September 6, 2016

Richard A. Lipsey
Chairman of the Board
The Louisiana Board of Regents
P.O. Box 83280
Baton Rouge, LA 70884
Re:

University Health

Dear Mr. Lipsey:

As the Chair of University Health, Im writing to respond to a series of misstatements
made to the Board of Regents by Dr. F. King Alexander regarding the relationship between the
LSU Shreveport School of Medicine (SOM) and University Health and its parent Biomedical
Research Foundation of North Louisiana. Unfortunately, Dr. Alexander has completely misstated
the facts. He has also ignored University Healths outstanding achievements in bringing
improved care to the poor and underserved citizens of North Louisiana, financial stability to the
Shreveport and Conway hospitals, and substantially enhanced financial and educational support
for the Shreveport SOM. Dr. Alexanders recent statements are just as inaccurate as the attacks
LSU made on University Health and BRF last summer, which resulted in dismissal of LSUs
litigation against us. In that case, Judge Hernandez found that LSUs failure to collaborate
required dismissal. Sadly, LSUs administration is again engaged in the very same mistakes and
misstatements.
This letter is a lengthy one, because we believe it important to rebut Dr. Alexanders
broad and conclusory misstatements with hard facts. But the essential facts are quite clear:
Long before privatization began, the Shreveport SOM has been incurring steadily
increasing operating losses, of $50-$100 million annually, under a failed financial
model. In addition, since 2011, LSU has drawn down a staggering $200 million in
reserves in an attempt to balance its budget.
BRF took on the job of operating privatized hospitals in Shreveport and Monroe at the
request of LSU. We agreed at the outset to provide $50 million in annual support to
the Shreveport SOM, an amount that LSU testified would be sufficient to allow it to
operate successfully. Shortly after we agreed to that, LSU then requested $100
million per year. We agreed to that number as well, and have fully complied with our
agreement.

1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

University Health has continued to provide substantial and growing support to the SOM
in Shreveport, with more than $380 million in payments since privatization. That has
continued to this day. We have not underpaid LSU in any way. In fact, the Shreveport
SOM owes significant sums to University Health. University Health is completely
current on all undisputed payments between the parties.
Our hospitals are profitable and successful. Our audited financial statements make that
clear beyond any doubt.
University Health has transformed the hospitals operations to a far more efficient model,
which has saved the state more than $100 million.
We have offered to work with the Shreveport SOM to try to apply the same efficiencies
to its operations, and believe that by doing so we could save the Shreveport SOM as
much as $90 million annually. But our requests to work together on these issues have
been ignored.
We have also substantially improved quality at the hospital. The single rating referred to
by Dr. Alexander is based on a system that has been almost universally criticized
across the United States, and is not based on current data. (And, of course, measures
of quality reflect performance of both the hospital and our outstanding LSU
physicians.) Moreover, our Conway campus achieved a substantial three star rating.
By any reasonable measure, the hospitals quality has improved dramatically since
privatization.
We have been consistently puzzled and disappointed by the refusal of the Shreveport
SOMs administration and Dr. Alexander to attempt to work with us to adopt a more efficient
business model.
The alternative would be a disaster for the people of North Louisiana. As you know, we
are pursuing a federal antitrust action against Willis-Knighton Health System, the dominant
health system in Shreveport. We allege that Willis-Knighton is attempting to further cement its
monopoly and its already extraordinarily high prices by an effective takeover of the
commercially insured business at University Health. Our lawsuit alleges that Willis-Knighton is
coercing the Shreveport SOM by demanding this transfer of patients in exchange for substantial
financial aid. But any efforts to undermine and remove University Health in order to eliminate
our antitrust suit and any obstacles to Willis-Knightons further monopolization will not succeed.
We continue to hope to work with the Shreveport SOM and LSU to improve health care
and research in North Louisiana. That is why the BRF has undertaken this task, and why we
continue to fight for health care in North Louisiana. We believe that we can cooperate with LSU
and succeed in this effort and invite you to work with us to do so.
The Financial Problems Faced by the Shreveport SOM Are Long Standing, and University
Health Has Provided Substantial Financial Assistance
It is important at the outset to note the SOMs very serious financial problems date back
to at least 2006. The chart below, reflecting an examination of LSU Shreveports own audited
1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

financial statements, reveals that the medical school has lost substantial sums for almost 10 years
prior to privatization. This is a sign of a deeply dysfunctional business model.

