Hurricane Katrina: Status of Hospital Inpatient and Emergency Departments in the Greater New Orleans Area
Published: 2006-09-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In the aftermath of Hurricane Katrina, questions remain concerning the availability of hospital inpatient care and emergency department services in the greater New Orleans area--which consists of Jefferson, Orleans, Plaquemines, and St. Bernard parishes. Because of broad-based congressional interest, GAO, under the Comptroller General's statutory authority to conduct evaluations, assessed efforts to restore the area's hospitals by the Department of Homeland Security's (DHS) Federal Emergency Management Agency (FEMA); the Department of Health and Human Services (HHS); and the Louisiana State University (LSU) public hospital system, which operated Charity and University hospitals in New Orleans. GAO examined (1) the availability of hospital inpatient care and the demand for emergency department services, (2) steps taken to reopen Charity and University hospitals, and (3) the activities that HHS has undertaken to help hospitals recover. To fulfill these objectives, GAO reviewed documents and interviewed federal officials and hospital, state, and local officials in the greater New Orleans area. GAO also obtained information on the number of inpatient beds for April 2006, which was the most recent data available when GAO did its work. GAO's work did not include other issues related to hospitals such as outpatient services or financial condition.
section_title: What GAO Found
paragraphs: While New Orleans continues to face a range of health care challenges, hospital officials in the greater New Orleans area reported in April 2006 that a sufficient number of staffed inpatient beds existed for all services except for psychiatric care--some psychiatric patients had to be transferred out of the area because of a lack of beds. Overall, GAO determined that the area had about 3.2 staffed beds per 1,000 population, compared with a national average of 2.8 staffed beds per 1,000 population. Hospital officials told GAO they planned to open an additional 674 staffed beds by the end of 2006, although they reported that recruiting, hiring, and retaining nurses and support staff was a great challenge. With these additional beds, the population would have to increase from 588,000 in April 2006 to 913,000 by December 2006 before staffed beds would drop to the national average. Hospitals also reported a high demand for emergency services, consistent with a June 2006 Institute of Medicine report, which found that emergency department crowding is a nationwide problem. Steps have been taken to reopen University Hospital, but as of July 2006, LSU had no plans to reopen Charity Hospital. LSU plans to open portions of University Hospital in fall 2006 and would like to replace both hospitals with a new one. LSU and FEMA have prepared cost estimates to repair these hospitals. For Charity Hospital, FEMA's estimate of $27 million is much lower than LSU's estimate of $258 million, which covers, for example, repairing hurricane damage and correcting many prestorm deficiencies. In contrast, FEMA's estimate covers repairs for hurricane damage only--the only repair costs eligible for federal reimbursement. HHS provided financial assistance and waived certain program requirements to help hospitals recover in the area. For example, HHS included $221 million in hurricane relief funds designated for Louisiana through Social Services Block Grants, which may be used in part to reconstruct health care facilities. HHS also waived certain Medicare billing and other requirements and accelerated Medicare payments to providers, including hospitals, in the hurricane-affected states. Rebuilding the health care infrastructure of the greater New Orleans area will depend on many factors, including the health care needs of the population that returns to the city and the state's vision for its future health care system. In light of the current sufficiency of hospital beds for most inpatient services, GAO believes a major challenge facing the greater New Orleans area is attracting and retaining enough nurses and support staff. HHS and the Department of Veterans Affairs (VA) agreed with the draft report. DHS said it had no formal comments on the draft. HHS, VA, DHS, and Louisiana's Department of Health and Hospitals provided technical comments, which GAO incorporated where appropriate. LSU did not provide comments.

section_title: Letter
paragraphs: Hurricane Katrina, which made landfall near the Louisiana-Mississippi  border on the morning of August 29, 2005, and the subsequent flooding  caused by the failure of the New Orleans levee system resulted in one of  the largest natural disasters ever to hit the United States. Among the  challenges facing the greater New Orleans area in the aftermath of  Hurricane Katrina is addressing the significant damage to hospital  facilities, the loss of hospital staff who relocated to other areas, and the  associated disruption of hospital inpatient care and emergency  department services. For example, Charity and University hospitals, which  are part of the statewide Louisiana State University (LSU) public hospital  system, suffered extensive damage as a result of the hurricane and  remained closed as of June 30, 2006. Private hospitals serving the area  were also damaged and, like their public counterparts, have been short of  nursing and support staff in the months following the hurricane.
In responding to a natural disaster such as Hurricane Katrina, the federal  government coordinates operations with state and local governments and  the private sector according to the framework provided in the National  Response Plan. Under this plan, the Department of Homeland Security’s  (DHS) Federal Emergency Management Agency (FEMA) has primary  responsibility for emergency response and recovery planning and  coordination, and the Department of Health and Human Services (HHS)  has overall responsibility for coordinating public health and medical  response to incidents. HHS is also designated as a support agency for long- term community recovery and mitigation.
In March 2006, we reported on the status of the health care system in New  Orleans as of that month. As we reported, the availability of health care  services—which includes those provided within and outside of a hospital  facility—is one of the factors that can affect whether and how quickly  residents return to an area after a disaster. This report is a follow-up to  our March 2006 report and focuses on hospital inpatient care; emergency  department services; and efforts to restore hospital infrastructure, that is,  facilities and staff. Specifically, this report discusses (1) the availability of  hospital inpatient care and the demand for emergency department services  in the greater New Orleans area, (2) steps taken by FEMA and LSU to  reopen Charity and University hospitals, and (3) the activities that HHS  has undertaken to help hospitals recover in the greater New Orleans area.  Because of broad congressional interest, we performed this work under  the Comptroller General’s statutory authority to conduct evaluations on  his own initiative.
