinated patient care in satellite health clinics. We also continue to forge partnerships with faith based clinics and private hospitals to deliver

primary care in the spirit of a redesigned health care system. This

initiative will utilize health information technology to monitor

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quality, enhance patient charting, and track prescriptions. Our faculty practice has already purchased and started implementing an

ambulatory electronic health record, and we are making that available to the various primary care clinics in the region to implement

the integration of the medical homes with the delivery of tertiary

care.

However, we need the ability to use DSH dollars to help pay for

physicians and clinic services. Without this flexibility the medical

home model of coordinated care through community clinics will not

become a reality in Louisiana.

We believe that the key to our ability to move beyond recovery

to revolutionizing Louisiana’s health care system is construction of

a new LSU academic teaching hospital. As you know, LSU and the

State of Louisiana, in February 2006, signed a Memorandum of

Understanding with the Department of Veterans Affairs to build a

joint medical center in downtown New Orleans. Land acquisition

has been accelerated, architects have been selected, and we are

identifying the types of service that will be provided by LSU,

Tulane, and the VA and those that will be shared.

Governor Blanco and the legislature meanwhile recently substituted $300 million in State money for the Federal Community

Block Grants to insure that the State can meet VA’s construction

time table. In short, Louisiana and LSU are ready to go. So, while

we are making steady progress mostly on our own, we still need

Federal help to complete our recovery and reform. We need a firm

and immediate commitment from the administration, particularly

the U.S. Department of Veterans Affairs, for the construction of a

new academic teaching hospital. This new facility is critical to the

future of medical training programs at both LSU and Tulane. I believe that is the only way to insure that we have an adequate supply of skilled medical professionals in the future.

Contrary to assertions by some skeptics, this project is the avenue of escape from what has been described by our critics as a twotiered health care system. It is the lynch pin of a reformed health

care system. Moreover, this project represents the largest urban renewal project in the history of New Orleans, a facility that will

serve as a beacon of hope and security for individuals and business

seeking to return and to rebuild. Thank you for your time, your interest, and your assistance.

[The prepared statement of Dr. Hollier follows:]

STATEMENT OF LARRY HOLLIER, M.D.

Chairman Stupak and distinguished members of the Subcommittee, thank you for

this opportunity to update you on the painstaking progress being made as we continue to recover from the impact of Hurricane Katrina on Louisiana State University’s professional medical education programs its ten public hospitals, and 36

health care clinics spread around our state.

When LSU representatives testified before this committee in March, they expressed considerable apprehension over the future of graduate medical education

and health care delivery.

Today, on behalf of my colleagues, as Chancellor of the LSU Health Sciences Center in New Orleans, my message is one of hope that we are finally moving forward.

With the support of Louisiana’s political leadership, including Governor Blanco

and the Legislature, we are deploying satellite medical clinics in New Orleans and

the first stage of what will be a comprehensive, statewide electronic medical records

system.

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In addition, LSU’s Health Care Service Division has been working closely with

representatives of the U.S. Department of Veterans Affairs to plan construction of

a joint academic medical center in downtown New Orleans.

Collectively, we have much work left to do and our medical training programs are

still threatened, but the picture I will paint today is significantly more optimistic

than it was four months ago.

I will also briefly address a number of continuing myths about the joint hospital

project, falsehoods that have caused a great deal of concern among indigent patients

and our veteran population.

Overall, although wait times for uninsured and underinsured patients at our hospitals and clinics are improved, they’re still too long.

We also need more bed space for mental health patients. In a few weeks, LSU

will open 33 mental health beds in leased space at a former mental hospital in uptown New Orleans.

We are adding diagnostics beds for mental patients at the Interim LSU Public

Hospital, but there is an overwhelming need to do more, and this need will not be

met until a new, 68-bed crisis intervention unit at the planned LSU hospital is

opened.

LSU and the state are planning early next year to deploy a ‘‘medical home’’ demonstration project in the New Orleans area funded by the State of Louisiana.

The project will provide coordinated, patient-centered care that utilizes partnerships and health information technology to improve health outcomes at reasonable

costs while providing increased training opportunities for our medical students.

Key to the effectiveness of this project will be new, satellite health clinics operated

by LSU doctors, nurses and allied health personnel in areas where our patients live.

Those clinics will be operational by the end of October, and will be in addition to

the other community and faith-based clinics currently in operation.

We believe this approach when eventually deployed statewide will relieve overcrowding not only at the Interim LSU Public Hospital in downtown New Orleans,

but also at private hospitals throughout the state that have seen their emergency

rooms overwhelmed by uncompensated care patients.

When the New Orleans demonstration project is fully online, it will include an

electronic health record, which our faculty physicians have already begun implementing. It will provide quality guidance and monitoring of the quality of care delivered. It will also include an innovative software program to enhance patient charting and prescription tracking, a service not limited to LSU-run facilities.

We have already forged partnerships with faith-based clinics and private hospitals

to deliver care in the spirit of health care redesign without depending on a massive

infusion of Federal taxpayer dollars.Our graduate medical education programs,

meanwhile, are another issue. Dr. Alan Miller from Tulane Health Sciences Center

is testifying regarding suggestions of temporarily changing how GME is funded following major disasters. LSU is strongly supportive of the suggestions outlined in his

testimony on GME and believe it would be very helpful in stabilizing GME in the

New Orleans area.

Prior to Hurricane Katrina, LSU annually trained approximately 627 residents

and fellows in 95 programs. Today 475 LSU residents are being taught in 76 programs, a 24 percent decline.

Because nearly three out of four physicians, dentists, nurses, and other allied

health professionals are trained by LSU and remain to practice in Louisiana, I believe we are facing a long-term shortage of doctors and other medical professionals

that will be worse than forecast physician shortages in other areas of the United

States.

This view is based on the fact that LSU’s GME slots are increasingly going to

international medical graduates, especially in internal medicine and family practice.

These young doctors will likely return to their home countries once they complete

their training whereas in the past, the majority of our graduates stayed to practice

in our state.

Following Katrina, the New Orleans area lost an estimated 50 percent of its medical professionals. At LSU, we lost more than 165 faculty. However, we have been

aggressively recruiting and our efforts have yielded almost 200 new faculty members during the last fiscal year. We also expect to add more than 100 new residency

slots by next summer.

We are encountering a pioneering spirit among new faculty members who are

committed to helping us revolutionize Louisiana’s health care delivery system.

The key to that revolution is the construction of the new LSU/VA academic teaching hospitals.

Over the past four months, LSU and the State Office of Facility Planning and

Control have accelerated land acquisition and design team selection, and are mobiVerDate 11-SEP-98 08:59 Oct 22, 2008 Jkt 000000 PO 00000 Frm 00250 Fmt 6633 Sfmt 6633 Q:\DOCS\110-62 SCOM1 PsN: SCOM1
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lizing teams that will complete historical preservation and environmental evaluation

and construction of these facilities.

Of particular note in this effort is the governor and state legislature’s decision to

substitute state funds for $300 million in Federal hurricane relief funds to eliminate

any possible delay in the state meeting the Department of Veteran’s Affairs timeline

for beginning the joint project. Among those state funds is $74.5 million for the purchase of 37 acres of land along with design work for the project. Legal teams are

identifying and expediting property acquisition, environmental assessments, and relocation matters. Architects for both facilities have been selected.

The city of New Orleans and the State Division of Administration, meanwhile,

have executed a Cooperative Endeavor Agreement to purchase an additional 29

acres of property adjacent to the LSU site for the exclusive use of the VA.

