[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                     POST KATRINA HEALTH CARE IN THE 
                    NEW ORLEANS REGION: PROGRESS AND 
                      CONTINUING CONCERNS--PART II 

=======================================================================

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             AUGUST 1, 2007

                               __________

                           Serial No. 110-62


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov
   POST KATRINA HEALTH CARE IN THE NEW ORLEANS REGION: PROGRESS AND 
                      CONTINUING CONCERNS--PART II

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                    COMMITTEE ON ENERGY AND COMMERCE

                  JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California          JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts          Ranking Member
RICK BOUCHER, Virginia               RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York             J. DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey       FRED UPTON, Michigan
BART GORDON, Tennessee               CLIFF STEARNS, Florida
BOBBY L. RUSH, Illinois              NATHAN DEAL, Georgia
ANNA G. ESHOO, California            ED WHITFIELD, Kentucky
BART STUPAK, Michigan                BARBARA CUBIN, Wyoming
ELIOT L. ENGEL, New York             JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland             HEATHER WILSON, New Mexico
GENE GREEN, Texas                    JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado              CHARLES W. ``CHIP'' PICKERING, 
    Vice Chairman                    Mississippi
LOIS CAPPS, California               VITO FOSSELLA, New York
MICHAEL F. DOYLE, Pennsylvania       STEVE BUYER, Indiana
JANE HARMAN, California              GEORGE RADANOVICH, California
TOM ALLEN, Maine                     JOSEPH R. PITTS, Pennsylvania
JAN SCHAKOWSKY, Illinois             MARY BONO, California
HILDA L. SOLIS, California           GREG WALDEN, Oregon
CHARLES A. GONZALEZ, Texas           LEE TERRY, Nebraska
JAY INSLEE, Washington               MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin             MIKE ROGERS, Michigan
MIKE ROSS, Arkansas                  SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon               JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York          TIM MURPHY, Pennsylvania
JIM MATHESON, Utah                   MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina     MARSHA BLACKBURN, Tennessee
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana

                                 ______

                           Professional Staff

                 Dennis B. Fitzgibbons, Chief of Staff

                   Gregg A. Rothschild, Chief Counsel

                      Sharon E. Davis, Chief Clerk

               David L. Cavicke, Minority Staff Director

                                  (ii)
              Subcommittee on Oversight and Investigations

                    BART STUPAK, Michigan, Chairman
DIANA DeGETTE, Colorado              ED WHITFIELD, Kentucky
CHARLIE MELANCON, Louisiana              Ranking Member
    Vice Chairman                    GREG WALDEN, Oregon
HENRY A. WAXMAN, California          MIKE FERGUSON, New Jersey
GENE GREEN, Texas                    TIM MURPHY, Pennsylvania
MIKE DOYLE, Pennsylvania             MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois             MARSHA BLACKBURN, Tennessee
JAY INSLEE, Washington               JOE BARTON, Texas (ex officio)
JOHN D. DINGELL, Michigan (ex 
    officio)
  















                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Bart Stupak, a Representative in Congress from the State of 
  Michigan, opening statement....................................     1
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     3
Hon. Charlie Melancon, a Representative in Congress from the 
  State of Louisiana, opening statement..........................     4
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................     7
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     8
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     9
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................     9
Hon. Jan Schakowsky, a Representative in Congress from the State 
  of Illinois, prepared statement................................    11
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................    13

                               Witnesses

Ray Nagin, mayor, city of New Orleans, New Orleans, LA...........    15
    Prepared statement...........................................    18
Frederick P. Cerise, M.D., secretary, Louisiana Department of 
  Health and Hospitals...........................................    35
    Prepared statement...........................................    38
Elizabeth Richter, acting director, Center for Management, 
  Centers for Medicare and Medicaid Services.....................    61
    Prepared statement...........................................    63
    Answers to submitted questions...............................   296
Robert L. Neary, executive-in-charge, Office of Construction and 
  Facilities Management, U.S. Department of Veterans Affairs.....    75
    Prepared statement...........................................    77
Julie Catellier, director, Southeast Louisiana Veterans Health 
  Care System....................................................    85
    Prepared statement...........................................    87
Clayton Williams, director, urban health initiatives, Louisiana 
  Public Health Institute........................................    91
    Prepared statement...........................................    93
Kim M. Boyle, chairman, health care committee, Louisiana Recovery 
  Authority......................................................    96
    Prepared statement...........................................    99
Diane Rowland, executive vice president, Henry J. Kaiser 
  Foundation; executive director, Kaiser Commission on Medicaid 
  and the Uninsured, Washington, DC..............................   146
    Prepared statement...........................................   148
Mark J. Peters, M.D., president and chief executive officer, East 
  Jefferson General Hospital, Metairie, LA.......................   166
    Prepared statement...........................................   169
Leslie D. Hirsch, president and chief executive officer, Touro 
  Infirmary, New Orleans, LA.....................................   179
    Prepared statement...........................................   181
Patrick J. Quinlan, M.D., chief executive officer, Ochsner Health 
  System, New Orleans, LA........................................   198
    Prepared statement...........................................   201
Gary Muller, president and chief executive officer, West 
  Jefferson Medical Center, Marrero, LA..........................   222
    Prepared statement...........................................   224
Mel Lagarde, III, president and chief executive officer, Hospital 
  Corporation of America, Delta Division, New Orleans, LA........   226
    Prepared statement...........................................   228
Larry Hollier, M.D., chancellor, LSU Sciences Center; dean, 
  School of Medicine.............................................   240
    Prepared statement...........................................   241
Alan Miller, M.D., interim senior vice president, health 
  sciences, Tulane University Health Sciences Center, New 
  Orleans, LA....................................................   244
    Prepared statement...........................................   246
Gary Q. Peck, M.D., American Academy of Pediatrics...............   260
    Prepared statement...........................................   263