To examine the availability of hospital inpatient care and the demand for  emergency department services, we contacted nine operating public and  private acute care hospitals in the greater New Orleans area to obtain  information on the number of available, staffed, and occupied beds for  one randomly selected day in April 2006, and later we asked the hospital  officials to provide the same information for the entire month of April,  which was the most recent data available when we did our work. Five  hospitals responded to our request for data for the month of April. We also  obtained hospital estimates of the occupancy rates for the 12-month  period prior to, and the 9-month period after, Hurricane Katrina for 8 of  the 9 open hospitals. To determine the April 2006 population of the four  parishes in the greater New Orleans area, we used estimates from the  Louisiana Department of Health and Hospitals Bureau of Primary Care and  Rural Health, which used two methodologies to estimate the population in  each of the parishes. It used school enrollment data for Jefferson,   St. Bernard, and Plaquemines parishes; and for Orleans Parish it used a  survey of persons occupying residential structures. The survey had been  conducted by the New Orleans Health Department in consultation with the  Centers for Disease Control and Prevention. To examine the demand for  emergency department services, we obtained information on emergency  room wait times for 6 hospitals and the number of times that 8 hospitals  diverted patients to other facilities for the 30-day period from March 28,  2006, through April 26, 2006. We limited our work to examining the status  of hospital inpatient and emergency departments in the greater New  Orleans area and did not examine other aspects of hospital services, such  as outpatient services or the financial condition of the hospitals. We also  did not address other issues related to the health care system, such as the  status of primary care, medical research, or graduate medical education.
To determine the steps that have been taken to reopen Charity and  University hospitals—two public facilities eligible for federal disaster  assistance—we reviewed LSU’s and FEMA’s damage assessments and cost  estimates for the hospitals and LSU correspondence to FEMA regarding  potential federal funding. We also reviewed FEMA regulations and  guidance pertaining to disaster assistance. We toured Charity and  University hospitals to examine the damage to these facilities. We also  toured two temporary facilities that provided hospital outpatient care and  emergency department services. These two facilities, established by LSU,  were the Elmwood Medical Center and the Medical Center of Louisiana at  New Orleans (MCLNO) Emergency Services Unit.
To determine the activities undertaken by HHS to help hospitals recover,  we reviewed documents outlining HHS programs and activities related to  helping restore hospital inpatient care and emergency department services  after a disaster. We also reviewed written summaries created by HHS  officials to document department activities to help restore hospital  inpatient care and emergency department services after Hurricane Katrina.
In addressing all three objectives, we interviewed officials from HHS,  FEMA, LSU (including LSU’s Health Care Services Division, which  manages the public hospitals in the greater New Orleans area), and seven  of the nine hospitals that we contacted in the greater New Orleans area.  We also interviewed officials from the Department of Veterans Affairs  (VA) because VA is considering building a joint hospital complex with LSU  in New Orleans, the Louisiana Recovery Authority because it is the  planning and coordinating body that was created in the aftermath of  Hurricane Katrina by the Governor of Louisiana to plan for recovery and  rebuilding efforts, and Louisiana’s Office of Facility Planning and Control  (OFPC) because it is administering the design and construction of all  Louisiana state-owned facilities damaged by Hurricane Katrina. We did not  independently verify information we received from hospitals in the greater  New Orleans area. We conducted our work from April 2006 through  September 2006 in accordance with generally accepted government  auditing standards. See appendix I for more information about our scope  and methodology.
subsections: section_title: Background
paragraphs: Before Hurricane Katrina, 16 acute care hospitals operated in the greater  New Orleans area. These hospitals included public as well as private for- profit and not-for-profit facilities. Because of the hurricane and resulting  flooding, 7 hospitals remained closed as of June 2006. (See table 1.)
Charity and University hospitals are part of the statewide system of 10  public hospitals. Charity Hospital, which served as a Level I trauma  center, was built in 1937. University Hospital was built in 1972. These  hospitals served as the primary health care safety net for many local  residents. About half of the patients served by these hospitals were  uninsured, and about one-third were covered by Medicaid, the federal- state program for financing health care for certain low-income individuals.  Charity and University hospitals served as a major state resource through  training programs for professionals in medicine, nursing, dentistry, and  public health.
Charity and University hospitals are eligible for federal aid under the  Public Assistance program managed by FEMA to help repair the damage  caused by Hurricane Katrina. This program, authorized by the Stafford  Act, provides grants to pay up to 90 percent of the costs of restoring a  facility to predisaster condition. A facility is considered repairable when  the cost of repairing disaster damages does not exceed 50 percent of the  cost of replacing the facility and it is feasible to repair the facility so that it  can perform the function for which it was being used as well as it did  immediately prior to the disaster. Although initial grant obligations are  based on FEMA’s estimate of the costs of repairs to restore the facility to  its predisaster condition, reimbursements are based on actual,  documented repair costs, which could be higher than the original estimate.  Alternatively, if FEMA’s estimated repair costs exceed 50 percent of its  estimated replacement costs, FEMA is authorized to grant up to 90 percent  of its estimated replacement costs to replace a facility. There is a  possibility for additional federal reimbursements under the Public  Assistance program for required code upgrades that are triggered by the  repairs. Code upgrades, although eligible for reimbursements, are not  included in determining whether repair costs exceed 50 percent of  replacement costs. In the event that FEMA’s estimated repair costs do not  exceed 50 percent of its estimated replacement costs and a decision is  made to replace rather than repair, funds authorized for repair may be  used to build a new hospital, but reimbursements will be limited to   90 percent of FEMA’s estimated cost to repair and restore the original  facility to its predisaster condition. In addition, projects for hazard  mitigation to prevent damage in future flooding events are eligible for  Public Assistance funding.