The LSU/VA cooperative planning group, which includes the VA, LSU and Tulane

University, has identified dozens of services that will be provided by each hospital.

Many of those services, such as lab work and radiology, will be shared.

Still other services will be purchased from each hospital. For instance, LSU will

purchase EEG, Pulmonary and Audiology services from the VA, while the VA will

buy Radiation Oncology, Dental, and Dietary services from LSU.

LSU alone estimates it will realize more than $4.2 million per year in operational

savings. Our business consultants estimate combined operational savings to LSU

and the VA will exceed $400 million over 25 years.

This facility makes economic sense. Cash flow will be sufficient to operate the facility, service debt, and finance the continued maintenance of the new facility thereby reducing reliance on state funds.

Moreover, the joint hospitals project, which will create 20-thousand jobs, will spur

growth in biomedical and research sectors and serve as the single largest post-storm

urban renewal project in New Orleans history.

A recent letter from Governor Blanco to Secretary Nicholson urging the VA’s continued collaboration with LSU to rebuild the VA facility in Downtown New Orleans

was cosigned by Louisiana’s legislative leadership, the presidents of LSU and

Tulane Universities and the chancellors of their medical schools, the mayor of New

Orleans, the director of the downtown development district, and a number of individuals representing veterans organizations.

My testimony would not be complete without addressing to those who contend

such a project should not be built in a flood zone. It is important that they keep

in mind breaches of Federal levees by Hurricane Katrina’s monster surge inundated

80 percent of the city of New Orleans.

Flood maps indicate both proposed sites for the new VA hospital were covered or

threatened by up to two feet of water.

Plans for the new LSU/VA medical center, however, include armoring both hospitals against hurricanes and terrorism. First floors of both facilities will be built

at least 25 feet above ground and the two hospitals will be capable of sustaining

operations for 30 days following any potential disaster

Finally, let me direct your attention to opponents of the joint LSU/VA project who

contend that the population of the New Orleans area will not be large enough to

support the new hospital.

Population estimates indicate people are slowly coming back to New Orleans.

Since Katrina, an estimated 90 percent of the veteran’s population in New Orleans

has returned along with a like percentage of residents in Jefferson Parish which is

part of the regional catchment area for the new academic medical center. The average age of the population in the catchment parishes for the new hospitals will be

older than their pre-Katrina population and will hence require more medical services.

This project will stop the so-called ‘‘Brain Drain’’ of skilled, well-compensated

medical workers while attracting a new generation of health care professionals. It

will also meet the medical needs of veterans for generations to come.

After nearly two years, New Orleans remains a shattered city on the mend, but

the outlook for health care and medical education is steadily improving.

Since the last time LSU representatives appeared before this committee, our institutions have begun aggressively working out and implementing solutions on their

own, but we still need Congressional help.

The message from New Orleans today is that we are making major progress in

building a ‘‘medical home’’ based health care delivery model using an electronic

medical records system that we believe will serve as a model for the nation.

Mr. Chairman and members, thank you for this opportunity to discuss these

issues. I will be happy to answer any questions you may have.

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Mr. MELANCON. Thank you, Chancellor Hollier. I appreciate

those comments. Dr. Miller, if you would, with the Tulane Health

Sciences, 5 minutes, please.

TESTIMONY OF ALAN MILLER, PH.D., M.D., INTERIM SENIOR

VICE PRESIDENT, HEALTH SCIENCES, TULANE UNIVERSITY

HEALTH SCIENCES CENTER, NEW ORLEANS, LA

Dr. MILLER. Thank you, Mr. Melancon, Mr. Whitfield, staff, and

members. Since the March hearing, and through your efforts a

number of actions have been taken that will have an immediate

impact on health care. We must turn our attention to long-term

stabilization, specifically the supply of future doctors and graduate

medical education or GME. Discussion must include keeping our

training programs vibrant. I will focus my comments on the role of

GME in providing the region’s health care and future workforce,

the role of the VA in patient care and physician training, and financial stability for the region’s providers. The tragedy of Katrina

has energized our young adults. Students flock to New Orleans to

assist in rebuilding.

This fall, our medical school will admit its largest class ever with

no compromise in quality. As a result of damage to the medical infrastructure, we have voluntarily downsized our GME programs.

Each year, the Tulane and LSU train fewer residents, Louisiana

faces long-term problems in physician supply. Prior to Katrina,

Louisiana ranked second in the percentage of physicians practicing

in the State in which they trained, yet Louisiana was still well

below the national average for physicians per 100,000. Our experience revealed flaws in the system for reimbursing GME that still

impacts us and will be repeated in other cities if a disaster results

in the total or partial closure of a major teaching hospital.

Pre-Katrina both schools had their largest concentration of residents at the Medical Center of Louisiana at New Orleans, MCLNO,

which was closed for 15 months post-Katrina. Although partially

reopened, it can accommodate only a portion of the previous total

residents. The financing of GME is a complicated maze. We have

provided diagrams demonstrating the process before and after

Katrina. We train residents at several hospitals and rotate those

residents among them. The medical schools act as pay masters so

the residents have consistency in salary and benefits. During the

period of total and partial closure the medical schools remain responsible for education of the residents and pay their salaries despite being unable to receive reimbursement from the closed hospital.

As a result, Tulane lost $6 million in fiscal year 2005–06 and anticipates $1.5 million this year. This process has been a bureaucratic nightmare. This diagram that you see on the screen shows

you the situation before on top and since Katrina in how the medical schools operated with hospitals and CMS to receive reimbursement and train the residents. CMS provided initial waivers that

helped but fell far short of solving the problem. Currently, we must

find teaching environments that meet accreditation standards but

cannot get agency approval until after the training is in progress.

Closed or partially closed hospitals must enter into affiliation

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agreements with host hospitals which then enter into agreements

with medical schools.

Our proposed remedy is pictured in the third diagram in the

written testimony. When a teaching hospital that functions in partnership with a medical school for GME will be totally or partially

closed the slots that cannot be supported should be put in the stewardship of the medical school giving the school greater flexibility in

assuring training and continued financial support. GME payments

would go the host hospitals who would reimburse the schools. This

would continue as long as the originating hospital could not support its total approved slots and be adjusted annually. The process

would be far simpler and assure the stability of the GME programs.

Another challenge has been the 3-year rolling average by which

CMS funds GME slots based on the average number of residents

over the preceding 3 years rather than the actual count. This was

waived for affected hospitals through June 2006, despite the fact

that the programs never totally closed as was stated earlier. Hospitals accepting additional residents report significant negative financial impact and have been unable to fully reimburse the medical schools. The difficulty in finding temporary hospital placements

for residents was in part a function of Medicare’s cap on the number of reimbursable training slots assigned to hospitals. Hospitals

were reluctant to accept residents because of the negative financial

implications of exceeding the cap.

The process of resident placement is dynamic in a recovery period. Adjustments must be made as the original training hospitals

reopen beds and as feedback from accreditation agencies mandate

change. We request that Congress instruct CMS or if necessary

pass legislation to provide further exemption from the 3-year rolling average for hospitals that take in displaced residents until a replacement MCLNO is completed. Prior to Katrina, Tulane provided

approximately 70 percent of the care at the VA medical center in

New Orleans which also provided training for 120 residents. The

VA closed as a result of Katrina and today provides outpatient

services in VA clinics and admits some patients to Tulane University Hospital.

