LAFAYETTE, La. (ABiz) – David Callecod, CEO of the six-hospital Lafayette General Health System, says the proposed $26 million in budget cuts, which represents more than a fifth of the hospital’s overall budget, could spell the end of the public-private partnership that manages the University Hospital & Clinics.

“The irony of it is it’s $9.9 million of state general funds, but once you pull down the federal dollars it is an effective $26.2 million cut,” says Callecod. “We’re not the second largest hospital, but we are receiving the second largest cut of all of the facilities. And percentage wise, it is the largest cut of all of the public-private partnerships.”

Callecod addressed the Senate Finance Committee on Feb. 17, and the Senate Revenue and Fiscal Affairs Committee on Feb. 24 about the importance of keeping state funding available to local hospitals, especially the public-private partnerships.

“I’m hopeful that a compromise can be found,” the administrator says. “I’m very much supportive of a shared sacrifice, but at this point I would describe this as instead of a haircut this is like a decapitation of the program in Lafayette.”

Callecod says the hospital board will meet Tuesday to discuss a resolution that would threaten a termination of the partnership with the state if legislators approve the budget cut.

“I hope they come up with a compromise of cuts and revenue so that we can then stay in this partnership,” says Callecod. “We do not want to leave this partnership, but if forced to do so I see no other alternative.”

According to Callecod, ending the partnership would require LGH to give a 60-day notice to the state, which would then be forced to find a new partner or turn the facility back over to LSU, which is also facing millions of dollars in reductions due to the state’s budget crisis. Callecod adds that the worst-case scenario would see several facilities close, which would also put residency programs in jeopardy.

“The care of the patients during that 60-day period would continue to be our responsibility as the public-private partner, but after 60 days those are questions that the state and LSU would have to answer,” says Callecod.

The state would have to pay out liquidated damages as well as capital that has been pumped into UHC. The unused lease payments for the property would have to be returned as well.

Callecod says that if the partnership were to be terminated and the partners walk away it would create an even greater fiscal crisis for the state.

“I think without question this is going to cost a lot more than the $54 million that the shortfall is representing to the public-private partnerships,” says Callecod. “The savings of those state dollars are going to translate into hundreds of millions of additional expenses that our state does not have. So it compounds the budget problems that we have. And quite frankly I find it silly that we’re even having this discussion when you look at the way in which we’ve improved care and driven down the cost of care.”

Lafayette General took over operation of the charity hospital back in 2012 on the condition that it would be reimbursed for services by the state. Since then, LGH has grown the daily census, or number of patients in bed each day, from 16 patients to 45 patients per day. It has also grown outpatient visits from 12,857 to 19,358 per month. The number of average clinic visits at UHC has grown from 7,899 to 11,795 since LGH took it over.

“The scenario of us experiencing this cut is a dire scenario and it is one that we need to avoid at all costs,” says Callecod. “So I urge our legislators to find not only revenue opportunities to solve the budget crisis, but also cost savings and cost cutting throughout the state government and to assure that this really is a shared responsibility for everyone in the state. I can’t stress enough that we need to solve this budget crisis. It not only threatens the public-private partners, but it threatens the very existence of many of our healthcare institutions across the great state of Louisiana.”

[This article was originally published in the February 2016 edition of Acadiana Business (ABiz) Magazine and on]