HHS is the federal government’s principal agency for protecting the health  of all Americans and providing essential human services. HHS’s Centers  for Medicare & Medicaid Services (CMS) administers Medicare, which  finances health care for elderly and certain disabled individuals, and  Medicaid. In its support role for long-term community recovery and  mitigation under the National Response Plan, HHS coordinates federal  government health care support to state, regional, local, and tribal  governments; nongovernmental organizations; and the private sector to  enable community recovery, such as recovery from the long-term  consequences of Hurricane Katrina and the subsequent flooding.
section_title: Sufficient Staffed Beds Existed for All Types of Inpatient Care Except Psychiatric Care; High Demand Existed for Emergency Department Services
paragraphs: In the greater New Orleans area, a sufficient number of staffed hospital  inpatient beds existed for all types of care except psychiatric care; there  was also a high demand for emergency department services. According to  information we obtained from hospital officials, we determined that as of  April 2006 the greater New Orleans area had more staffed beds per 1,000  population than the national average, and over two-thirds of these beds  were within 5 miles of Charity and University hospitals. While hospitals  were able to maintain a sufficient number of staffed beds, hospital officials  also reported that recruiting, hiring, and retaining nurses and support staff,  such as nursing aids, housekeepers, and food service workers, to staff the  available beds constituted a great challenge. Eight of the nine hospitals  that remained open after Hurricane Katrina reported a high demand for  services in their emergency departments, not unlike emergency  departments in other parts of the country, which are also experiencing  high demand.
subsections: section_title: Staffed Beds per 1,000 Population Exceeded National Average
paragraphs: According to information we obtained from hospital officials, we  determined that as of April 2006, the greater New Orleans area had more  staffed beds per 1,000 population than the national average. Before  Hurricane Katrina, the population of the greater New Orleans area was  about 1,002,000, with about 455,000 living within the city boundaries of  New Orleans (Orleans Parish). The number of staffed hospital inpatient  beds on hand to serve the people of the greater New Orleans area was  3,958, or about 4.0 staffed beds per 1,000 population, as compared with the  national average of 2.8 staffed beds per 1,000 population reported in 2006.  The population of the greater New Orleans area remains in flux and is  difficult to estimate, in part due to former residents living outside the city  and returning during the day and workers involved in reconstruction  activities. PricewaterhouseCoopers estimated the February 2006  population of the four parishes (Orleans, Jefferson, Plaquemines, and St.  Bernard) to be 578,000, and the Louisiana Department of Health and  Hospitals reported estimates of about 569,000 for January 2006 and  588,000 for April 2006. In April 2006, the hospitals in the greater New  Orleans area reported to us that they were able to staff 1,878 of the 2,328  available beds. Based on their reports and the April 2006 population  estimate, we calculated the four parishes had 3.2 staffed beds per 1,000  population and 4.0 available beds per 1,000 population. About 69 percent  of the available beds are within 5 miles of Charity and University hospitals,  and about 91 percent are within 10 miles. Consequently, patients who live  and work within Orleans Parish are close to hospital services. Figure 1  shows the location of all the hospitals in the greater New Orleans area,  including the nine open hospitals we surveyed.
Furthermore, hospital officials we surveyed told us that they planned to  reopen additional staffed beds by the end of the year. For example, LSU  plans to reopen 166 beds at University Hospital in late September or early  October 2006 and an additional 224 beds by the end of the year for a total  of 390 additional staffed beds. Tulane University Hospital and Clinic plans  to reopen an additional 117 staffed beds by the end of 2006. In all,  hospitals plan to reopen at least 674 staffed beds by the end of 2006. Given  these plans, even if the population of the greater New Orleans area rises   30 percent by the end of 2006 over the estimated population as of April  2006, there would be about 3.3 staffed beds per 1,000 population. This  estimate assumes that the estimated population of 588,000 in April 2006  would increase to 764,000 by December 2006. Furthermore, the population  of the greater New Orleans area would have to increase by 325,000 or  about 55 percent, to 913,000, by December 2006 before staffed beds per  1,000 population dropped to the national average of 2.8.
section_title: Occupancy Rates Were Higher Than They Were before Hurricane Katrina, but Staffed Beds Were Sufficient for All Types of Inpatient Care Except Psychiatric Care
paragraphs: Consistent with nationwide data on occupancy rates (occupied beds as a  percentage of staffed beds), information we received on estimated  occupancy rates from hospitals in the greater New Orleans area  demonstrated wide month-to-month fluctuations. Nevertheless, these  hospitals were able to meet the demand for inpatient care, with the  exception, in many cases, of psychiatric care.
Post-Hurricane Katrina hospital occupancy rates in the greater New  Orleans area are higher than they were before the hurricane. For all types  of care, eight of the nine hospitals we contacted provided us with an  estimated overall occupancy rate for the 9-month period following the  hurricane (through April 2006) and for the 12-month period before the  hurricane. The hospitals’ occupancy rates for the 9-month period after the  hurricane ranged from 45 percent to 100 percent, or an average of   77 percent, compared with a range from 33 percent to 85 percent, or an  average of 70 percent, for the 12-month period before the hurricane. The  American Hospital Association reported that the average monthly hospital  occupancy rate nationwide was 67 percent in 2004, the most recent year  for which nationwide data are available.
We also obtained actual occupancy rate information from the nine greater  New Orleans area hospitals for one day—April 25, 2006—and five of them  provided actual daily occupancy rate information for the entire month of  April 2006. The five hospitals reported actual occupancy rates that ranged  from 70 percent to 89 percent (70, 75, 85, 86, and 89 percent).
According to hospital officials, the greatest need was for medical/surgical  care, adult critical care, and psychiatric care beds. For example, on   April 25, 2006, the occupancy rate was 95 percent for medical/surgical  care, 96 percent for adult critical care, and 100 percent for psychiatric  care, compared with rates of 68 percent and 71 percent for obstetrics care  and pediatrics care, respectively. (See table 2.) Hospital officials also told  us that inpatient psychiatric care beds were frequently not available in the  greater New Orleans area and that psychiatric patients were the only type  of patients that had to be transferred out of the greater New Orleans area  because of a lack of beds. For example, an official at one hospital reported  that since Hurricane Katrina the demand for psychiatric services has  overwhelmed that hospital’s 15-bed psychiatric unit, and the hospital has  had to house up to eight psychiatric patients in the emergency department  at one time until psychiatric beds could be found in other facilities. An  official at another hospital reported that sometimes psychiatric patients  have stayed in the emergency department for several days until an  inpatient psychiatric bed could be found for them somewhere else in  Louisiana. An official at a third facility stated that the facility’s case  workers frequently spent all day calling other facilities in the state looking  for an inpatient psychiatric bed. In one case, workers made 39 telephone  calls before locating a facility that would accept the patient.