                           Submitted Material

Michael O. Leavitt, Secretary, Department of Health and Human 
  Services, letter of March 21, 2007 to Messrs. Stupak and 
  Whitfield......................................................   287
Department of Health and Human Services news release of May 24, 
  2007, ``HHS Announces Additional $195 Million in Grants for 
  Gulf Coast Region''............................................   289
Leslie Eaton, the New York Times, July 24, 20007, ``New Orleans 
  Recovery is Slowed by Closed Hospitals''.......................   291
Committee exhibit binder.........................................   305


    POST KATRINA HEALTH CARE IN THE NEW ORLEANS REGION: PROGRESS AND

                      CONTINUING CONCERNS--PART II

                              ----------                              


                       WEDNESDAY, AUGUST 1, 2007

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:30 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Bart 
Stupak (chairman) presiding.
    Members present: Representatives DeGette, Melancon, Green, 
Schakowsky, Whitfield, Walden, Burgess, and Blackburn.
    Also present: Representative Jefferson, Delegate 
Christensen.
    Staff present: Chris Knauer, Kristine Blackwood, Scott 
Schloegel, John Sopko, Angie Davis, Kyle Chapman, Alan 
Slobodin, Peter Spencer, and Garrett Golding.

  OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Stupak. This meeting will come to order. Today we have 
a hearing on Post Katrina Health Care in the New Orleans 
Region: Progress and Continuing Concerns, Part II. This 
hearing, on the eve of the second anniversary of Hurricane 
Katrina landfall, is a follow-up to the subcommittee's March 13 
hearing, which examined the immediate health care needs of 
citizens in the New Orleans region. Our hearing will touch on 
issues involving not just the immediate health care needs of 
the region but also some of the long-term plans that Federal 
and State officials have for rebuilding the large hospitals in 
New Orleans that were lost because of Hurricane Katrina. The 
Nation has much to learn from the people of New Orleans about 
the long and difficult road to full recovery after a major 
disaster. Katrina brought us the unprecedented experience of 
having a major American city health care system shatter 
overnight. Surviving the disaster and its immediate aftermath, 
while difficult enough, now appears less daunting than 
regaining a fully functioning and well-balanced health care 
infrastructure for the region. Fortunately, hospital workers no 
longer have to pump IVs and heart machines by hand to keep 
patients alive in a darkened hospital.
    But the area's health care system remains vulnerable and 
overwhelmed and much work remains to be done. Since our hearing 
in March some progress has been made in the four Katrina 
affected parishes known as region 1. Following our March 
hearing Health and Human Services Secretary Leavitt released 
$100 million in Deficit Reduction Act funds for public and not-
for-profit clinics that provide primary care to low income and 
uninsured regions of region 1, uninsured residents of region 1. 
This targeted infusion of funds will help restore and expand 
access to outpatient primary care including medical and mental 
health services, substance abuse treatment, oral health care, 
and optomic health care. HHS also provided an additional $35 
million to Louisiana for workforce development and retention 
and an additional $26 million direct funding to providers at 
acute hospitals, psychiatric hospitals, skilled nursing 
facilities, and community mental health facilities.
    The subcommittee is still not clear as to exactly how these 
funds will be distributed, and we look forward to flushing that 
issue out in today's questions. While we have had some 
improvements since our March hearing there are still serious 
challenges facing local, State, and Federal public health 
officials. A similar degree of focus and effort needs to go 
towards stabilizing the graduate medical education GME programs 
in New Orleans. The whole State of Louisiana relies on GME 
assistance for developing of its future health care workforce. 
Louisiana State University historically trains 75 percent of 
all health care professionals in the State through its medical 
school in downtown New Orleans.
    Tulane University's School of Medicine, also headquartered 
in downtown New Orleans, trains much of the balance of the 
health care workers for Louisiana. The Federal and State funds 
that support medical training are funneled through teaching 
hospitals like LSU's Big Charity and several other hospitals 
destroyed by Katrina. Without their principal teaching hospital 
to provide the necessary case concentration needed for 
accreditation, LSU and Tulane have had to close some of their 
medical specialty training programs.
    At the same time, because of the cumbersome manner in which 
Medicare reimburses hospitals for hosting medical residents at 
their facility, the medical schools have had to enter into 
torturous and expensive negotiations with other hospitals so 
that residents may continue their training. Meanwhile, although 
host hospitals receive relief from Medicare's 3-year rolling 
average rule in the first year after the hurricane that relief 
of the 3-year rolling average expired in 2006 causing 
reimbursement shortages. Until LSU can build a new training 
hospital these other hospitals should be able to host medical 
residents without incurring a financial penalty.
    I again urge the Secretary to engage academic and public 
health officials in the State to develop a fair way to insure 
that medical training can continue in the region at an adequate 
level. Likewise, I urge Secretary Leavitt to meet with the 
representatives from the local private hospitals who will 
testify today. Hospitals in the four Katrina-affected parishes 
report that they are incurring substantial increased costs of 
doing business that continue to disable the system and limit 
patient access to reliable health care. Hospital 
representatives will tell us of the financial pressures they 
face due to labor costs driven up by serious shortages of 
nursing and other personnel.
    I am concerned that this labor shortage may have multiple 
weakening effects on an already fragile system. For instance, 
LSU has reported that it is difficult to open additional 
hospital beds at its rehabilitative university hospital 
facility due to lack of nurses. This in turn increases the 
burden on private hospitals and independent providers who are 
already treating unprecedented numbers of uninsured since Big 
Charity's closure. These challenges deserve the attention and 
leadership from our public health officials, and I hope the 
Secretary will lead efforts to address structural imbalance in 
the health care economy in the New Orleans region.
    Finally, we have seen plans to build two of New Orleans' 
most important facilities, LSU's Academic Medical Center and 
the VA Hospital, mired in emotional and political debates. I 
believe the community in the New Orleans area needs as much 
clarity and transparency with respect to decisions being made 
regarding these two hospitals as soon as possible. It is 
difficult enough for low income and uninsured members of the 
community and veterans in the region to obtain convenient and 
consistent hospital care without these critical facilities up 
and running. Their wait should not be made harder by 
unnecessary delays and backroom politics.
    In closing, I would like to thank the Republican members 
and the staff for their continued bipartisan approach to this 
investigation. I would also like to mention the leadership of 
my vice chairman of this subcommittee, Mr. Melancon, for his 
tireless effort to insure that rebuilding the health care 
system of New Orleans remains a priority for this Congress. You 
have my personal assurance that this subcommittee will continue 
to monitor the progress and push wherever necessary to see the 
region's health care needs are met. That concludes my opening 
statement. I next turn to my friend, the ranking member of the 
subcommittee, Mr. Whitfield, from Kentucky for an opening 
statement, please.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Whitfield. Chairman Stupak, thanks very much. All of us 
are quite excited about this third hearing on health care needs 
and the situation in New Orleans and the surrounding area as a 
result of the devastation of Katrina. I remember last March 
when we had this hearing it was some 18 months after the storm, 
and hundreds of millions of dollars had been sent to the region 
and at that time there was still a lot of gridlock and 
stagnation. I remember I walked away from that hearing with the 
impression that there had been so much focus by different 
advocates on what reforms needed to take place in health care 
that the immediate needs were sort of placed on the back 
burner. I think we have 15 witnesses, and we genuinely 
appreciate all of you for being here because you are the ones 
involved in the trenches trying to address these problems. I 
know that people are always skeptical and scared when the 
Congress comes forth and says what can we do to help you, but 
that is really why we have these hearings for you all to give 
us some idea of how we can we be helpful and what can we do.
    And I know after Chairman Stupak's March hearing, as he 
said, we were quite excited that Secretary Leavitt came forward 
and did release about $160 million to help strengthen community 
health centers and primary care facilities as well as to 
support health provider recruitment and retention and to aid 
the hospital's financial situation. It is my understanding that 
we will hear this morning that there have been policy 
developments toward improved coordination of future care 
delivery, and most of the key State and regional players have 
developed a common vision for long-term rebuilding, which 
should help expedite the recovery and will encourage more 
health professionals to return to the region.
    And by all accounts this is welcome news, positive news, 
and we are excited about that. But we also are quite concerned 
about these stories and about how the hospitals are facing dire 
financial needs and have continuing significant losses and then 
the stability and medical educational situation and the 
challenges faced by private practice physicians and the overall 
shortage of health care providers. So we want to be sure that 
the Federal Government, the Department of Health and Human 
Services, and the Congress is responsive. And as Chairman 
Stupak said, this is and has been a totally bipartisan effort 
because all of us want to do everything we can to help improve 
the health delivery system in New Orleans.
    And once again, I want to thank all of you for being here. 
As I said, you are the ones in the trenches. You are the ones 
facing every day problems. Constituents come to you with their 
complaints, and we look forward to hearing your testimony and 
hopefully can help move us down the road to solving this 
problem and having a more effective health care delivery 
system. And I yield back the balance of my time.
    Mr. Stupak. I thank the gentleman. Mr. Melancon for opening 
statement, please.