The VA’s integration with the Health Sciences Centers at Tulane

and LSU provided a critical synergy. The missions of these 3 institutions in patient care, education, and research are integrally

intertwined. The quality of the health care provided to our veterans

is enhanced by the association with the schools and the highly

skilled clinical faculty. It is critical that construction of a new VA

hospital in downtown New Orleans proximal to the two medical

schools begin without further delay. Finally, I ask you not to forget

the doctors who are providing uncompensated care. If hospitals are

compensated and doctors are not who will admit, diagnose and

treat. Once again, I thank you for your continued attention and

support for the challenges that we face.

[The prepared statement of Dr. Miller follows:]

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Mr. MELANCON. Thank you, Dr. Miller. I appreciate your comments. Dr. Peck, if you would, please, 5 minutes.

TESTIMONY OF GARY Q. PECK, M.D., AMERICAN ACADEMY OF

PEDIATRICS

Dr. PECK. Good afternoon. I appreciate this opportunity to testify

today. My name is Gary Peck, and I am proud and pleased to represent the American Academy of Pediatrics. I chair the Academy’s

Disaster Preparedness Advisory Committee and I sit on the Board

of Directors. I also am a former medical director and assistant

State health officer for the Louisiana Office of Public Health as

well as a former pediatrician who practiced in New Orleans.

An effective health care system has two primary components:

strong hospitals and related institutions, but an equally robust

cadre of private practitioners in the community. We have heard a

great deal about hospitals today and institutions. We have heard

virtually nothing about the vitally important physicians in private

practice, so allow me to share with you this afternoon the litany

of issues faced by my colleagues in the New Orleans area.

Many physicians faced the total destruction of their homes and

office space, including medical records, equipment, and supplies.

Physicians lost revenue during the weeks or months they were unable to practice. Many physicians who stayed in the region are only

now—2 years later—seeing an adequate volume of patients to sustain their practice.

Under the Stafford Act, physicians in private practice are considered for-profit entities like dry cleaners or liquor stores. As such,

they are unable to access most forms of Government aid like the

programs that assist hospitals and community health centers. The

Louisiana Department of Hospitals and Health Program retains

and recruits new providers, but has been the subject of a good deal

of confusion, and its impact on retention, especially in pediatrics,

is very unclear. While the greater New Orleans Health Service

Corps will distribute $50 million, 70 percent of that is earmarked

for recruitment of new providers and only 30 percent for retention

of existing health care workers in the New Orleans area.

In the immediate wake of the storm, the entire Gulf Coast region

experienced an influx of volunteer organizations providing free or

low cost care to our residents. Local, private practitioners found

their patients going to temporary facilities that were more visible,

better advertised, and easier to access than their own practices.

While certainly well meant, these efforts had the unintended consequences of diverting patients to temporary providers that fail to

provide a medical home and deny needed revenue to local health

care providers.

With the loss of jobs after the hurricane, the number of patients

covered by Medicaid or having no coverage at all has increased dramatically. Louisiana Medicaid now covers approximately 20 percent

of all people in the New Orleans area. At the same time almost

65,000 fewer children are covered by Medicaid in the SCHIP program. We are faced with a paradoxical situation of having far fewer

residents but a higher proportion of uncompensated Medicaid care.

Physicians in private practice do not have the ability to charge

more for their services. Pediatricians are locked into contracts with

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private insurances or Medicaid that prevent them from altering

their rates. In fact, one private insurer, United, is currently decreasing reimbursement to New Orleans primary care pediatricians.

The recruiting challenges faced by hospitals and health systems

are as bad if not worse in physician practices.

As caregivers for children, pediatricians do not treat Medicare

patients and were therefore unable to benefit from the modest

health provider shortage area increases disbursed through Medicare to Gulf Coast providers. Medicaid rates, in Louisiana average

60 to 70 percent of Medicare rates although recently the legislature

has passed a measure that will raise our Medicaid payments to 90

percent of Medicare rates effective October 1.

Pediatricians face very high overhead costs, particularly in the

forms of vaccines, which must be purchased and paid in full up

front with no guarantee that all of the doses will be administered

or reimbursed. Pediatricians struggle to provide medical help, particularly for children with chronic or complex health needs. Usually

they find the extra time and work involved does not get compensated. Children’s mental health in New Orleans are woefully

unmet; a recent study estimated that 45 percent of children returning to New Orleans need mental health services.

If we hope to rebuild a robust health care system in New Orleans

that can provide quality, high health care to all patients. policymakers must recognize the crucial role that private physicians in

private medical practices play in that. In pediatrics in particular,

85 percent of all patient encounters occur in privately owned and

operated practice settings.

In conclusion, I have two recommendations for the State of Louisiana. The American Academy of Pediatrics commends the State

of Louisiana for its recent decision to increase Medicaid payments.

Unfortunately, this increase is still insufficient to assure access to

care for all children. Policymakers should re-examine the emphasis

of the greater New Orleans Health Services Corps on retention versus recruitment. The State’s effort to establish additional community health centers and federally qualified health care centers

should be reviewed to insure that it represents a long-term strategy that will best serve the needs of my area residents.

The Louisiana Department of Health and Hospitals should affirm

the vital role of private practitioners in the health care system by

exploring creative incentives for supporting these practices and

their efforts to serve their patients and recruit staff in their practices.

The Federal Government must transform its goal in disaster

medical care from providing short-term, temporary care to supporting the local health care system and its providers. After the immediate recovery phase, Federal efforts should focus on the reinstatement of local health care institutions and providers, rather than

the provision of care through volunteers and short-term facilities.

Health care providers, including for-profit private practices must be

provided with aid to re-establish their operations. Patients must be

encouraged and be assisted in returning to their prior health care

providers to improve the continuity of care. The Stafford Act should

be examined to identify avenues for providing aid for profit health

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care entities such as private practices, recognizing the vital role

they play in a health care system.

The American Academy of Pediatrics commends you, Mr. Chairman, for holding this hearing today to examine the ongoing challenges facing the health care system in my home, New Orleans. I

appreciate this opportunity to testify, and will be pleased to answer

any questions you may have. Thank you.

[The prepared statement of Dr. Peck follows:]

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Mr. STUPAK. Thank you, Dr. Peck, and thank you to the full

panel for being here today and your testimony and your help and

support in what we are trying to do in New Orleans. I apologize

for being in and out but we have been on the floor with SCHIP.

For questions, Mr. Melancon, please, do you want to start?

Mr. MELANCON. Thank you, sir. First, and a positive statement,

Dr. Quinlan, don’t feel bad for trying to take an opportunity and

make it work for your hospital. No one faults you for that. The people that should be faulted for that happening in the sense of where

the VA didn’t go yet, where Charity didn’t go yet or the people up

here that have played politics with it and left it out there. I truly

understand. Now our goal is, and I think what I heard from every

one of you gentlemen and Dr. Rowland, is that we have got a lot

of immediate problems that we need to address, and I think you

have delineated those very well today. And if I can, I would like

to rather than ask questions just kind of make sure I hit them and

then let us talk about what we do from this point forward.

I have been in office with every one of you, I believe, at some

point in time in the last 2 years, and we have had these discussions. As Dr. Hollier, I believe, expressed it never went anywhere

after you had the discussions with the bureaucracy. They listened,

and then as I heard today, and I said where is the action switch,

we haven’t seen that. One is we have to remedy the situation with

the bleeding, with the red ink, and address those issues in whatever way that we can try and get those things, take a direct attack

at them through the legislation.