Occupancy rates increased following Hurricane Katrina not only because  of the loss of staffed beds but also because patients on average have been  staying in the hospital longer. According to hospital officials, the average  length of stay has increased by about one-half day because there is a  shortage of facilities to which patients can be discharged, such as skilled  nursing facilities and long-term care facilities. In addition, because of the  extensive destruction of housing, many patients may not have appropriate  housing to which they can return. According to a recent report prepared  for the Louisiana Recovery Authority Support Foundation, a single-day  increase in the average length of stay drives occupancy rates up about   15 percent.
section_title: Recruiting, Hiring, and Retaining Hospital Staff Posed Significant Challenges
paragraphs: Hospital officials reported that recruiting, hiring, and retaining nurses and  support staff, such as nursing aids, housekeepers, and food service  workers, to staff the available beds constituted a great challenge. The  officials told us that the demand for nurses was greater than the supply  because (1) many nurses left the greater New Orleans area during and  after the storm, (2) there was an insufficient supply of suitable housing for  nurses, and (3) local nurses were being recruited by facilities outside the  greater New Orleans area. According to officials, the hospitals have been  able to reopen beds and keep them open by having employees work  overtime and by paying higher salaries for permanent and temporary  contract staff. However, a shortage of skilled workers remains. For  example, an official at one hospital reported that the hospital had to  temporarily suspend its open heart surgery program because of its  inability to hire operating room nurses and technicians with experience in  open heart surgery, even after offering a salary increase of over 30 percent.  Officials also stated that competition from nonhospital employers for  unskilled workers made it difficult for the hospitals to hire and retain  them. For example, whereas the average hourly rate for food service  workers was about $7 per hour before Hurricane Katrina, fast food  restaurants are currently offering about $12 per hour, with one restaurant  chain, for example, offering a signing bonus of about $6,000.
section_title: Hospitals Reported High Demand for Emergency Department Services
paragraphs: The hospitals that remained open after Hurricane Katrina have reported a  high demand for services in their emergency departments. Data reported  by some of the hospitals showed that wait times for emergency medical  service vehicles to move stable patients from the vehicle into the  emergency department varied from no wait time at one hospital to almost  40 minutes at another hospital for the 30 days between March 28 and   April 26, 2006. During the same 30-day period, four of these hospitals  reported that their emergency departments were occasionally at capacity  and therefore temporarily diverted patients to other facilities. The four  emergency departments temporarily diverted patients 8 to 26 times; three  of the departments reported being in diversionary status from 5 to 48  hours. Over this same period, officials from six of the nine hospitals also  reported that an average of 7 patients per day had to be housed in the  emergency department until a hospital bed was available after a decision  had been made to admit them to the hospital. This ranged from 1 patient  per day at one hospital to 18 patients per day at another hospital.
By comparison, demand for emergency medical services in other parts of  the country is also high. For example, the Institute of Medicine reported in  June 2006 that emergency department crowding was a nationwide  problem, with numbers of visits having grown by 26 percent from 1993 to  2003. The Institute of Medicine also reported that patients are often  boarded in the emergency department for 48 hours or more until an  inpatient bed became available. Furthermore, an April 2002 report  conducted for the American Hospital Association found that officials at  many hospitals in urban areas described their emergency departments as  operating at or above capacity. In addition, we reported in March 2003  that because of a lack of inpatient beds about 2 in 10 of the 1,489 hospitals  we surveyed temporarily diverted patients from their emergency  department more than 10 percent of the time—or about 2.4 hours or more  per day—and nearly 1 in 10 hospitals temporarily diverted patients from  their emergency department more than 20 percent of the time—or about   5 hours per day. In our March 2003 report, hospital officials cited  economic reasons for the lack of inpatient beds, including financial  pressures and the inability to staff the available beds because of difficulty  in recruiting nurses or the increased cost of hiring contract nurses. We  also reported that for about 1 in 5 hospitals the average time that patients  remained in the emergency department after a decision was made to admit  them as inpatients or transfer them to other facilities was 8 hours or more.
section_title: Steps Have Been Taken to Reopen University Hospital, but LSU Has No Plans to Reopen Charity Hospital
paragraphs: FEMA and LSU have prepared damage assessments and cost estimates for  University and Charity hospitals. FEMA’s cost estimates for repairs at  Charity and University hospitals are considerably lower than LSU’s  estimates. While repairs are under way to reopen portions of University  Hospital beginning this fall, as of July 2006, LSU had no plans to reopen  Charity Hospital. Rather, LSU intends to pursue the possibility of building  a new facility, in collaboration with VA. Meanwhile, LSU has established  temporary facilities to provide some of the hospital functions previously  provided by the two hospitals. For example, LSU established the MCLNO  Emergency Services Unit, which is located in a former department store,  and opened a trauma center at the Elmwood Medical Center.
subsections: section_title: LSU’s Cost Estimates for Repairing Charity and University Hospitals Are Considerably Higher Than FEMA’s Estimates
paragraphs: LSU’s cost estimates for repairing Charity and University hospitals are  considerably higher than FEMA’s estimates. Shortly after Hurricane  Katrina struck the greater New Orleans area, LSU hired ADAMS  Management Services Corporation (ADAMS) to assess the condition of the  two hospitals. In addition to identifying safety and health issues with  respect to physical construction and deficiencies, ADAMS was tasked with  recommending specific corrective measures, including cost estimates, to  make it feasible to restore the hospitals to a usable condition. ADAMS  completed its assessment in November 2005. According to the ADAMS  assessment, Charity and University hospitals’ structural systems, such as  columns, beams, and flooring, were in functional condition, although  further testing would be required to verify this condition. However, the  mechanical, electrical, and plumbing systems were beyond repair, and  there were significant environmental safety problems. ADAMS estimated  the repair costs at $257.7 million for Charity Hospital and $117.4 million  for University Hospital. ADAMS also estimated replacement costs at  $395.4 million for Charity Hospital and $171.7 million for University  Hospital. On the basis of these estimates, ADAMS determined that repair  costs exceeded 50 percent of the replacement costs for the two hospitals.  As a result, LSU officials told us they believed that the hospitals met the  Public Assistance program criteria for replacement funding and that LSU  could obtain 90 percent of the estimated cost to replace Charity and  University hospitals through the Public Assistance program.