The chart also shows that in virtually all of those years, before University Health took
over the hospital, the hospital lost money as well. Losses occurred in 5 of 7 years, with modest
profits (under $20 million) in only two years (when a short-lived change in federal
reimbursement briefly boosted the hospitals finances). Therefore, the statement that the hospital
before privatization contributed $30-$40 million to the medical school is flatly false. The
hospital had essentially no profits to contribute.
The result of this failure has been a precipitous decline in the fund balances at the School
of Medicine, as the following graph (also taken from LSUs own audited financial statements)
shows:

1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

As the graph reveals, the Shreveport SOMs funds balance began declining dramatically
in 2011. By contrast, other LSU campuses have maintained their fund balances during this
period. The sharp decline began well before the privatization of October, 2013. There is no
possible way to conclude that the dysfunctional financial operations of the Shreveport SOM are
in any way due to University Health.
There have been similar substantial declines in Research funding since 2010.

1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

The financial management of the LSU hospitals in Shreveport and Monroe when we took
them over reflected serious deficiencies in financial management:
There were no separate financial statements for the hospital and the school of medicine.
In many cases, patients who could afford to pay were never billed for the services, and
there was no effort to collect payments.
In many other cases, patients were not billed on the assumption that they had no
insurance, without any recognition of the fact that they might be eligible to be
covered by Medicaid or other insurance.
The SOM had no faculty practice plan.
There were no efforts made to qualify patients for Medicaid, which would have resulted
in additional federal funds.
Patient charges were not updated for years. Managed care rates were also not updated for
years, several for over a decade.
1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

There was no system to track productivity in patient care or targets set for improving
productivity and patient care. Therefore, there was no established process by which
the hospitals could work to improve their efficiency.
Routine analytics were not consistently prepared to measure hospital or school
operations.
Financial and decision support systems in place were either outdated or non-existent.
Cash flow projections were not prepared.
After we took over the hospitals in October, 2013, we began a comprehensive effort to
develop new systems and procedures to allow the hospitals to be run more efficiently. Working
with the same complement of employees, but with a new top management, we were able to
significantly improve hospital operations:
We have reduced overtime to almost zero.
We have reduced labor and benefit costs by 30% despite increasing volume.
We have improved monthly cash collections by 44%.
We have renegotiated all the hospitals managed care contracts with significant increases
in reimbursement.
As a result, we were able to turn around the hospitals finances, going from a substantial
eight figure deficit ($34 million in 2012) before privatization to clear profitability since
privatization. Indeed, the hospital is set to earn approximately a $10 million profit for fiscal year
2016. 1
University Health has therefore been able to pay far more money to the SOM than it
received from hospital operations in the past. The chart below shows that we have paid more
than $380 million to LSU Shreveport since privatization.

1 We have had two clean audits, and have consistently met the financial goals jointly agreed upon at the outset of

the partnership. We are more than happy to share to share our financial statements with you if you so desire.

1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

In addition to its direct payments, University Health has made substantial contributions to
medical education and research. For example, University Health made the following significant
contributions to the SOM residency programs:
In 2014, University Health increased resident compensation by 4% and in 2015 by 3%.
University Health paid for the addition of six more residents at the mid-year point.
University Health funded an additional fellow for neurosurgery and two additional
fellows for pulmonary/critical care.
University Health has also contributed significantly to the recruitment of new physicians
and staff by LSU and to the purchase of equipment for use by the hospital and LSU physicians.
This has included, for example:
We have assisted in the recruitment of more than 30 new LSU physicians since
privatization.
Purchase of new pediatric robotic surgery equipment, for the da Vinci robot, which is
cutting-edge surgical equipment.
1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

Purchase of new laboratory equipment for the pathology department.