Now the second one is the GME, the third is the DSH dollars to

compensate physicians at the hospitals. I think I have got them all.

They are not all inclusive, but what I would like to ask of the

chairman and the ranking member is that at this juncture, the end

of this meeting, that the staff of this committee become the mediator between the Louisiana medical community or the New Orleans

regional medical community and the agencies we are dealing with

and start trying to put something down that they can do with either the rules and regulations or that we can do through legislation

here because it is entirely too long the process that has been ongoing. But is there anything that anybody other than your prepared

statement, Mr. Chairman, if I am allowed with my extra 2 minutes

that if anybody has any other comments or suggestions of things

that we need to make sure to include.

Dr. HOLLIER. I will just make one comment for emphasis. We

keep hearing multiple comments being made in Washington that

they would prefer that we not build a replacement University Hospital in New Orleans in order to help drive health care reform. We

have been trying to change the system since before Katrina, and

we are still committed to doing that, but what is often missed is

that how one funds health care and how one provides graduate

education and care for patients are related but different. It is important to recognize that the University Hospital, Charity Hospital,

that we had before the storm not only trained residents but it had

over 2,200 students that it trained.

LSU and Tulane trained over 70 percent of the physicians in the

State of Louisiana. All the health care professionals are dependent

upon this training system. It has been very destructive to have so

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much opposition to building a hospital. I think all of my colleagues

here that we worked with and the hospital CEOs have had concerns on their own about not being able to replace the workforce

that they need, so this is an important thing we recognize. We need

a place not only for the residents but to also train all these students that we have to train.

Mr. MELANCON. Let me ask one. When you have had the conversations after either our meetings or the last hearing and we

thought maybe things would move, what kind of response did you

get from CMS or VA or any of the agencies? Was it just they read

to you what the programs provided and then left it or did they try

and give you any suggestions?

Dr. MILLER. Particularly on the GME issues, I think what we

have tried to do is educate on what the problems were and how we

saw that they might be ameliorated, and what we got in return

was education on what their regulations were and how they

wouldn’t allow what we wanted.

Mr. MELANCON. And when you presented to them the problems,

what was their response? What did they do?

Dr. MILLER. It was similar to what you had this morning in the

earlier panel.

Mr. MELANCON. A renumeration of the program.

Dr. MILLER. Yes.

Mr. MELANCON. Mr. Chairman, thank you.

Mr. STUPAK. Mr. Whitfield for questions, please.

Mr. WHITFIELD. Thank you, Chairman Stupak, and I would

thank you all once again. I know how frustrating it is to be sitting

here so many hours when you have so many issues facing you.

Chairman Stupak, I would follow up on the suggestion made by

Mr. Melancon that it maybe would be helpful to have our committee staff be intermediaries to deal with this because every time we

have a hearing and the people from the Federal Government, CMS,

and other agencies may have the very best intentions but it appears that there is always an explanation of a regulation or a rule

or a law or why you can’t do something, why you can’t address the

issue, why it is an obstacle. And so all of us seem to be tied up

in knots and not getting anywhere. And when Dr. Peters presents

the combined financial statements of the five hospitals that he

talked about for the first 5 or 6 months of this year and the combined losses in excess of $53 million, it makes you wonder—and,

by the way, in March when you all were here we were talking

about those losses as well.

And so we have discussed the depleting of these cash reserves

and the deficits and how long can you all really continue to operate? Where does this money come from? If you all would address

that, you executives of those five, how long can you operate?

Mr. MULLER. Maybe I should start because I think I am a little

different at West Jefferson because of the bond insurance requirements. We have to have an operating income quick. They are talking about September, another review by December, so if we don’t

have operating income, which would include grants and things that

are immediate then we become in default. They take the mortgage.

They can come in and operate West Jefferson. That would not

serve the community.

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Mr. WHITFIELD. And what about you, Dr. Quinlan? What about

Ochsner?

Dr. QUINLAN. Well, we made a commitment from the beginning

that we are not going to put patients in the middle, and to date

we have been reasonably successful at preserving services and we

have committed the company to risk its existence to promote economic growth in addition to care. We keep scrambling to find new

ways to stretch dollars and make them work but the losses make

that progressively more difficult.

Mr. WHITFIELD. Mr. Hirsch.

Mr. HIRSCH. We are in a similar position. I brought a deficit

budget to our board in the beginning of this year. I have never in

my career—I can’t say that I have never operated at a loss before

but I have never planned on doing it before the year started. And

that budget called for going through about two-thirds of a board

designated fund of cash to support our operations to the tune of

about $20 million. And so we can’t do that for another year or two.

It is a spiral. To Mr. Muller’s point, we had the same kind of

issues. We are not in a technical default right now but I don’t know

how far away we might be from that. We had that last year as well

so it is—the question gets asked what do you cut and when. I am

not certain about that, but I know that it looms as a possibility.

I am not prepared today to say exactly what but again in almost

30 years, I have never seen a picture like this.

Mr. WHITFIELD. Dr. Peck.

Dr. PECK. This is a great question. I can comment on a couple

of pediatricians. I know of two practices in New Orleans who are

just getting ready to go under. They can’t practice for much longer.

And it wasn’t just New Orleans. It is the Gulf Coast. There was

a pediatrician who practiced in Bay St. Louis. He was very young.

He went back to Bay St. Louis after Katrina and tried for 2 years

to get things going and just ran out of money. I have two practices

in New Orleans I know of that if it doesn’t turn around they are

having to leave the city just because of reimbursement costs. It is

incredible.

Mr. WHITFIELD. Well, thank you very much for that, and I know

this next question is not related to the physician which is an important component of this obviously, but after our last hearing Dr.

Quinlan and Dr. Miller and Dr. Hirsch signed a letter which they

outlined certain solutions to this problem or at least helpful steps

that could be taken. And one was relating to critical access designation so the reimbursed costs plus, and I remember at that

hearing there was a lot of discussion about that but whatever happened to that suggestion and is that not possible or what is the

deal?

Dr. QUINLAN. Actually we have looked into that further and we

have different effects with the different hospitals based on the size

of their graduate medical education program. Because of our size

we have 350 residents and fellows that would actually lose revenue

by that mechanism. Don’t ask me how but we would. It is kind of

an archaic accounting system. Others I think would benefit so the

effects would not be the same.

Mr. WHITFIELD. So some would benefit and some would not?

Dr. QUINLAN. That is correct.

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Dr. PETERS. I would make the comment probably very general in

nature. I think what it really takes at this point is to try to come

up with some creative solutions. I think first acceptance of the data

and maybe making sure that it is accurate, which we are convinced

that it is, I think that that has always been a question mark with

some of the agencies, is it really as bad as what maybe individuals

anecdotally portray. So and not to be repetitive, but I think there

have been a lot of dead ends with regulatory roadblocks, and I

think I will speak for East Jefferson, we would welcome staffers

being helpful to be intermediaries to whether it is thinking out of

the box or really determine a type of cost-based reimbursement

that would address this unique issue that exists.

Mr. WHITFIELD. Thank you very much. Do you want to say something, Mr. Hirsch?

Mr. HIRSCH. I was just going to say that we would be supportive

of cost-based reimbursement. It would help us. We have hit these

same kinds of dead ends that we heard earlier with some of the

questions that the Chair was asking, and we just hit dead ends on

these kinds of solutions.