FEMA’s cost estimates for repairing the two hospitals, however, are  considerably lower than LSU’s estimates. FEMA completed its initial  damage assessment in December 2005. However, FEMA’s initial  assessment did not include elevator repairs because the elevators were not  accessible at that time. FEMA completed its assessment of the elevators in  April 2006. Like the assessment ADAMS did for LSU, FEMA’s initial  assessment found mechanical, electrical, and plumbing damage, among  other things. FEMA estimated the repair costs, including the elevator  repair costs, at $27 million for Charity Hospital and $13.4 million for  University Hospital. FEMA also estimated replacement costs at   $147.7 million to $267.3 million for Charity Hospital and $57.4 million to  $103.9 million for University Hospital. From these estimates, FEMA  determined that the repair costs did not exceed 50 percent of the  replacement costs for the two hospitals. (See table 3 for a comparison of  LSU’s and FEMA’s repair and replacement estimates.)
Two significant factors contribute to the differences between LSU’s and  FEMA’s cost estimates. First, LSU’s cost estimates cover whole building  repair, meaning that they include costs for damage from Hurricane Katrina  and many deficiencies that had been identified before the hurricane. For  example, LSU’s estimates include costs for installing fire-rated doors and  frames in all exit corridors throughout University Hospital, the lack of  which was identified in 2003 as a problem that needed to be addressed. In  contrast, FEMA’s estimates for Charity and University hospitals cover the  repair costs for damage from flooding and wind only, since these are the  only repair costs eligible for federal reimbursement under the Public  Assistance program. Prior deficiencies are generally not eligible for  reimbursement. Second, LSU’s estimates also included a 66 percent cost  escalation over a commonly used index of labor and material for New  Orleans. The cost escalation was meant to anticipate material and labor  shortages over the next 3 to 6 years as a result of the hurricane. FEMA’s  estimates, in contrast, did not include a cost escalation for labor and  material. According to FEMA, three of the five bids for a recently awarded  contract for the New Orleans Arena were below the federal government  estimate. Based on those bids, FEMA concluded that a cost escalation for  labor and material inflation was not justified.
State officials disputed FEMA’s cost estimates of the hurricane damage to  Charity and University hospitals. LSU maintained that these hospitals are  not repairable, as defined by federal regulation. Specifically, LSU  maintained that the cost of repairing the hospitals to their predisaster  condition exceeded 50 percent of the cost of replacing the hospitals and  that it was not feasible to repair the hospitals so that they could perform  the functions for which they were being used immediately prior to the  disaster. In a November 2005 letter to Vice Admiral Thad Allen, LSU  noted that “It is not feasible to repair these facilities to restore the design,  function, and capacity, as well as all required code and standard upgrades,  at a reasonable cost.” LSU further suggested in the letter that FEMA’s  estimated costs were too low, noting that FEMA’s estimates did not  include all eligible expenses that might be incurred in completing the  repairs, such as those associated with compliance with the Americans  with Disabilities Act (ADA). For example, the ADAMS assessment includes  accessibility upgrades to bring Charity and University hospitals into  compliance with current ADA requirements, including upgrades to the  restrooms, telephones, and drinking fountains. Officials from OFPC, which  administers the design and construction of all Louisiana state-owned  facilities damaged in Hurricane Katrina, also told us that FEMA’s estimates  for the two hospitals were too low and did not reflect the current market  conditions (i.e., the shortage of labor and material). Officials from both  LSU and OFPC provided several examples of FEMA’s underestimating the  costs of repairs for facilities in the greater New Orleans area. For example,  FEMA estimated the costs for repair to the engineering building on the  University of New Orleans campus at about $286,000. The contract was  awarded for about $689,000. However, FEMA officials cautioned against  using differences in estimated and actual repair costs for other facilities as  benchmarks for comparing or adjusting the estimates for Charity and  University hospitals, noting that each facility and its associated estimate  are unique.
To help reconcile FEMA’s and LSU’s cost estimates, FEMA officials  suggested that LSU select a few projects at Charity Hospital and put them  out for bid. According to FEMA officials, this process would provide  actual repair costs and could serve as a baseline for adjusting LSU’s or  FEMA’s estimates as needed. FEMA officials noted that some repair  projects at Charity Hospital would be necessary even if LSU opted to  replace, not repair, the facility. Officials from LSU and OFPC told us that  they questioned whether this would be the best use of time and resources,  however, especially since they said they did not believe that restoring  Charity Hospital to its predisaster condition would adequately meet the  health care needs of the community. However, a senior OFPC official told  us that OFPC would evaluate whether some repairs were necessary to  prevent further deterioration of the facility.
