Growing Pains

Bryan says the effort was helped recently when Louisiana lawmakers gave St. Bernard Parish a rural-health designation that pays hospitals at cost for treating Medicaid and indigent patients. Still, the cost of building a hurricane- and flood-proof building that must be self-sustaining for up to two weeks could top $1.5 million per bed because of the high cost of labor and construction materials, Bryan says.

Ochsner, which has seven hospitals, proposed to build a 20-bed, $20 million hospital but expanded its plan to a 40-bed hospital after parish officials questioned whether it was too small. Ochsner CEO Patrick Quinlan, MD, says the health system is being "prudent" and reacting to limited resources. "We wanted to start out conservatively to minimize losses.

"We want to build a hospital that can grow as the demand warrants," he says.

Ensuring that the new hospital is sustainable, rather than focusing on bed counts, is critical for the psychological health of St. Bernard's traumatized residents, Quinlan says. "When you are in recovery mode, you want a series of positive events, you never want to lose ground. There were so many failures related to the storm, the last thing we wanted was another one."

The development company hired by the parish to oversee the design and construction of the hospital, Brookfield, WI-based Hammes Company, says that no matter which plan is ultimately accepted, the hospital likely won't open until mid-2011. And even as Ochsner and Franciscan look to open a new facility in St. Bernard, a recent Government Accountability Office report offers a bleak assessment of New Orleans hospitals' financial health. Five New Orleans-area organizations—West Jefferson Medical Center, East Jefferson Medical Center, Touro Infirmary, Tulane University Hospital and Clinic, and Ochsner Health System—lost a combined $135 million in 2007, the report says. The combined post-Katrina operating losses for the five organizations are expected to top $405 million by 2009. Ochsner lost $31.6 million in 2007 and is projected to lose $23 million in 2008.

Multiple factors have contributed to the hospitals' financial struggles—everything from a greater charity burden to high worker demand that has forced hospitals to pay a premium for labor. But making matters worse, Quinlan says, is Medicare lagging three years behind the times. "We are still being paid on the cost structure prior to Katrina," Quinlan says, adding that it won't be until 2010 before Medicare payments reflect reality. "We're talking about a five-year period in which we are vastly underpaid," he says.

Despite those challenges, however, Quinlan says the New Orleans hospital community has resolved to do everything it can to help the region recover. "This is a story about a community of hospitals that came together, did the right thing very well, continued through adversity, and are still planning to meet public need. In the process though, they are becoming depleted and they need some help."

—John Commins