Mr. LAGARDE. For Tulane we would—critical access designation

would negatively impact us with the same reason it would negatively impact Ochsner. The hospitals with the large teaching programs, I agree with Dr. Quinlan on this, it is impossible to understand but it would not benefit. It would have millions of dollars

worth of impact to us to move to a critical access designation at

this point in time.

Mr. STUPAK. But if the purpose is to give you critical access designation so you can be paid a premium for your services, not asking

you to move or do other things, just that the reimbursement rate

was at a critical access hospital rate wouldn’t that be beneficial?

Mr. LAGARDE. In theory it would but the way the critical—if critical access designation is amended from the way it is currently

paid it potentially could be beneficial for all five hospitals represented here but the way it currently reimburses hospitals it

would have an impact upon——

Mr. STUPAK. Because of your GME?

Mr. LAGARDE. Because of not only GME but also our indirect

medical education costs as well.

Mr. STUPAK. We sort of see that from this side of dais, and we

see it in sort of a separate situation like you would think you would

be reimbursed your critical access for services provided, the emergency room, your GME, but one offsets the other, right?

Mr. LAGARDE. That is correct. Dr. Hollier was reminding me, it

is a formulation, it is a formula driven reimbursement that doesn’t

fully account for the cost associated with large graduate medical

education or direct or indirect medical education.

Mr. STUPAK. You want to waive those requirements so you can

get reimbursed for services.

Mr. LAGARDE. I think as Mark Peters has mentioned this is

something that we would probably like to have a good conversation

about.

Mr. STUPAK. Dr. Peters, on the financial statements that you provided us, do you have any objection if this committee bipartisanly

asks GAO to go through those numbers so we can get some quick

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verification? We will ask them to do it expeditiously because we

need some verification and get back to HHS and others to move

this process along.

Dr. PETERS. No, absolutely. We all welcome that and we welcome

the rapid approach to that.

Mr. STUPAK. We talked today, and there has been discussion about like $195 million coming in to the area and another $100

million is supposed to be available around September 1, and $26

million for GME. You hear these numbers, and my folks back home

are saying, man, you are pouring a lot of money in there, but then

I look at your financials and it is not there, the money is not there,

so how did we get to this point? Can you give us a little bit more?

Has Secretary Leavitt or representatives from HHS engaged you in

a dialog about these issues, the financial parts? Mr. Peters, do you

want to start? How did we get here?

Dr. PETERS. I think it is probably a multi-factorial reason. One

is I think the efforts have been diluted as we have talked about.

I think that Medicare wage index money is a good example that

went to 31 parishes, 60 some hospitals. That diluted its impact on

the hospitals in our area. I think that——

Mr. STUPAK. The wage index—let me stop you there. So because

people were not in your hospitals, what happened to the wage

index? Did they take it down on you? Did you get less money?

Dr. PETERS. Well, first off the dollars came as a grant. It was not

stepping——

Mr. STUPAK. I see what you are saying. It was spread out too.

Dr. PETERS. Change in the dial, the new setting that would pay

us at a different level for every Medicare patient that is admitted

to the hospital which is again one thing that is an immediate partial solution to the problem because there is a process already in

place. There is a way to audit it. We do Medicare cost report, et

cetera. So I think that that is a huge area of opportunity. I think

second maybe stepping aside from dollars, I think that there has

been maybe too much emphasis looking at long-term reform and

not the immediate needs. And I think what the testimony of my

colleagues has expressed today health care providers continue to

want to do the right thing and keep taking care of patients in spite

of all this bad stuff. None of us are businessmen at heart and if

we were we probably would have about half the beds in place. So

I think not enough attention to address the short-term needs which

honestly would help us have more ability to look at reform as we

move forward.

Mr. STUPAK. Define your short-term needs. From listening to the

last panel with HHS it seemed like the short-term needs was, OK,

the hurricane was over, things calmed down, we are out of here.

But I see your short-term is a little bit longer than what——

Dr. PETERS. To fill a gap that exists to get us back to break even

because the other thing we have not talked about——

Mr. STUPAK. Was that short-term going to be 2 years, 3 years?

Dr. PETERS. I think we would say 3 years, 3 years to fill that hole

because the other thing that has happened is that we have all cut

back on expenditures. We have all not bought some of the things

we would have normally and there is going to be a huge price to

pay at a later date. The other thing that I wanted to mention to

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Congressman Whitfield’s question is how long can we all go. The

other thing that has happened that we all appreciate now is how

intertwined our fates are and whether it is East Jefferson, West

Jefferson, Ochsner, Touro or Tulane if somebody cuts services tomorrow it is going to make my situation worse because this is all

that is there. And with all due respect to the new facility, the VA,

where it should be located, this is that immediate issue that if as

Gary talked about he is forced out of his own control to do something we are all going to pay the price and it starts back that

downward spiral. And that is not even talking about how much

that impact will be on whether somebody is going to come back to

New Orleans.

Mr. STUPAK. Well, you must have had these conversations with

HHS. What is their response? We certainly understand it up here

but what is their response? What are they doing to help?

Dr. PETERS. They listen. They will say we will try to evaluate

and look at some of these solutions, and again there have been partial solutions. East Jefferson got $5 million for the Medicare wage

index. That is a lot of money but relative to where it should be if

current data was being used it to a degree it is like me saying here

is a quarter, go have a great lunch. It is nice you got a quarter but

I don’t think it is going to buy you much of a lunch. We appreciate

that effort but it just hasn’t taken care of it, and we are frustrated

too. We are very frustrated. But also why we are here is we are

still trying to come up with solutions.

Mr. STUPAK. Dr. Miller and Dr. Hollier, I mentioned earlier to

HHS that the Utah demonstration project for reimbursement of

your GMEs, could that work in your situations or am I just off

base?

Dr. MILLER. After that, I talked a little bit with Secretary Cerise

and with Dr. Hollier regarding that. Something of the modification

of that plan could possibly work for us. I think the plan itself is

too broad to apply because you don’t really need to apply it to the

hospitals that are open and taking care of their own GME slots. It

really only needs to be applied or something like it applied to the

handling of GME slots from a closed or partially closed facility. So

if there were 600 some odd slots at MCLNO prior to the storm, if

you could put those 600 slots into some type of stewardship, whether the stewardship was administered by the medical schools in proportion to what proportion of those slots they handled before or by

some type of oversight, that would go a long way to solving the

problems. We would be able to place those residents in hospitals

that could handle them with the proper teaching environment.

The funds would flow so that the medical schools and the hospital supporting the GME were reimbursed, and it should take

away any of the 3-year rolling average problems.

Mr. STUPAK. I don’t mean to interrupt you, but could the two of

you put together a proposal of the modified Utah, get it to us, and

we will try to coordinate that with Secretary Cerise, and maybe we

can start pushing HHS. So what I have been hearing again today

is DSH payments, we have to get that fixed. We could do a waiver

there. The GME, we need to fix this one. The wage index, we have

to get back and take a look at it now. Any other areas I am missing? I know we still got the BA issue.

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Dr. QUINLAN. I think the other issues would be don’t forget immigration to increase the labor pool. Those are caught up in the

visa problem bottleneck. And remember the wage index refers just

to that. It is a workforce issue but there are other expenses around

insurance and utilities that are significant contributors, and there

are other smaller ones but this problem is not one thing. It is hard

for people to understand. It is a lot of things that go against us and

a little bit that doesn’t go for us. In aggregate, that is how small

companies develop large deficits.