OPENING STATEMENT OF HON. CHARLIE MELANCON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF LOUISIANA

    Mr. Melancon. Thank you, Mr. Chairman. We are now on the 
eve of the second anniversary of Hurricane Katrina. Nearly 2 
years later we find ourselves in this room with much work still 
ahead. This committee made a commitment that it would continue 
to examine the collapse of the health care system in the 
greater New Orleans region, and this is the next installment 
towards that effort. As Chairman Stupak, Chairman Dingell, and 
previous chairman, Mr. Whitfield, said before: this body will 
work hard to show the people in the Katrina affected area by 
insuring that this government move things forward and see to it 
that the relevant Federal agencies continue to provide the 
necessary relief. This hearing is part of that process.
    The testimony at our March 13 hearing on this topic 
revealed the landscape with citizens of the New Orleans region 
struggling to use a health care system comparable to what one 
might find in a developing country. Those without insurance 
were forced to wait in long lines at city sponsored health care 
fairs or volunteer clinics just to see a doctor and dentist. 
Health care workers told committee staff of families sleeping 
in cars outside the clinics to insure placement on a waiting 
list. Examples such as a diabetic being able to access even a 
few days worth of insulin were reported regularly. The 
committee was told how those with complicated chronic ailments, 
such as heart disease or a mental health condition, had almost 
no chance of locating a specialist if they lacked insurance.
    Private hospitals were receiving large numbers of uninsured 
patients and were unsure how they would avail those costs or 
continue providing such services. Private physicians that were 
trying to rebuild their businesses were finding it almost 
impossible to do so because they were not being paid for the 
care they rendered. The major hospitals that took care of the 
poor and uninsured and the primary hospitals treating veterans 
remained closed. The University Hospital, the small Charity 
Hospital were so overwhelmed with patients it was often on 
deferral. In fact, when our staff visited that hospital in 
March much of the emergency room was dedicated as a holding 
area for individuals needing critical psychiatric care.
    What we are doing today remains crucial to rebuilding the 
region. As recently reported by the New York Times just last 
week, restoring health care services may be the most important 
factor in restoring this region, and I would urge you to read 
this article for New Orleans reviving health care systems or 
said city's future. Today's hearing will attempt to highlight 
not only what has been accomplished but also what more we need 
to do in order to bring health care back to the region. I am 
pleased to report that some progress has been made since our 
last hearing on resolving key health care issues.
    For example, HHS recently released nearly $135 million in 
DRA dollars to the greater New Orleans region with the 
objective of recruiting and retaining health care workers and 
provide some relief to the many primary care clinics which may 
play a key role in providing access to health care. From what 
we have been told, this should allow them to operate for about 
3 more years. This is a very positive development and I thank 
the Department for making this money available. We look forward 
to hearing from HHS, Louisiana Public Health Institute, and 
Secretary Cerise regarding how this money will be spent and 
what they hope it will accomplish.
    Nevertheless, while funding primary care claims is a 
particularly positive development, we are a long way from 
restoring adequate health care for the region. As you will hear 
today, many vexing health care challenges remain. These will 
require the attention of policymakers at the State and Federal 
level as well as this Congress.
     Let me briefly summarize what appears to be among the most 
pressing. First, due to high labor costs and labor shortages 
the region's top five private hospitals report that they are 
collectively losing considerable sums of money and that these 
losses could ultimately result in a reduction of services. 
Collectively, Ochsner, East and West Jefferson, Tulane, and 
Touro report to our staff that they expect a combined loss of 
$125 million in 2007. We are told this loss is expected to go 
to over $400 million over the next several years.
    As reported to staff, these losses are due to extraordinary 
high labor costs associated with staffing hospital beds and 
continued uncompensated care costs. The solution to this 
problem remains unclear. At a minimum, however, I believe that 
this concern must be investigated to understand its potential 
impact on the region's health care services. I will ask 
representatives from both the State and Federal Governments 
what they know about this claim and how it should be evaluated 
or verified. I will also explore with key agencies what kind of 
relief might be made available to these hospitals should these 
claims hold merit. I will ask the U.S. Government 
Accountability Office, HHS, Office of Inspector General or some 
other objective third party entity to evaluate the concerns 
voiced by the five private hospitals that will testify today.
    What they will describe is a potential new storm on the 
health care horizon for this area. It is a problem that 
deserves a thorough review and I look forward to hearing from 
my witnesses on how to best approach this. Second, the region's 
two primary teaching schools, Tulane and LSU, continue to 
struggle to keep their medical programs alive, and much of this 
relates to the current structure of the graduate medical 
education payments made by Medicare. Prior to Katrina both 
Tulane and LSU were both training residents at several regional 
hospitals. The one site where both of these schools had the 
largest concentration of residents, however, was the Medical 
Center of New Orleans, commonly referred to as ``Charity.''
    According to both universities during this period of total 
and partial closure after Katrina, the medical schools remained 
responsible for the education of the residents and for paying 
the salaries and benefits of the residents despite being unable 
to receive reimbursement from the closed hospital. This ongoing 
arrangement has created a number of financial difficulties for 
both Tulane and LSU. Given that the bulk of all of Louisiana 
health care workers are trained in these two institutions, it 
is critical that we explore with HHS ways to remedy at least 
some of the burden placed on the universities by current GME 
rules. These rules are extremely complicated.
    I will look forward to discussing with CMS what tools might 
be made available that may provide both flexibility and relief 
to these two institutions, at least until a new medical center 
is built. The third major problem we hope to examine is the 
continued debacle of rebuilding a major public hospital to 
replace Big Charity and determine the new location of the VA's 