FEMA has begun the process of obligating funds based on its assessments.  As of June 16, 2006, FEMA had obligated about $21.5 million for repairs to  Charity Hospital and $14.3 million for repairs to University Hospital. The  funds are allocated to Louisiana’s Office of Homeland Security and  Emergency Preparedness (i.e., the grantee), which then distributes the  funds to LSU (i.e., the applicant) for reimbursement for the costs of  repairing Charity and University hospitals.
section_title: Repairs to University Hospital Are Under Way, and LSU Is Pursuing the Possibility of a New Facility to Replace Both Charity and University Hospitals in the Future
paragraphs: At the time of our visit in May 2006, repairs to University Hospital were  under way, and portions of the facility were expected to reopen by late  September or early October 2006, with the remainder of the facility  expected to open by the end of the year. Initially, LSU officials had hoped  to reopen a portion of the facility by the end of June 2006. However,  according to LSU officials, estimates for reopening a portion of the facility  in June—which assumed a 75-day construction schedule—were optimistic  given the amount of repair work needed. An official from OFPC told us  that several contractors estimated it would take 180 days to complete the  work, which was more than 3 months longer than LSU requested. LSU and  the winning contractor ultimately negotiated a 120-day construction  schedule. According to this new schedule, LSU plans to reopen portions of  University Hospital, including inpatient beds, a pharmacy, and a blood  bank, in fall 2006. In addition, LSU plans to convert space on the first floor  of the hospital for a Level I trauma center. This work is scheduled to be  completed by the end of 2006. However, officials from LSU and OFPC  stated that the schedule is subject to change, depending on the availability  of resources and the ability of the contractor to complete the repair work  on time. In addition, although LSU plans for University Hospital to be  fully operational by the end of the year, a senior LSU official told us that  LSU is pursuing the possibility of a new hospital that would allow it to  close University Hospital in the future. According to this official, the  building is near the end of its useful life.
While repairs to University Hospital are under way, LSU currently has no  plans to reopen Charity Hospital. Charity Hospital sustained significant  damage as a result of Hurricane Katrina, in large part because of the  flooding that occurred in the basement. In addition, according to officials  from LSU and OFPC, the facility was antiquated prior to Hurricane Katrina  and was not well suited for a modern acute care medical facility. As a  result, LSU does not want to invest significant resources in repairing the  facility and would prefer to invest available funding in constructing a  replacement facility. If LSU decides to replace Charity Hospital, LSU is  authorized under the Public Assistance program to use funds approved for  repair, including the $21.5 million already obligated, on a replacement  facility. However, the amount eligible for reimbursement cannot be greater  than 90 percent of FEMA’s initial cost estimates for repairs.
Prior to Hurricane Katrina, LSU had decided to support the construction  of a new facility to replace both University and Charity hospitals, and it  was seeking funding for the project when the storm occurred. LSU  continues to support this option and has taken some initial steps, in  collaboration with VA, to plan for a new facility. Like LSU’s Charity and  University hospitals, VA’s New Orleans Medical Center sustained  extensive damage as a result of Hurricane Katrina, and VA has determined  that the existing facility is no longer suited for providing patient care. As a  result, VA is also proposing to construct a new facility. LSU and VA  formed the Collaborative Opportunities Study Group (COSG) to study  options for constructing a new joint hospital facility. In its June 2006  report, COSG recommended a “collaborative complex”—that is, separate  VA and LSU bed towers connected by a corridor that houses facilities and  services used by both entities. According to the June report, a  collaborative complex would be more cost-effective than LSU and VA  operating stand-alone facilities.
section_title: LSU Has Established Temporary Facilities to Provide Public Hospital Functions
paragraphs: Following Hurricane Katrina, LSU established several temporary facilities  in order to continue to meet the health care needs of the population  currently in the greater New Orleans area and to continue to fulfill LSU’s  mission of providing care to the uninsured. Two key temporary facilities  are the MCLNO Emergency Services Unit and the trauma center at the  Elmwood Medical Center. The MCLNO Emergency Services Unit is located  in a former department store in downtown New Orleans. It was originally  established in the parking lot of University Hospital in October 2005. The  facility was moved to the Ernest N. Morial Convention Center in  November 2005 and eventually to its current location in March 2006.
According to LSU officials, the MCLNO Emergency Services Unit provides  a variety of outpatient services, including minor emergency services,  dental care, radiology services, and services for victims of sexual assault,  among others. According to LSU officials, the facility is not equipped to  provide major emergency services. In order to accommodate the services  being provided, LSU set up cubicles and tents to serve as treatment rooms,  storage, conference rooms, and offices. LSU plans to close the MCLNO  Emergency Services Unit in October 2006, when University Hospital is  reopened.
LSU is also leasing space for a trauma center from the Ochsner Clinic  Foundation at its Elmwood Medical Center. LSU opened the facility on  April 24, 2006, to provide the trauma services previously provided at  Charity Hospital. Charity Hospital served as the only Level I trauma center  in the region. According to LSU officials, the trauma center at Elmwood  Medical Center houses a blood bank, laboratory, pharmacy, and treatment  rooms, among other things. In addition, computed tomography and  magnetic resonance imaging services are provided in mobile trailers on  the grounds of the facility. LSU’s lease for this space expires at the end of  2006.
section_title: HHS Has Provided Financial and Technical Assistance and Program Waivers to Help Address Restoration
paragraphs: HHS officials said that the agency’s efforts to restore hospitals’ health care  infrastructure following Hurricane Katrina included financial assistance,  technical assistance, and waivers that allow exceptions to some program  requirements. HHS financial assistance included two opportunities for  hospitals to receive additional funds for infrastructure repair—SSBG that  may be used to repair or rebuild health care facilities, and a Medicare  extraordinary circumstances exception that allows damaged hospitals to  receive payment for capital costs. SSBG funds generally cannot be used  for construction; however, the Department of Defense, Emergency  Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico,  and Pandemic Influenza Act, 2006, enacted December 30, 2005, specifically  authorized the use of SSBG funds appropriated by that act for the repair,  renovation, and construction of health facilities. The act appropriated an  additional $550 million to the SSBG program, from which HHS designated  about $221 million for Louisiana in February 2006.
In addition, four applications were submitted to CMS for assistance to  hospitals in the greater New Orleans area under the Medicare  extraordinary circumstances exception, which provides additional  payments for unanticipated capital expenditures that exceed $5 million  (after taking into account proceeds from other sources, such as insurance  or FEMA aid) and result from extraordinary circumstances, such as  hurricanes. The provision does not provide a lump sum payment up front;  instead, it allows eligible hospitals that serve Medicare patients to  depreciate the cost of the unanticipated capital expenditures over the life  of the asset, once repairs have been made. Charity and University  hospitals (submitting a joint application), East Jefferson General Hospital,  Tulane University Hospital and Clinic, and Ochsner Medical Center have  applied for this funding. As part of the approval process, HHS requested  that each hospital provide a plan and a schedule for submission of  documents to support its exception request. As of June 8, 2006, only  Charity and University hospitals had provided estimates of their expected  capital expenditures, which they set at approximately $900 million, an  HHS official said.