We renovated the entire clinical lab and replaced all core lab equipment.
Expanded GI services including the construction of two additional procedure suites, new
GI equipment and expansion GI clinic days and hours.
Funding of recruitment cost for a new chair of the Department of Medicine, a pediatric
neurologist, a pediatric allergist, a pediatric pulmonologist, and a radiation oncologist.
Renovation of clinic facilities for many departments, including a renovation of the call
room and patient consulting room for the neurosurgery department.
Renovation of patient waiting area and infusion center for oncology patients.
University Health also provided substantial funding for a series of LSU clinical
programs, including the following:
University Health assumed the funding for the viral disease clinic when grant funding
expired. We did the same for the telemedicine program, which provides remote
medical care, especially for the rural poor.
University Health took over financial responsibility for LSUs physician assistants, nurse
practitioners and certified registered nurse anesthetists who were working for LSU.
All these physician support staff (totaling at least 60 FTEs) are now paid for by
University Health, rather than LSU, providing a significant benefit to LSU.
We increased on-call pay for several LSU specialties.
University Health has directly paid for the compensation of a number of members of the
LSU physician faculty, including half the salary of a gynecologist oncologist and radiation
oncologist, payment for two physician FTEs in pulmonary/critical care, payment to cover one
epilepsy neurosurgeon physician FTE, financial support for the chair of urology, and support for
expansion of the bone marrow transplant program.
We have engaged in similar activities to expand medical education at Conway. For
example:
We have arranged for LSU medical students in LSUs four year medical program to
come to UH-Conway as part of their hospital rotations.
We have arranged for a new physician to come to the hospital one day each month to
perform cataract procedures for our residents to observe.
We leased brand new housing and furnishings for residents rotating at UH-Conway.

1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

We contracted with Dr. Claude Minor, a local Vascular Surgeon, to staff our new
Vascular Clinic, opened in December 2014, and Catheterization Lab, opened in
March 2015, and to support the LSU medical staff.
We built a Skills Laboratory for our LSU residents and medical students.
We also offer our LSU residents and students a computer laboratory in which they have
access to webinars and online training, including a wide variety of continuing medical
education programs. In this regard, we also host numerous webinars for LSU
physicians, residents and students.
We hosted a rural training center for emergency first responders in connection with the
Louisiana Emergency Response Network, and we have relationships with eight other
educational providers on our area and offer programs from all of those schools to our
LSU physicians, residents and students.
UH-Conway also provides LSU physicians and residents with financial support and
improvements to their work environments. For example, we have renovated and upgraded
physician and resident spaces throughout the hospital, including:
We renovated the hospital and family practice residency building to include new study
areas, break areas, and computer equipment for residents.
We updated our 3rd Floor Womens Program, setting up new work areas for the
residents, reestablishing a recovery room for patients, updating the post-partum and
labor room, and initiating a Baby Friendly program to enhance physician and
residence experiences with patients.
We opened a Prison Unit Inpatient Program for the convenience of our LSU physicians,
residents, and patients. This Program allows prisons to bring prisoners right from
their cells into our unit so that our physicians and residents can see them in a safe and
convenient environment.
University Health has also expended (a modest amount of) funds in marketing campaigns
which promote the practices of LSU physicians. These campaigns have involved banners, grand
opening programs, television and radio commercials, print ads, billboards, social media, direct
mail, and public events. These campaigns have helped us earn substantial increases in
admissions and clinic visits, and a higher percentage of commercially insured patients, providing
substantial additional revenues to both University Health and the SOM.
The Payment Issue is a Red Herring
Dr. Alexanders suggestion that financial problems at the LSU School of Medicine in Shreveport
are related to University Health short paying bills is utterly false. The LSU School of Medicine
in Shreveport has engaged in systematic submission of questionable invoices to University
Health since hospital privatization began that suggest a pattern of poor fiscal management
underlying the schools current financial crisis. In fact, LSU has overbilled UH for physician
1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

services on every single invoice since inception, and UH had no alternative but to attempt to
recoup some of the amounts due.
Examples of the types of errors in the invoices LSU submitted to UH for payment include:

LSU overbilled UH more than $5.6 million for teaching, supervision and physician
services that included charges for physicians no longer on staff, physicians double
counted and residents who worked more days than actual days in the month
LSU overbilled UH more than $1.8 million for indigent care for patients
LSU failed to pay UH $2.2 million in cash it collected or received on behalf of UH
LSU incorrectly billed UH more than $900,000 because of math and calculation
errors

In addition to the invoice errors, between October 2013 and June 2014, the LSU School of
Medicine failed to even submit what should have been monthly invoices for services over that
nine-month period. Even so, University Health, in good faith, paid the school $4.2 million each
month as estimated payments in an attempt to fulfill its obligations as a public-private partner
and help the school maintain its cash flow and financial stability.
In fact, UH is owed approximately $10.2 million dollars for other services provided to
LSU.
The Shreveport SOM Continues to Operate Under a Failed Business Model, Which
University Health Can Help Solve
As described above, University Health has been able to change the culture and
dramatically improve the business model and performance at the former LSU hospitals. UH has
invested millions of dollars in the purchase and implementation of state-of-the art financial and
decision support systems. Unfortunately, no such improvements have occurred at the SOM,
which still uses antiquated systems, and does not measure physician productivity.
We helped the SOM set up a faculty practice plan, but we believe that it is still only a
shell. As a result of these deficiencies, the SOM is mired in ever-increasing losses.
The SOMs problems are illustrated by Dr. Alexanders contentions that the SOMs
physicians are being paid below market value. The SOM has contended that its physicians have
not been receiving fair market value, but in response to repeated inquiries by University Health,
the Shreveport SOM has refused to substantiate its assertions. For example, in a July 10, 2016
email to Aaron Eichorn of University Health, Bruce Solomon of the SOM stated as I have told
you several times, our counsel has told us there is no requirement that we provide you any type
of FMV analysis.
In health care, it is a commonplace that fair market value is typically determined with
respect to physician productivity, commonly measured by RVUs (relative value units). For
example, the most common source of information utilized in estimating the fair market value of
physician compensation is the MGMA Physician Compensation and Production Survey Report,
or AAMC which provides data on physician compensation per RVU. However, the SOM has not
1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

shared (and claims it does not possess) RVU data for the vast majority of the physicians at LSU
Shreveport. In contrast, we understand that LSU in New Orleans has measured physician
productivity for many years.
This lack of basic productivity data is symptomatic of the dysfunctional financial
operations at the Shreveport SOM which we solved at the hospital and believe that we can help
solve at the SOM. Our proposals have included our assistance in improved productivity systems,
the sales of services at low rates to LSU, increasing shared services provided by the hospital and
cooperation in innovative managed care contracting. These are the same kinds of efforts that
have enabled University Health to save the state well over $100 million through more efficient
operations. We estimate that we could save LSU up to $90 million annually through these
efforts. LSU has not responded to our suggestions.
One of the solutions would involve immediate application of the recently published CMS
Final Managed Care Rule. This would result in substantial additional funding for hospital and
physicians services for Medicaid patients (in significant part with 97.5% of the payments
derived from federal matching funds), and a substantial increase in the payment ceilings which
could be supported by these funds. If the private Medicaid managed care plans elected to
increase rates up to those ceilings, that could result in tens of millions of dollars in additional
funding to LSU Shreveport. But the Shreveport SOM administration has not been willing to
work with us to obtain this additional reimbursement.
Another example involves physician clinical documentation. We determined that SOM
physicians have serious problems in accurately documenting services provided, resulting in
substantially less reimbursement to both University Health and LSU. We proposed to sponsor
education for physicians at our expense. Months later, the SOM has not responded, and directed
its billing firm that it should not meet with us.
Quality of Care Has Dramatically Improved at University Health
Prior to privatization, there were similar problems in the clinical processes at the hospital.
Because of the poor operation of the clinics at which LSU physicians saw patients, vast numbers
of patients who called for treatment were not able to get an appointment. Obviously, this was a
critical problem to the many patients who were uninsured and for whom our hospitals and clinics
were the only realistic source of care. When we took over University Health, there was a waiting
list to get an appointment at one of our clinics of more than 12,000 people. In some
subspecialties, there were one to two year waiting times for appointments.
When patients did arrive for appointments, they faced very long waits for care. Patients
were frequently told to arrive at 7:00 a.m., and they would be seen at some point during the day.
There were similar long waits for use of critical diagnostic equipment, such as MRIs and
CTs. Patients on average had to wait two months for an MRI. On a daily basis, patients left our
emergency department because of long wait times.
We have dramatically reduced the enormous wait times that kept patients from seeing
physicians and receiving any care, often for months or longer. Among our dramatic successes are
the following:
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Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