proposed hospital, which may or may not be part of that deal. 
Unfortunately, both appear stymied by endless politics and 
debate. As we all know, Big Charity once served many of the 
regions working for it. Since its destruction many have had to 
pursue a patchwork of options when seeking medical care.
    As plans were being made to rebuild Charity, the VA, who 
also lost its regional hospital in the flood, entered into an 
Memorandum of Understanding with LSU to explore the possibility 
that two hospitals would be rebuilt as a collaborative project. 
While it was understood by certain stakeholders that this 
project would soon be underway and that the VA would locate its 
facilities downtown and in close proximity with LSU's 
replacement facility, the plans for this project still remain 
unclear. Currently, the VA is considering both the downtown 
site, which is close to the existing health care facilities, 
and a site located in Jefferson Parrish. I believe it is time 
for the VA and the State to resolve this deal and to begin 
building a hospital. Neither the citizens of Louisiana nor the 
veterans are being served by this continuing delay. I intend to 
explore with the VA and LSU the status of this proposal.
    Moreover, because this project has been mired in continued 
confusion and controversy, I am asking that the VA formally 
brief this committee once a month as to the status of this 
project. For all parties involved, I believe that both LSU and 
VA's plans for building these two hospitals must be made 
clearer than they have been thus far. Not a shovel's worth of 
dirt has been lifted towards either hospital's construction and 
that I find totally unacceptable. I would like to conclude by 
first of all thanking my colleagues on this committee for the 
continuing work they and their staffs have done and provided to 
us helping torebuild this region.
    This has been a continued effort and a continued bipartisan 
endeavor. I know that it will continue. I would also like to 
thank the many excellent witnesses providing testimony. Many of 
you remain in the trenches and are truly the heroes that are 
the most responsible for moving this effort forward. We are 
making progress, and as tired and frustrated as we are at 
times, I believe we will be successful. I do want to renew that 
commitment that we have made to you before. We will use this 
committee's resources to continue to examine this important 
area and assist you in what you are all trying to do in any way 
legally possible. That concludes my remarks, and I thank you, 
Mr. Chairman.
    Mr. Stupak. I thank the gentleman. Mr. Walden from Oregon, 
please.
    Mr. Walden. Mr. Chairman, I am going to waive my opening 
statement. I know we have got a busy day on the floor and 
probably a few interruptions so it would be nice to hear from 
the witnesses. Thank you, sir.
    Mr. Stupak. OK. Thank you. Ms. DeGette.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you, Mr. Chairman. I just want to 
welcome our witnesses today, particularly the mayor and others. 
Many of you who I have been working with for the last 2 years 
on the health care situation in Louisiana, as the chairman and 
the ranking member know, we went to New Orleans 6 months after 
the terrible tragedy, and we have been going back and we have 
been talking to people ever since. We are really committed to 
working with you to try to rectify the terrible health care 
situation that followed the hurricane. It really is an American 
tragedy what has happened, and we need to work together to make 
sure that this situation is rectified.
    I have been frustrated, as my colleagues have, by the slow 
lack of progress and lack of communication between various 
governmental agencies, including Federal agencies, and remain 
committed with the other members of this committee to insuring 
that this problem is resolved and resolved quickly. Mr. 
Chairman, I want to apologize. I won't be able to stay for the 
whole hearing because I am the chief deputy whip in charge of 
the SCHIP bill which will be up on the floor momentarily, so I 
too want to hear the testimony of the witnesses and yield back 
the balance of my time.
    Mr. Stupak. I thank the gentlelady for her statement. 
SCHIP, the Children's Health Initiative Program is on the floor 
today. All of us have worked on that legislation. It came 
through our Energy and Commerce Committee. The bill is on the 
floor, and I am sure members on both sides of the dais will be 
going down and making their comments, conclusions, whatever 
they would like, on the bill, but we appreciate everyone being 
here. So we will be moving in and out. No disrespect to our 
witnesses. Mr. Burgess, I am sure you want something to say on 
what I had to say or else at least an opening statement.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. I am going to forego saying something I wanted 
to say on what you had to say. I am actually going to forego an 
opening statement as well. We have important testimony to hear 
today. There is a lot going on on the floor, and I am anxious 
to hear from our witnesses. I am glad to see Dr. Peters and Mr. 
Muller back here from my first visit down to the area in 
October 2005 and understanding the problems that face them. Ms. 
DeGette called it an American tragedy. I would say it is a 
bureaucratic nightmare. And I still, frankly, do not understand 
where the logjam is. I don't know whether the logjam is here. I 
don't know whether the logjam is at the State. I don't know 
whether the logjam is at some point in the city. But clearly 
the work of this committee has to be to identify and unwind 
that logjam and get the dollars going to the people who need 
them.
    At the end of the 106th Congress last year, we had put $100 
billion towards this effort, and to find that we are still not 
receiving dollars on the ground to me is a source of enormous 
frustration. I go home and hear from angry constituents that 
you are spending too much money, and then I come to this 
committee and find that the money hasn't been spent at all. And 
that leaves me with an internal state of perplexion that really 
has to be resolved quickly for my continued good health. I want 
to work with this group today. I am anxious to hear your 
stories, and I will yield back, Mr. Chairman, and would hear 
from the witnesses.
    Mr. Stupak. Thank you, Mr. Burgess. Ms. Schakowsky from 
Illinois.
    Ms. Schakowsky. Thank you, Mr. Chairman. I am going to put 
my statement in the record. I just want to say I was able to go 
with this committee to have a similar hearing, in New Orleans 
months after the storm. I was shocked then, even more surprised 
now, that not enough is done. I feel responsibility that the 
Federal Government has missed the boat here and that we have to 
do better. I wanted to thank Mr. Melancon for all of his work 
for keeping this issue on the top of the agenda here in 
Congress, and now I am looking forward to some progress being 
made. And your testimony will be very important to help us do 
that. Thank you. I yield back.
    Mr. Stupak. Thank you. Mrs. Blackburn, opening statement?