HHS technical assistance to Louisiana related to restoration of the health  care infrastructure includes both ongoing and planned technical  assistance. Since Hurricane Katrina, HHS has assigned staff members to  assist hospitals and other state and local entities in Louisiana in evaluating  health care challenges and identifying available resources. For example,  HHS staff members did the following:    Provided consultation services at Orleans Parish health planning  committee meetings that addressed shortages of staff, hospital beds, and  funding. As a result, an immediate need for registered nurses was  identified, and HHS, in coordination with VA, made arrangements for 12 to  20 registered VA nurses on 2- to 4-week rotations through mid-April 2006  to provide emergency room, medical-surgical, and intensive care unit  services at Tulane University Hospital and Clinic.
Conducted joint weekly teleconferences beginning in January 2006 with  the Joint Commission on Accreditation of Healthcare Organizations, state  survey agencies, and hospital and other health care providers to  coordinate the application of accreditation standards for hospitals that  were providing care in temporary facilities or in facilities damaged by the  hurricanes.
Facilitated meetings between St. Bernard Parish and a nonprofit medical  center that led to the opening of a new primary and urgent care facility in  April 2006 after the parish lost all its health care facilities during Hurricane  Katrina.
Additionally, since Hurricane Katrina, HHS officials have chaired two  federal interagency working groups, the President’s Health Care: Chronic  Care and Facilities Restoration Workgroup and HHS’s Gulf Coast  Recovery Working Group. The President’s Health Care: Chronic Care and  Facilities Restoration Workgroup produced two major working papers in  2006, a summary of the federal payments available for providing health  care services and rebuilding health care infrastructure after Hurricane  Katrina and a document that sets out guiding principles for the federal  government in the rebuilding process. The federal payments summary  served as the basis for two all-day interagency workshops in New Orleans  on January 10, 2006, and February 9, 2006, sponsored by HHS and  Louisiana, for local and regional health care providers and elected officials  to identify information about available federal resources and to provide  technical assistance in accessing them. While the President’s Health Care:  Chronic Care and Facilities Restoration Workgroup has disbanded, many  of its members have been included in meetings of the Gulf Coast Recovery  Working Group. The Gulf Coast Recovery Working Group is an HHS staff- level group that meets regularly to resolve issues and offer advice on how  to improve HHS programs supporting the recovery efforts. The Gulf Coast  Recovery Working Group also began working with the Department of  Homeland Security’s Office of the Federal Coordinator for Gulf Coast  Rebuilding shortly after the office was established on November 1, 2005,  by Executive Order 13390 to lead the federal response. The Gulf Coast  Recovery Working Group reports to the HHS Secretary and provides input  to, and coordinates on a policy level with, the Federal Coordinator.
Planned technical assistance is part of a broader effort to redesign the  entire continuum of Louisiana’s health care delivery system, from primary  care clinics to the restoration of hospital inpatient care and emergency  department services in the greater New Orleans area, HHS officials said.  HHS plans to provide technical assistance to the Louisiana Healthcare  Redesign Collaborative (Collaborative), a state and locally led effort to  redesign the health care delivery system in Louisiana, including the  existing hospital system. HHS’s Office of the Secretary expects to provide  technical staff, guidance, and funds to support the redesign effort. In an  address before the Louisiana state legislature on April 25, 2006, the  Secretary of HHS committed to participating in the redesign effort but  emphasized that the redesign effort must be locally led and governed  according to guiding principles endorsed by all participants. A charter,  signed July 17, 2006, places the Collaborative under the authority of the  Louisiana Department of Health and Hospitals and includes guiding  principles. To help coordinate technical assistance from HHS to the  Collaborative, HHS has hired a full-time senior advisor to the Secretary of  HHS and plans to provide part-time staff from across HHS agencies. HHS  officials said that the agency expected to work with the Collaborative to  develop a health care system recovery proposal that could include  requests for Medicare demonstrations and Medicaid waivers. HHS  officials said that they expected that the redesign effort would produce a  more efficient and effective health care delivery system in Louisiana. HHS  officials noted that prior to Hurricane Katrina, Louisiana had one of the  most expensive health care systems in the United States, but that it  generally ranked close to the bottom among states in terms of health care  quality indicators.
The Secretary of HHS has waived or modified various statutory and  regulatory requirements to assist hospitals and other health care providers  in states in which he had declared a public health emergency. For  example, certain Medicare billing and other requirements were waived or  modified to accelerate Medicare payments in the hurricane-affected states,  including Louisiana. Under the waivers, HHS has    paid hospitals the inpatient acute care rate for Medicare patients that  remained in a hospital but no longer required acute level care, until the  patient could be discharged to an appropriate facility; relaxed the data requirements to substantiate payment to the provider  when a facility’s records were destroyed;   allowed hospitals to have a responsible physician (e.g., the chief of  medical staff or department head) sign an attestation of services provided  when the attending physician could not be located; and instructed its payment processing contractors to immediately process  requests for accelerated payments for health care providers, including  hospitals, affected by the hurricane.
In addition, after HHS received inquiries concerning whether hospitals  could provide free office space, low interest or no interest loans, or other  arrangements to assist physicians displaced by Hurricane Katrina, the  Secretary permitted CMS to waive sanctions for violations of the physician  self-referral prohibition, known as the Stark Law, through January 31,  2006. This time-limited relief concerns statutory prohibitions against a  physician referring Medicare patients to an entity with which the physician  or a member of the physician’s immediate family has a financial  relationship. HHS officials said that a waiver had been approved for one  hospital in the greater New Orleans area for one physician.