We reduced clinic patient referral queues from 12,000 to a small fraction of that number.
We implemented an Expedited Care program in our Emergency Room which
significantly reduced both patient wait times and patients leaving the emergency
room without being seen.
We reduced wait times for an MRI from 60 days to two and for CT scans from 21 days to
one.
University Health has also made very substantial improvements in quality at the
Shreveport hospital since privatization. In late 2014, we brought in a national consulting firm,
Greeley Company, to review the quality processes at the hospital, and Greeley offered 60
different recommendations for improvement. 40 of those have already been implemented with
another 13 in process. Among many other things, the hospital quality staff now engages in
regular rounds of each unit to address quality issues, and the hospital has adopted a new variance
reporting system to encourage the identification and correction of problems as soon as possible.
The Quality Committee of the Board reports to the Board on quality issues at each and every
meeting. We have also developed a quarterly physician report card which will provide feedback
on key quality measures, and an interdisciplinary process involving physicians, management and
nurses to perform root cause analyses of problems that arise. Perhaps as a result, University
Health now performs better on the Center for Medicare and Medicaid Services (CMS) core
measures than does, for example, UMC in New Orleans.
Among other achievements:
We have dramatically expanded programs and services available at the two
University Health hospitals, expansion of our radiation oncology program
including a new linear accelerator and CT simulator, a cardiac cath lab and
specialty clinics at Conway, a new urgent care center, a new heart failure
program, and an enhanced telemedicine program.
We have reinstated the Level I trauma designation which was lost by the
Shreveport hospital under LSUs leadership prior to privatization.
We have recently achieved certification as a Primary Stroke Center, the first in
North Louisiana.
Opened three new retail pharmacies for the convenience of employees, patients,
and LSU physicians.
According to the Director of Accreditation & Certification Operations of The Joint
Commission, the results of The Joint Commissions recent survey at University Health are better
than the average of 56 comparable public hospitals that The Joint Commission surveys.
Dr. Alexanders criticisms of our quality are based on recently released CMS star
ratings which gave a one star rating to University Health Shreveport, through it gave our
Conway hospital a three star rating. However, these ratings are widely recognized to be flawed
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Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