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you, Mr. Chairman. I do have a brief 
opening statement I will submit for the record, but in the 
interest of time, I do want to say welcome to our witnesses. I 
want to say thank you to those that have worked since our very 
first hearing that we did in New Orleans to address this 
situation. One of the components of leadership is when you have 
a situation such as what happened with Katrina, one of the 
things you have to do is admit we did things wrong. And I think 
when you look at how the health care situation was addressed in 
Louisiana the plans that were not made, the things that were 
left undone as you looked at a readiness plan, when you looked 
at how you were going to secure your infrastructure, the 
admission of that as having been a mistake, and then the 
agreement and establish a health care network that is going to 
be beneficial for your citizens. I think that is an important 
step.
    So as we move forward, I look forward to your continuing 
testimony, to your continuing work, and certainly to seeing all 
of yourebuild a health care system that will deliver accessible 
and affordable health care for the citizens of Louisiana. I do 
say welcome to the mayor. Some of us were here until about 3 
o'clock this morning for the Rules Committee hearing for SCHIP, 
and I think we would be wishing that you had brought along some 
beignets and coffee with you to help us get through this as we 
take the SCHIP bill directly to the floor as we see that happen 
today.
    But some of us were here a little bit later, and Mr. 
Pallone was also here through the evening, so we thank you and 
I yield back, Mr. Chairman.
    Mr. Stupak. Thank you. That concludes the opening 
statements by members of the subcommittee.
    Any other statements for the record will be accepted at 
this time.
    [The prepared statements follow:]