Mr. STUPAK. I am looking at this financial and I see utilities are

up 32 percent, your employee contract labor is 162 percent increase. This is pre and post-Katrina. Then I am looking at insurance, business interruption, that is up 35 percent. Bad debts up

over 30 percent, so I can certainly understand how these numbers

multiply and if there are five hospitals it multiplies in a hurry. Dr.

Rowland, if I can ask you just a couple quick questions on some

financial things. You have heard the hospitals stating their financial situation and it sounds pretty stark. What would you recommend to the committee and some of the HHS areas they could

address?

Ms. ROWLAND. Well, I think that one of the issues that has clearly come out today is that our health policies and health reimbursement policies are based on a health system that is continuing and

continuous and so you can go back to 3-year old data and move forward. I think there clearly needs to be for future disasters like this

and to even help here to have some mechanism by which these

rules can be flexible and suspended. Then if a crisis occurs you can

have a demonstration program or an initiative that lets you weave

together all these pieces that everyone has talked about today

whether it is for special incentives for workforce or other

componets.

And I recall many years ago, when I worked at the Department

of Health and Human Services, we had an initiative we called financially troubled hospitals. And it happened in New York, it

wasn’t Louisiana at the time, but we were looking at ways to use

grant funds combined with waivers of Medicare and waivers of

Medicaid and put together a demonstration project that could really move in and provide the funding. And the other piece that I have

heard today is that it not 1 year or 2 months. It is over a long period of time and that instead of focusing on what the health system

will look like in 2020, we need to focus on how to get enough of

the resources there to get them over the hump, and the hump I

think is a lot higher than what we had said before. But clearly

looking at one of the lessons out of this I think is to really put together some kind of a disaster-related assistance so when a health

system is disrupted as that in Louisiana you have some ability to

go in whether it is an earthquake in San Francisco or whatever.

And we clearly just see a patchwork approach, and I think that

is why there are so many stumbling blocks about trying to put one

piece together and another piece doesn’t work.

Mr. STUPAK. I am sorry. I am way over my time. Mr. Burgess,

do you have questions? I am sorry. I didn’t see you down there.

Mr. BURGESS. That is all right, Mr. Chairman. Cheerful persistence is my motto today. Let me just ask a question I had. I probVerDate 11-SEP-98 08:59 Oct 22, 2008 Jkt 000000 PO 00000 Frm 00286 Fmt 6633 Sfmt 6633 Q:\DOCS\110-62 SCOM1 PsN: SCOM1
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ably ought to ask this of Mr. Miller because I remember we talked

about this in October 2005 when I was there. Community development loans were monies that you all needed to keep your operations going. Actually I think you wanted those to come in the form

of Federal grants and they actually came in the form of loans. But

my understanding from information I received is there was $100

million left on the table at the end of September 2006 that was not

subscribed. What was the reason that you couldn’t utilize that

money, that the hospitals couldn’t utilize the money? Was it because they had to be paid back? Was that a problem with your

bond holders from East Jefferson and West Jefferson’s perspective?

Mr. MULLER. Actually a couple things. The formula again for receiving any amount of money comes from your revenues lost and

the CDL. We had actually applied for almost $50 million and ended

up getting $30 million, so that $20 million was left on the table

East Jefferson, Jefferson Parish, Orleans Parish, whoever got the

CDLs. The formula drove a lower number. The second thing——

Mr. BURGESS. So then let me just interrupt you for a second,

then that money left on the table could not be accessed? You didn’t

get another bite at it?

Mr. MULLER. No.

Mr. BURGESS. Does anyone know what has happened with those

dollars since then? When the time limit expired did those dollars

come back to the Federal Treasury or maybe that is something we

need to find out, Mr. Chairman. I don’t know what happened to

those dollars.

Mr. STUPAK. That is a good point. That is a good point. What

happened to them? If it was designated for you and you couldn’t

use it because of the formula based upon past old information if

that money has been designated why can’t we get it back?

Mr. BURGESS. And let me just, reclaiming my time, let me just

ask have we done anything legislatively to alleviate some of the

burden as far as the repayment of this? Has anything happened to

your understanding in either the House or Senate where they made

a legislative fix that these loans would convert to perhaps grants

where repayment would not be requested?

Mr. MULLER. Well, it was approved in the Iraq war bill, part of

the Iraq war bill, to have them forgiven. Again, we said that is

wonderful. What we have found is that the process of forgiveness

is going to take several years, and that is the problem.

Mr. BURGESS. Again, reclaiming my time, this was in the supplemental that we just passed in June, is that correct?

Mr. MULLER. In June, that is correct. It was in the bill. It was

forgiven. We said wonderful. I believe the rules came out like end

of July or something and we found that it would take several years

to do it. I am not going to get into how they decided this but it is

a legislative way of doing it.

Mr. BURGESS. Mr. Chairman, I know we are not a legislative

committee but maybe we could put our staff to work on this if

there is language that we can write that would make this money

available and make those loan forgivenesses accelerated so that

you guys aren’t in hot water with the New York bond holders and

can continue——

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Mr. STUPAK. That was not the intent of Congress, that is for

sure. Maybe HHS wrote the rules that way but that is not——

Mr. BURGESS. We actually wrote part of the rules that way.

Dr. QUINLAN. Can I make a point?

Mr. BURGESS. Please. I wish you would.

Dr. QUINLAN. Not all institutions are eligible because we are not

governmental agencies.

Mr. BURGESS. And that is a very good point. Had these been handled as grants rather than loans perhaps Ochsner would have had

the availability of some of those funds. And again, Mr. Chairman,

I would just suggest that if we are looking for legislative fixes that

may be something that we ought to investigate.

Dr. Peters, I do need to ask you, and I thank you for outlining

the five issues, the target issues, that you brought to our attention.

And based on your understanding of what is available, what do you

see—I know my time is brief. Maybe the chairman will indulge me

a similar amount of time that he had. What do you see as the fixes

that are amenable that could be done from the Federal agency,

from HHS, from the standpoint of State government, and the

standpoint of congressional activity? Are there things that come to

mind that leap off the page looking at those five targeted areas

where if HHS would do this, if the State would do that, and if Congress would do the other things that your lives would be improved.

Dr. PETERS. At the State level, I think that what we would really

like to see is a consistent, more than a 1-year response of how we

could plan from compensated care dollars. Our State goes through

a legislative process every year. It is always unclear how that will

settle out so we are really interested in consistency, again, over the

next 2 to 3 years to let us effectively plan.

Mr. BURGESS. Let me just interrupt you for a second. Have you

found a sympathetic ear at your State legislature for that concept?

Dr. PETERS. I think that the State legislature has been very engaged in this process. I think they have wanted to come up with

some solutions.

Mr. BURGESS. I hope they have.

Dr. PETERS. I think one of the challenges that remains is, how

much should be directed to New Orleans as it relates to the other

part of the State, so that is a recurrent issue both at a State and

Federal level of everyone has problems these days and health care

is not wonderful anywhere, so we face that challenge. At the Federal level——

Mr. BURGESS. Let me just interrupt you there for a second. I just

have to ask this, and it may be inappropriate and I apologize in

advance if it is, but other States were affected by this disaster. Are

they having the same types of difficulties vis-a-vis their State legislatures with the distributional issues that have been brought to our

attention this morning? Is it unique to where you are living or is

it in fact all of the States that have been so affected have found

the same problems?

