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CMS Rejects Louisiana’s Plan to Privatize State-Owned Hospitals

Leslie J. Levinson
Edwards Wildman Palmer LLP - New York Office

Michaela ("Kayla") Tabela
Edwards Wildman Palmer LLP - Boston Office

May 8, 2014

Previously published on May 2014

On May 2, 2014, CMS rejected Louisiana Gov. Bobby Jindal’s plan to privatize six state-owned hospitals in New Orleans, Lafayette, Houma, Lake Charles, Shreveport and Monroe.

According to CMS, the arrangements are not consistent with the restrictions on Federal Medicaid funding when a state receives donations from, or imposes taxes on, providers or provider-related entities. In particular, CMS questioned the $266 million in “advance lease payments” that the hospitals managers paid pursuant to their no-bid contracts with the state. The agency noted that the information submitted by the state indicated that these payments were in excess of fair market value and that, as such, the payments appear to be an improper payment (i.e., a non-bona fide provider related donation) from the private hospitals to the state.

CMS’ decision may have a significant impact on the state’s budget since the hospitals are already operating under the Governor’s plan. Gov. Jindal’s administration did not wait for approval from the Federal government before it shifted the hospital management.


The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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