    Prepared Statement of Hon. John D. Dingell, a Representative in 
                  Congress from the State of Michigan

     Today, we will hear from public health leaders and 
representatives from the New Orleans area who are helping the 
brave citizens of that region rebuild their lives and their 
communities. We should pay close attention to the lessons they 
can teach us about the tenacity and creativity it takes for a 
health care system to recover from a national disaster.
     At our last hearing on this topic, I promised that we 
would focus on stabilizing the health care crisis in the New 
Orleans area and that we would keep our focus on that issue 
until the system is stable. This is the second in a series of 
oversight hearings on these issues, and I assure you, it will 
not be the last.
     Four and a half months ago, we heard testimony from 
doctors and clinic administrators about people lining up in 
their cars overnight, simply so they could get attention to 
basic health needs such as prescription eyeglasses and asthma 
medicine from health care professionals working in tents with 
flashlights. Their stories described a landscape we might see 
in third world countries, not one we could imagine here in our 
own country.
     I am pleased that Secretary Leavitt took to heart the 
moving testimony we heard, and released $100 million in 
discretionary Deficit Reduction Act monies to target primary 
care in the greater New Orleans region. I thank the Secretary. 
These much-needed funds will soon flow to clinics in the 
greater New Orleans area that provide primary and preventive 
care--such as vaccinations, pre-natal checkups, and basic first 
aid--to poor and uninsured patients.
     These funds will help fill in some--but certainly not 
all--of the holes in what is left of a shattered health care 
system in the New Orleans region. As we will hear today, that 
system is still precarious as we mark the 2-year anniversary of 
Hurricane Katrina. If the system were a patient, we might say 
it is still in the Intensive Care Unit. We will hear from 
today's witnesses that the area's economic recovery is stalled 
because the health care system remains fragmented and 
overwhelmed.

     There continue to be critical shortages of 
professional health care workers;
     Doctors are having difficulty sustaining their 
practices and are moving out of a city that desperately needs 
them;
     Graduate medical education programs are struggling 
to survive so they can continue to train the State's future 
healthcare workforce; and
     Private hospitals report they are hemorrhaging red 
ink in the post-Katrina economic environment.

     Meanwhile, 2 years have passed since Veterans Affairs and 
the State lost their major hospitals in downtown New Orleans. 
However, not a shovel of dirt has been lifted to rebuild them. 
That is a simply outrageous situation for our country.
     The people in the New Orleans region, and the wounded and 
maimed veterans returning to their homes, deserve to have these 
vital institutions rebuilt and rebuilt now. Likewise, the 
citizens of New Orleans need to have their public hospital 
rebuilt and rebuilt now. The uncertainty, particularly with 
respect to the VA's plans, is almost as damaging as the absence 
of the hospitals themselves.
     I wish to thank our subcommittee chairman, Representative 
Bart Stupak, and our subcommittee vice chairman, Representative 
Charlie Melancon, for their leadership on these issues. Mr. 
Melancon has been heavily engaged in helping his own district, 
which is adjacent to the four New Orleans parishes, recover 
from these storms. I look forward to hearing from our witnesses 
today about the path ahead.
                              ----------                              

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    Mr. Stupak. Let me call forward our first panel of 
witnesses. The Honorable Ray Nagin, mayor of New Orleans; Dr. 
Frederick Cerise, Louisiana Secretary of Health and Hospitals; 
Ms. Elizabeth Richter, Acting Director, Center for Medicare 
Management at CMS; Mr. Robert Neary with the Veterans 
Administration Office of Construction and Facilities, and he is 
accompanied by Ms. Julie Catellier; Mr. Clayton Williams, 
Louisiana Public Health Institute; and Ms. Kim Boyle, Louisiana 
Recovery Authority.
     It is the policy of the subcommittee to take all testimony 
under oath. Please be advised that the witnesses have the right 
under the rules of the House to be advised by counsel during 
their testimony. Do any of you wish to be represented by 
counsel? Everyone seems to be shaking their head no.
    [Witnesses sworn.]
    Mr. Stupak. Thank you. Let the record reflect that the 
witnesses replied in the affirmative. You are now under oath. 
We will begin with the opening statement of Mayor Nagin. If you 
would, please begin your opening statement. We have 5 minutes 
for opening statements. If it is longer, we will make it part 
of the record, but we have a large panel here and if we keep it 
to 5 minutes that would be great. Mayor, thank you and welcome.