Mr. MELANCON. If I could, if you would yield for a second, I think

I can explain something. What happened in Orleans Parish is that

the entire——

Mr. BURGESS. We have experts that we asked—you and I can

talk any time.

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Mr. MELANCON. The difference of what happened is on the budgetary problems the State constitutional amendment says they have

to balance the budget every year, and they don’t do 2 years of projections. That is——

Mr. BURGESS. You and I can have that discussion.

Mr. MELANCON. I yield back. Thank you.

Mr. BURGESS. Is there anyone on the panel who has a feeling

about that? Is there something that is unique to Louisiana or is in

fact Alabama and Mississippi having similar sort of difficulties?

Mr. LAGARDE. Wearing my HCA hat, we operate hospitals in Lafayette, Louisiana and also Gulfport, Mississippi. Neither of their

total of four hospitals that we operate in these other communities,

as well as we operate a hospital on the north shore of—none of our

hospitals anywhere else other than in Orleans and Jefferson Parish

do we have this fact pattern. As far as the metrics, the normal operating metrics of hospitals and hospital expense management

issues, revenue issues, totally out of whack, and Orleans and Jefferson Parish in relation to anywhere else that we do business.

Mr. BURGESS. OK. I think, Mr. Chairman, that is something at

some point this committee does need to follow up on. Let me go

back to Mr. Peters, and then again from the standpoint of the Federal agency and from legislative action, are there fixes you see that

aren’t over the horizon that are within your grasp or within the capabilities of the Federal agency or this committee?

Dr. PETERS. I think a very rapid meeting of the minds that says,

OK, we have this gap, how can we best accomplish fixing that, or

something that comes close to that that is acceptable. We in this

conversation talked about cost-based reimbursement, critical access

designation, adjustment of the Medicare wage index. I think the

numbers need to be plugged in and think about how can we come

up with the solution and then create whether it is waivers or legislative changes to make that be accomplished and not have the perspective of we can’t do this because of this rule or that rule.

As you have heard, we all have some different structures and different needs, and so I think thoughtful analysis of all of those potential solutions so that we don’t create a solution that partially

solves the problem or helps two out of the five of us which then

doesn’t really solve the New Orleans situation.

Mr. BURGESS. Very good. And, Mr. Chairman, again, I would ask

that perhaps that is something we can task our committee with

trying to draft whatever language would be necessary. And then finally, Dr. Peck, in the time I don’t have remaining, let me just ask

you because it did come up earlier about preparedness for the current hurricane season that is ahead of us, how do you feel—obviously a hurricane planted square at New Orleans again would be—

strike the community with an additional disaster do you have a

feeling as to the level of preparedness?

Dr. PECK. I certainly have concern. Something you could do is

certainly look at the Stafford Act again. I think the Stafford Act

needs to be reexamined at and potentially have some rewriting of

the Stafford Act so it can help for-profit health care providers for

the immediate recovery of a situation. Should it happen next weekend, private practitioners could be of benefit from that, and I think

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you would go a long way to help that region and that part of America.

Mr. BURGESS. Very good. I just want to thank everyone for being

here and for your indulgence today. We have had things happen on

and off the floor that have kept us away, and I apologize for the

time I wasn’t here. It wasn’t because your issue is not important

to us, and some of the most venerable names in American medicine, Charity Hospital, Ochsner Clinic, these are words I heard all

my life growing up because my dad was a physician too. These are

cherished medical institutions in our country and we are really

privileged on this committee, Mr. Chairman, to be able to be participating in saving these institutions. With that, I will yield back.

Mr. STUPAK. I thank the gentleman.

Mr. MELANCON. If I may, Dr. Peck, in your testimony you mentioned the monies from the DRA are going to bolster the greater

New Orleans Health Service Corps in the fact that the bulk of the

money will be going to attract or recruit new providers.

Dr. PECK. Yes, sir. Of the $50 million that is going through, 70

percent of that is going to be for the recruitment of physicians to

the area versus 30 percent that is going to be for retaining of physicians.

Mr. MELANCON. So very little that is going to help you or other

physicians like yourself?

Dr. PECK. That is correct.

Mr. MELANCON. Another question, the monies that they are talking about to attract physicians back in, will that also be available

to the physicians that have hung in there if they are not back up

to that level of income?

Dr. PECK. Talking to the pediatrician in the city of New Orleans

it is available but the restrictions and the confusion about the applications and all the restrictions within—three big practices that

I know in pediatrics, and one of those had about a 99 percent Medicaid practice. The other one had a dual practice in Metairie and

in New Orleans. It was not worth the effort, the issue or the detail,

so of all the private practitioners that I know of in my region 1 of

them ended up applying for it and receiving that care. It is certainly available for those that come out and if you did receive it

you were pretty much insured—unless you really had a substantial

practice—of insuring yourself at $33,000 annual salary.

Dr. MILLER. I do want to say that it is a good thing. I think it

can be simplified and it can be made better but certainly this $50

million that is available, and it came in one pot of $15 million that

was very heavily for primary care and recruitment, and then the

second pot which more recently came to the State of $35 million,

which does have more for retention and also more for specialties

and allows more use by the teaching institutions is a good thing.

It can be improved in the way that physicians who are currently

in practice and have needs can access it, but I think it is a positive

that came out of previous hearings.

Ms. ROWLAND. Mr. Chairman, if I could interject. I think one of

the ways to really help the existing physicians who are there is

through some of these changes like we talked about with the DSH

allocation to allow that to go to non-institutional providers and to

help physicians because currently there is no way to really provide

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for the uncompensated care cost that they may be incurring. I

think you need a dual strategy, one that helps recruit people back

but also helps to provide a reasonable income to those who are

there practicing and seeking to re-establish——

Mr. STUPAK. Well, Dr. Peck or Dr. Miller, have you talked about

the DSH payment concept to help you out? Have you looked at that

if all if we can get a waiver here?

Ms. ROWLAND. I think the State has already asked for such a

waiver but it hasn’t been granted.

Mr. STUPAK. Was it turned down or granted? The State asked for

it, did they not?

Ms. ROWLAND. They just asked for it but——

Mr. STUPAK. Or HHS.

Ms. ROWLAND. But it has not been granted.

Dr. PECK. I certainly don’t know the immediate answer but I certainly can get that for you from one of the——

Mr. STUPAK. OK. I think it was turned down anyway or not ruled

upon. That is one I think we should take a look at for those providers who tried to hang in there. Anyone else? Mr. Burgess.

Mr. BURGESS. To clarify, are you talking about the disproportionate share funds that were allocated for the fall of the last quarter

of 2005 or have there been ongoing allocations for DSH funds for

hospitals that are no longer in existence?

Mr. STUPAK. I am talking about 2005.

Mr. BURGESS. Then going forward, and I don’t know if anyone

can answer this, what has happened to that stream of disproportionate share funds for say all of the quarters of 2006? If Charity

was not able to see patients then what has happened to those

funds?

Dr. HOLLIER. Dr. Cerise could probably answer that but I believe

that some of those funds were moved to where the patients were

now being cared for in the other Hospitals. Lafayette got a large

influx of patients. Baton Rouge got another large number of patients; so some of those budgetary funds were moved there where

the patients were cared for.

Mr. BURGESS. Were any of those funds moved to East Jefferson,

West Jefferson, Touro, Ochsner?

Dr. HOLLIER. I think that is the problem we are talking about.

They haven’t been able to have that.

Mr. MELANCON. Mr. Chairman.

Mr. STUPAK. Mr. Melancon.