HHS officials said that few HHS programs or activities are designed to help  address the restoration of hospital inpatient care and emergency  department services in the greater New Orleans area. The department  does not have broad authority to respond to the needs of hospitals  affected by a disaster, HHS officials said. They cited several issues that  limit the agency’s ability to provide this type of assistance. First, agency  officials emphasized that HHS’s role in financing health care services does  not easily translate into providing restoration assistance after a disaster.  Second, HHS must consider whether proposed responses to problems  identified in the greater New Orleans area could adversely affect other  areas of the country. For example, Louisiana has requested that HHS  adjust the wage index used in determining Medicare prospective payments  to hospitals to account for the higher wages that must be paid to attract or  maintain health care workers, including nurses and physicians, in the  greater New Orleans area. However, HHS officials said that by law,  changes to the wage index must be “budget neutral.” Practically, this  means that if the wage index is increased for the greater New Orleans  area, then the wage index must be decreased for another area, HHS  officials said.
section_title: Agency Comments
paragraphs: We sent a draft of this report for comment to DHS, HHS, VA, and the State  of Louisiana. Excerpts from it were also sent to LSU for comment. HHS  agreed with the draft report, and its comments are included as appendix II.  VA informed us by e-mail that it agreed with the draft report. DHS also  responded by email and informed us that it had no formal comments on  the draft report. DHS, HHS, and VA also provided technical comments, as  did Louisiana’s Department of Health and Hospitals through an e-mail  response. We considered all technical comments and incorporated those  that were appropriate. LSU did not provide comments.
We are sending copies of this report to the Secretaries of Homeland  Security, Health and Human Services, and Veterans Affairs and other  interested parties. We will also make copies available to others on request.  In addition, the report is available at no charge on the GAO Web site at  http://www.gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.
If you or your staffs have any questions about this report, please contact  Cynthia Bascetta at (202) 512-7101 or bascettac@gao.gov for issues related  to health services. Please contact Terrell G. Dorn at (202) 512-6923 or  dornt@gao.gov for issues related to medical facilities and FEMA. GAO  staff members who made significant contributions to this report are listed  in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: To examine the availability of hospital inpatient care and the demand for  emergency department services, we contacted nine operating public and  private hospitals in the greater New Orleans area. We randomly selected  one day—April 25, 2006—and asked hospital officials to provide  information on the number of available, staffed, and occupied beds for  that day, by type of patients served, such as critical care, medical and  surgical, and pediatrics. We later asked for the number of available,  staffed, and occupied beds for the entire month of April; however, only  five hospitals responded to this request. From the hospital officials we also  obtained estimates of the occupancy rates for the 12-month period prior  to, and the 9-month period following, Hurricane Katrina for 8 of the 9 open  hospitals. We weighted the estimated hospital occupancy rates by the  number of staffed beds to obtain a weighed average. Further, we asked  about plans to open more beds and about emergency department services  provided for the 30-day period from March 28, 2006, through April 26,  2006. We conducted telephone interviews with senior officials from seven  of the nine hospitals to clarify information provided in their written  responses to our survey. We did not independently verify the data the  hospitals provided on bed availability and the amount of emergency care  provided. To determine the April 2006 population of the four parishes in  the greater New Orleans area, we used estimates from the Louisiana  Department of Health and Hospitals Bureau of Primary Care and Rural  Health, which used two methodologies to estimate the population in each  of the parishes. It used school enrollment data for Jefferson, St. Bernard,  and Plaquemines parishes; and for Orleans Parish it used a survey of  persons occupying residential structures. The survey had been conducted  by the New Orleans Health Department in consultation with the Centers  for Disease Control and Prevention. We limited our work to examining the  status of hospital inpatient and emergency departments in the greater New  Orleans area and did not examine other aspects of hospital services, such  as outpatient services or the financial condition of the hospitals. We also  did not address other issues related to the health care system, such as the  status of primary care, medical research, or graduate medical education.
To examine the Federal Emergency Management Agency (FEMA) and  Louisiana State University (LSU) efforts to reopen Charity and University  hospitals, we reviewed LSU and FEMA damage assessments and cost  estimates for the facilities, FEMA regulations and guidance, and the  Department of Veterans Affairs’ (VA) damage assessment of its medical  center in New Orleans. We toured Charity and University hospitals and the  temporary facilities LSU has established to provide hospital outpatient  care and emergency department services. We interviewed officials from  FEMA; LSU (including LSU’s Health Care Services Division that manages  the public hospitals in the greater New Orleans area); VA because it is  considering building a joint hospital complex with LSU in New Orleans;  the Louisiana Recovery Authority because it is the planning and  coordinating body that was created in the aftermath of Hurricane Katrina  by the Governor of Louisiana to plan for recovery and rebuilding efforts;  and Louisiana’s Office of Facility Planning and Control because it is  administering the design and construction of all Louisiana state-owned  facilities damaged by Hurricane Katrina. We did not independently verify  the damage assessments prepared by FEMA and LSU. We limited our  review to the efforts to restore state-owned public hospital facilities.
To determine the activities that the Department of Health and Human  Services (HHS) has undertaken to help hospitals recover in the greater  New Orleans area, we interviewed officials in various HHS agencies,  including officials in the Centers for Medicare & Medicaid Services  headquarters and Dallas and Atlanta regional offices, the Health Resources  and Services Administration, the Administration for Children and Families,  and the Office of Public Health Emergency Preparedness. Additionally, we  reviewed documents and summaries outlining HHS programs and  activities related to helping restore hospital inpatient care and emergency  department services after a disaster. Finally, we reviewed applicable  federal law and regulations.
We conducted our work from April 2006 through September 2006 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: Comments from the Department of Health and Human Services
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to the contacts named above, key contributors to this report  were Michael T. Blair, Jr., Assistant Director; Nikki Clowers, Assistant  Director; Karen Doran, Assistant Director; Jonathan Ban; Michaela Brown;  Nancy Lueke; Roseanne Price; and Cherie Starck.