generally, and there are specific reasons to believe that they are inaccurate with regard to the
current operations at University Health in Shreveport.
The head of every major national hospital association, and almost 300 members of the
House and Senate, have criticized these ratings as misleading. According to Association of
American Medical Colleges President and CEO Darrell G. Kirch, M.D., [t]hrough these star
ratings, CMS has implied that hospitals have been measured on an equal basis and that the
comparisons are fair, an assumption that is unfortunately not true.
Teaching hospitals perform a wide array of complicated and common procedures,
pioneer new treatments, and care for broader socio-demographic patient populations that may not
have access to regular care, Dr. Kirch noted. He added that despite this disparity the CMS
ratings compare teaching hospitals directly to hospitals with more resources and lower risk
patient populations.
Americas Essential Hospitals, a trade association for safety net hospitals such as
University Health, offered similar views when the star ratings were released:
We are disappointed the Centers for Medicare & Medicaid
Services (CMS) chose to publicly release overall hospital star
ratings today, when so many questions remain about the data
behind the ratings and their value to consumers.
The ratings disadvantage hospitals that care for vulnerable
patients and underserved communities and threaten to confuse,
rather than inform, consumers as they make important health care
decisions. Congress shares these concerns: Nearly 300 House and
Senate lawmakers have called on CMS to go back to the drawing
board.
The Federation of American Hospitals and American Hospital Association were similarly
critical.
Indeed, many leading teaching/safety net hospitals across the United States received similar one
star ratings, despite their recognized high quality of care. These included, among others, the
following hospitals:
George Washington University Hospital
MedStar Georgetown University Hospital
University of Miami Hospital
University of Louisville Hospital
Henry Ford Hospital Detroit
Robert Wood Johnson University Hospital
University Health SUNY
There are specific reasons to believe that this rating was inaccurate as to University
Health. First, the ratings are based primarily on fairly old data, including, substantially, data from
2014, before University Health had begun its efforts to revamp the hospitals approach to quality.
1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

In fact, some data used in these ratings was from 2012, well before privatization. Significantly,
University Health has recently improved its scores in almost 75% of the categories measured by
CMS.
Finally, the ratings are based in significant part on how the hospital codes cases. But, as
described above, there have been significant deficiencies in the coding of cases at University
Health which date back to long standing practices when LSU ran the hospital. The hospital has
recently been revisiting its coding processes to make them more accurate; as noted, the SOM has
refused to work with us to help the physicians gain the same proficiency.
The Money University Health Has Saved the State Should be Returned to North Louisiana
University Health certainly cannot solve all of the Shreveport SOMs problems. In the
short run, additional funding is certainly necessary, and University Health has requested that the
state provide an additional $37 million, as requested by the SOM, to allow it to do so.
This would cost the state far less than that amount. Under federal matching system, the
state would be required to pay only about 20% of this sum. We have encouraged the Shreveport
SOM to work with us to advocate this funding, and we certainly encourage the Board of
Supervisors to do so.
Providing this money to Shreveport is a matter of simple equity. As acknowledged by
DHH, we have saved the state more than $100 million through our improvements in efficiency
and cost saving efforts at University Health. It is only appropriate that much of that money be
returned to North Louisiana for the benefit of health care in our region.
Many years ago, the Shreveport SOM was an engine that provided substantial financial
returns that benefited LSU campuses throughout the state. Now, with greater need in Shreveport,
LSU should provide additional support for North Louisiana. North Louisiana deserves the
support from the rest of the state to maintain its outstanding medical school.
The alternative an alliance with Willis-Knighton would be very harmful to North
Louisiana. We estimate that if University Healths commercial business were transferred to
Willis-Knighton that this would cause an increase in costs to North Louisiana employers of
approximately $150 million. Indeed, our pleadings filed in our antitrust case state that treatment
rates at Willis-Knighton for University Healths own employees are approximately double that at
University Health. We need a solution that does not raise health care costs in North Louisiana
and that provides benefits to both the Shreveport SOM and the ordinary citizens of our region.
We believe that we can work with LSU to provide those solutions.

1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com

We would be very interested in meeting with you and the Board of Supervisors to further
explain our position and our proposals to work to improve the Shreveport SOM. We are also
more than happy to provide backup data and documents to support every single point in this
letter. We will make ourselves available at your earliest convenience.

Sincerely,

Stephen F. Skrivanos
Chairman of the Board

1541 Kings Highway, Shreveport, LA 71103

Phone: 318-675-5058

Fax: 318-675-3373

www.uhsystem.com