East Jefferson General Hospital opened its doors as a private hospital Thursday, ending a half-century run as the lone public hospital on Jefferson Parish's east bank and joining its west bank counterpart as part of the LCMC Health network.
The deal to sell the hospital to LCMC officially closed at midnight Wednesday, giving LCMC's growing network a 420-bed foothold in Metairie and continuing the New Orleans-based nonprofit's efforts to expand and compete directly with Jefferson-based Ochsner Health, headquartered just a few miles away.
LCMC Health, under Chief Executive Greg Feirn, now either owns or operates two hospitals in Jefferson Parish as well as Children's Hospital, New Orleans East Hospital, Touro and University Medical Center, all in New Orleans. The moves follow a health care industry trend in which standalone community hospitals have struggled to compete against larger networks.
"It was a great day," Feirn said Thursday. "We now have a health care footprint in every major service area in this market."
The first day of the transition was "seamless," Feirn said. He praised LCMC's technology and systems staff for doing the heavy lifting in moving EJ to LCMC's system. The coronavirus pandemic did not alter the terms of the transaction, he said, but did delay the closing by a few months.
LCMC's team will immediately begin working on some deferred maintenance projects to upgrade the facilities and will consult with medical staff about other potential projects, he said.
"We are looking at all aspects of the hospital," he said.
LCMC Health ponied up $90 million for East Jefferson, money that will be combined with the hospital's existing reserves to retire approximately $135 million in bond debt and other obligations as well as fully fund the existing pension programs, which will cost another $50 million or so. The company has also committed to spend $100 million over the next five years on facility improvements.
The deal rescues East Jefferson General from impending financial ruin: the hospital's bonds had been downgraded to near-junk status and its lenders had put the hospital into technical default, which while not the same as a monetary default, highlighted the bleak outlook. Hospital leaders kept the debt payments current, but as cash reserves dwindled by millions of dollars per year, that course was unsustainable.
LCMC Health to spend $90 million paying debt, funding pensions, plus $100 million on improvements
Feirn and East Jefferson General CEO Gerald Parton, who have been the key actors in bringing the deal to fruition through months of negotiations, have said that employees and patients won't notice much of a difference when they walk through the doors. LCMC has pledged to keep the vast majority of the 3,000 employees, and the hospital's doctors also gave the deal their backing.
And though Thursday marked the official changeover, any doubt about whether the sale would happen was erased Aug. 15, when east bank voters — who by law had to approve the sale — blessed the proposition with 95% approval. The overwhelming margin marked a stark shift from two decades ago, when a similar proposal to sell the hospital drew hostility from residents, many of whom had worked to get a community hospital opened in the first place.
Former Jefferson Parish President Tim Coulon said those efforts were born out of a desire for Jefferson Parish residents to have better access to health care, instead of having to travel into the city.
"I was born at Baptist (in New Orleans)," Coulon recalled. "My doctors were on Canal Street."
The effort and work that went into creating two hospital service districts and then erecting and operating two public hospitals, one on each side of the river, were a source of civic pride, he said. Residents approved a tax to back the bonds for the construction, but after that, the hospitals became self sustaining, he said.
Coulon was on Parish President Mike Yenni's staff in the 1990s when the idea of selling the hospitals was first floated. At the time they were succeeding financially without tax support, and residents balked at the parish selling their hospitals, he said.
But the market has changed since those days and hospitals like East Jefferson General have struggled to keep up. The Jefferson Parish Council began its latest effort to unload the two public health care facilities in 2013, when it offered them both for lease.
After a bitter and protracted public battle, LCMC managed to snag West Jefferson Medical Center in a 45-year deal that included more than $200 million in rent and $300 million in capital improvements over the term of the lease.
By a huge margin, voters on the east bank of Jefferson Parish approved the long-sought sale of East Jefferson General Hospital, a venerable Me…
Soon after, the council sought operators or buyers for East Jefferson and eventually hammered out the deal with LCMC.
Coulon compared the hospital's plight to his parents' hardware store, which was in Westwego for more than 50 years.
"The big box stores came in and ate up the mom-and-pops," he said. The same dynamic, on a much larger scale, is what is happening with standalone community hospitals.
"I think the health care industry changed so dramatically," he said.