Mr. MELANCON. If I could, and I think we have a good pretty

good handle on the issues that are here in front of us, and I would

like to request, if I could, when you think about it we got what,

a five-person staff for this subcommittee, the Department has

about 5,000 people, and they can’t seem to solve the problems, if

we could ask for a meeting with the Secretary and Mr. Madison

and sit down and go through the list and find out what their intentions are. We have talked about just trying to move this forward.

We have tried to do it nicely. I had the same problems with FEMA.

You bring it to public attention. They get a little bit of responsiveness and then all of a sudden they go back to wherever they came

from and disappear, so, Mr. Chairman, I would make that request

if I could.

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Mr. STUPAK. We tried that a few times, but we will continue. Any

other questions?

Mr. BURGESS. I will just say obviously the flooding we have had

in Texas this spring nowhere near on the order of magnitude of

what you have endured but I will just have to say the Federal

agencies I have found were responsive when those requests were

made, and I am still having a hard time understanding what is

going on that makes this so difficult to solve. I know it was a big

storm. I know it is going to be difficult to recover from it, but it

just seems like we have more than our share of difficulty dealing

with this. And, again, I just frankly don’t understand what the

problem is.

Dr. QUINLAN. It is a simple issue of scale. This scale is of such

magnitude it simply cannot be dealt with by conventional means.

It is that simple. The tools that are designed to address these kind

of problems were designed to address exactly what you experienced

in Texas and absolutely has nothing to do with what we have experienced in New Orleans.

Mr. BURGESS. But still after 2 years time and $100 billion from

the Federal Government, it seems like we should be doing a better

job. They had the same—and again I don’t know really—I haven’t

traveled to Mississippi. I don’t know the difficulties that they have

encountered or where they are in their recovery but we don’t have

Mississippi at the table and they had the same storm. And I realize

that New Orleans had three crises happen one right on top of the

other with the wind, the water, and then the levees breaking. But

still it seems like we should be in a better place now with all of

the effort that has been extended. And I don’t understand why it

is so difficult to overcome that inertia and make some things happen.

Mr. MELANCON. If I could——

Mr. BURGESS. And again we have plenty of time to talk——

Mr. MELANCON. And I would like to but I wanted to invite you

to come on a CODEL on the 12th through the 14th to New Orleans

where we will sit down with all of the aspects of the community

including health care, and you will get an opportunity to go to

Gulfport and Biloxi and get a first-hand view and an opportunity

to visit with those folks.

Mr. BURGESS. And I will tell the gentleman I wish he had disclosed that to me earlier. Obviously, my August schedule is pretty

much set as is yours. It would be very difficult for me to get out

of obligations, but I do think this committee ought to have a followup hearing on site, a field hearing like we did in January 2006. It

is high time we did that, and maybe we can include some of the

other sites as well.

Mr. MELANCON. If the gentleman would yield back, I agree, and

of course getting a CODEL authorized when it happens, it happens, and then you move as quickly as you can and it happened

at the end of last week so now we are trying to get people to go.

And we understand that, and I understand your schedule and everyone else’s, but it is difficult to explain without actually—and you

can see it on TV, you can hear about it when people talk about it

including you and I having conversations about it, but until you

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physically ride the mile after mile after mile after mile of devastation and vacancy, and it is——

Mr. BURGESS. Well, if the gentleman will yield, I have—I haven’t

spent a lot of time but I have made two trips to New Orleans, one

with this committee and one as a guest to the private hospitals

who invited me down there in October, and very kind to fly me in

a helicopter around the Plaquemines Parish and saw the mile after

mile after mile and saw the car dealerships that were inundated.

And, yes, it is devastation on a scale that I have never seen before.

But, again, I don’t understand why we can’t move this process forward. If it is inertia at the Federal level, let us get past it. If it

is inertia at the State level, let us get past it. Again, I get criticized

at home for the amount of money that the Congress has spent and

yet it doesn’t feel like we have done a darn thing. That leads to

an internal conflict that I find very, very difficult to reconcile. We

kept these gentlemen long enough, and I am going to yield back.

Mr. STUPAK. I think today and especially this last panel has

pointed out a number of areas we can work on, and I think it is

the Federal rules, regulations, and laws that are passed are not designed for a hurricane or disaster like this, and we have to find a

way to get waivers and other creative ways to help these folks out

in a bipartisan manner. We have asked for the Secretary to come.

We have asked for Ms. Madison to come who seems to be holding

the keys to many of these programs. They have refused us. So

maybe we have one last weapon in our arsenal here we can use

and maybe we ought to ask the Secretary once more to come and

set a time and date at his convenience, and if he can’t then we subpoena him or something. We have to get this thing rolling. I think

we are all frustrated. Their financial ruin is sitting right there, and

we have to move this thing along. If you have some good suggestions, we will work on it. Stay in touch. Chris Knauer and his staff

will be working on this for the Energy and Commerce Committee,

and both sides of the aisle have been great and they have been

down there a couple of times and spoke with most of you. We will

continue to work this. This is our third hearing. I am looking forward to a fourth hearing in New Orleans. I hope we have good

news. It seems like we get a little impetus every time we have one

of these hearing. Things start moving and then after about a

month or two it falls apart again.

And I am not casting any shadows at anyone at this table. We

are here in Washington. I find it ironic that we have this hearing

today. We asked the Secretary to be here. He couldn’t be here, 600

feet away, but yet he is down in New Orleans. It sounds like the

Federal Government just can’t get coordinated, can we? But I will

dismiss this panel, and thank you again for all that you do, and

thanks for services you do for the people in New Orleans and this

country. That concludes our questioning. I want to thank all of the

witnesses for coming today and for their testimony. I ask unanimous consent that the hearing record will remain open for 30 days

for additional questions for the record. Without objection, the

record will remain open. I ask unanimous consent that the contents

of our document binder be entered into the record. Without objection, the documents will be entered in the record. This concludes

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our hearing. Without objection this meeting of the subcommittee is

adjourned.

[Whereupon, at 3:45 p.m., the subcommittee was adjourned.]

[Material submitted for inclusion in the record follows:]

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COMMITTEE EXHIBIT BINDER

Exhibit No. 5: Department of Veterans Affairs report, ‘‘Report to

Congress on Plans for Re-establishing a VA Medical Center in New

Orleans’’

Exhibit No. 6: Memorandum of understanding between U.S. Department of Veterans Affairs and Louisiana State University

Health Care Services Division

Exhibit No. 8: Letter from Dr. Alan Miller, Tulane University to

Mr. Barton

Exhibit No. 9: Letter from Karen DeSalvo, Tulane University, to

Mr. Barton

Exhibit No. 10: Letter from Frederick Cerise to Secretary Leavitt

regarding immediate health care needs in the New Orleans region

Exhibit No. 11: Letter from Thomas Koehl, et al., to Secretary

Leavitt

Exhibit No. 12: Letter of Thomas Koehl, et a., to Messrs. Dingell,

Barton, Stupak, and Whitfield

Exhibit No. 13: Letter from Norman Francis, et al., to Secretary

Jackson and Secretary Nicholson

Exhibit No. 14: Letter from President Cowen and Senior Vice

President Miller, Tulane University, to Secretary Nicholson

Exhibit No. 15: Letter from Greater New Orleans Healthcare

Community Stakeholders to Mr. Stupak

Exhibit No. 16: Letter from Greater New Orleans Healthcare

Community Stakeholders to Secretary Leavitt

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