    STATEMENT OF RAY NAGIN, MAYOR, CITY OF NEW ORLEANS, NEW 
                          ORLEANS, LA

    Mr. Nagin. Thank you. Good morning to the Chair, 
Congressman Bart Stupak, Ranking Member Ed Whitfield, Vice 
Chair Charlie Melancon, distinguished members and guests of the 
House Committee on Energy and Commerce Subcommittee on 
Oversight and Investigations. Thank you for calling this 
hearing today on the progress and continued challenges we face 
in providing basic and quality health care to meet our 
citizens' needs and provide what they deserve. We are grateful 
for your support of our continued efforts during the last 2 
years. And we thank the American people and our friends 
throughout the world for their donations of resources, labor, 
prayers and positive thoughts as we continue to rebuild.
    Most of all, I want to thank you for following up on the 
issues and the needs discussed in your March hearing on this 
topic. The attention you have brought to these issues has 
helped us to begin to repair critical aspects of our health 
care delivery system, which was decimated by Hurricane Katrina 
and the subsequent flooding. Ladies and gentlemen of this 
committee, this is my 28th lobbying trip and appearance before 
a committee since Katrina. I must admit I was a little 
reluctant to come up today because I am getting pretty weary 
about continuing trips up here and testifying and going over 
some of the same things over and over, but I think this is a 
very important day to be up here to make sure that everyone 
around the Nation, including this committee, continues to 
understand the challenges that we face.
    But I must be frank with you. I keep hearing about this 
$100 billion that has been allocated to the city of New 
Orleans. I keep hearing about this $100 billion that has been 
allocated to the Gulf Coast for recovery, but I have seen very 
little of that money in the city of New Orleans. And in essence 
the city of New Orleans is suffering in many different ways. We 
are in recovery, and our citizens are working in spite of the 
odds, but we are suffering, ladies and gentlemen, from 
financial malnutrition, and we need an acute infusion of 
resources into our environment to help us to overcome this 
incredible challenge that I don't think many people still 
understand.
    Our city was totally devastated after Katrina, and after 2 
years we are still trying to recover. It was unprecedented. But 
our citizens, as we sit here testifying and talking about this, 
they continue to suffer. We have increased mortality rates. We 
have increased stress levels throughout the city of New Orleans 
and the region, and we have many compounded mental health 
problems that are not being adequately addressed. A study by 
Dr. Kevin Stephens, the city's health director, documented a 47 
percent increase in deaths in the city of New Orleans. I repeat 
that, 47 percent increase in deaths in the city of New Orleans. 
The State has a smaller number that they have presented but 
whether you believe it is 20 percent or 47 percent deaths are 
up in the city of New Orleans and it is growing at an alarming 
rate.
    Our Orleans Parish coroner, Dr. Frank Minard, told the 
Associated Press he sees every death that happens in the city 
of New Orleans, that he has no doubt that Katrina, the after 
effects of Katrina, is killing our residents. These deaths have 
taken the form of pre-existing medical conditions that are made 
worse by the stress of living here in the city and in this area 
after the storm. It also is showing up in the elderly, many of 
them who are growing weary and tired and exhausted and too 
defeated and they are just giving up. Your committee has done 
some good work, and I must continue to applaud you. After your 
last meeting, which was recently, Secretary of Health and Human 
Services Michael Leavitt invoked his authority, you didn't have 
to do anything, under the Deficit Reduction Act of 2005 to make 
$100 million available to restore and expand access to primary 
health care for all those reasons.
    But, guess what, that money has taken the normal route that 
it always takes. It may or may not leave the Federal 
Government. It may or may not hit the State government. And it 
definitely is having a long time getting to the city of New 
Orleans. And if there is anything that this committee can do, 
and if there is anything this Congress can do, you can put a 
speedway to getting funds directly to the devastated areas, and 
this would help this recovery tremendously. We have been 23, 24 
months of going through this dance where money flows from the 
Federal Government to the State government and gets stuck and 
does not get to the people who need the money.
    I am off script and I know that is very damaging sometimes 
for me. But this is my 28th trip to this Nation's Capitol, a 
mayor of a city that has been totally devastated, and I am 
getting really upset about this because we are getting ready to 
go to the second anniversary of the biggest natural and man-
made disaster, and I still do not have adequate health care in 
my community. Our hospitals are still shuttered for the most 
part. The one that is open you have to wait hours and hours and 
hours to get emergency care. There is no substantial mental 
health care happening in the city of New Orleans. There is very 
little substance abuse and many of our citizens are self-
medicating, which is a nice term I am going to use, to take 
care of what they can't handle, the day-to-day struggle of our 
city.
    Now we are 300,000 strong. Our citizens are doing 
incredible work in spite of not having the resources that they 
need but it shouldn't be this hard in the greatest country in 
the world. And I am pretty sick of it. The VA hospital, if we 
can get a decision on the VA hospital, that would stabilize the 
health care community in our city, but we keep going around 
this dance with RSVP and now the city of New Orleans is in a 
position where it is competing with the surrounding parish for 
this facility. We wouldn't be here if it wasn't for the failure 
of the Federal levee system that was supposed to protect New 
Orleans, and now I am sitting in the city of New Orleans 
competing with the surrounding parish to bring a facility back 
that should be downtown in the city of New Orleans, and I have 
to go through this ridiculous process.
    That is what we deal with in the city of New Orleans and 47 
percent more people are dying in the city of New Orleans 
because of this thing that we are going through. I implore, I 
ask, I beg this committee to really do something to help us. I 
am not sure where my city is going to be at the end of the day. 
It is coming back but I am losing people every day. Since I 
started talking, I probably lost a citizen in the city of New 
Orleans, and we need this committee, we need this Congress to 
help us. Thank you.
    [The prepared statement of Mr. Nagin follows:]

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    Mr. Stupak. Thank you, Mr. Mayor. Mr. Cerise, opening 
statement, please, 5 minutes.

  TESTIMONY OF FREDERICK P. CERISE, M.D., M.P.H., SECRETARY, 
          LOUISIANA DEPARTMENT OF HEALTH AND HOSPITALS

    Dr. Cerise. Mr. Chairman and members of the committee, 
thank you for the opportunity to testify on the status of 
Louisiana's health care system. I am Fred Cerise, Secretary of 
the Louisiana Department of Health and Hospitals. Today my 
comments will center around three areas, new Federal and State 
commitment, continuing needs, and sustaining some of the 
momentum that has begun with State and Federal relief. In the 2 
years since Katrina hit, New Orleans has accomplished much 
through local, Federal, and State investments. Recent Federal 
actions include the allocation of the remaining DRA funds. 
Louisiana received $161 billion which is targeted at workforce 
recruitment and retention, stabilization to hospitals, and 
primary care stabilization and expansion.
    I will note that the workforce recruitment and retention 
effort is ongoing. Out of the $50 million that has been 
allocated for that $11 billion in recruitment offers have been 
made. Over 100 people have been recruited back to the area as a 
result of that work. There was an award of $2.5 million in HRSA 
grants to increase access to health care services in the area 
and the extension of social services block grant funding to 
September 2009. Those are things we asked of this committee and 
HHS, and you responded and we appreciate the attention to those 
requests that we have made.
    I think it is also important to note that Louisiana has 
stepped forward with significant State investments in health 
care. Over a billion dollars in new State and matched funds 
were dedicated to programs including several proposals put 
forth by the redesign collaborative such as expanded insurance 
coverage to children, and individuals with disabilities, 
Medicaid rate increases to retain access to services, health 
information technology investments building on Federal grants, 
the establishment of a quality forum, and funds for a medical 
home systems pilot program.
    In addition, there is new funding to replace expiring 
Federal relief to expand and restructure mental health care 
delivery and to replace an academic medical center in 
conjunction with the VA in downtown New Orleans. The VA's 
return to the city, as the mayor mentioned, is a critical piece 
to the city's recovery. Extensive planning among LSU, Tulane, 
and the VA has occurred over the past 18 months. In addition to 
providing high quality care to veterans, this joint venture 
will save American taxpayers an estimated $400 million in long-
term operational costs while serving as a centerpiece of a 
vibrant, academic teaching center and a bio-sciences research 
cell.
    We need an expedient decision to rebuild on the land 
currently being assembled in New Orleans so that both the LSU 
and the VA can focus more directly on returning vital services 
to the region. For the next few minutes, I will outline a few 
of our continuing and new issues, those surrounding graduate 
medical education, hospitals, and care for the uninsured. In 
response to the previous hearing, I convened a graduate medical 
education stakeholder group which the group identified as its 
major ongoing concern an extension of the 3-year rolling 
average exemption for the medical schools and hospitals which 
step forth to assist the residency program post Katrina. HHS 
advised that Federal legislation would be required to address 
this issue.
    Estimates from the hospital place the cost of $10 million 
to $15 million over the next 4 years. This is a complex area, 
as many of you know, in which we will need a commitment of 
solution oriented, active engagement by CMS in crafting a 
satisfactory resolution. In terms of the hospitals it, was made 
clear in the March hearing that the hospitals in the New 
Orleans area were struggling with uncompensated care. In 
response to that issue, the State revised its existing $120 
million community hospital uncompensated care pool to allow 
more funds to flow to the New Orleans area hospitals and has 
continued to support in this fiscal year through this pool and 
through Medicaid rate increases.
    However, the State has been notified by the hospitals that 
they continue to have a significant need for additional funding 
beyond UCC and beyond the previously estimated Medicare wage 
index projections. The State has not conducted a detailed 
analysis of the individual hospital's profits and losses. I 
agree with Representative Melancon's recommendation that an 
independent third party, such as GAO or some other party, 
conduct this detailed analysis to identify documented needs and 
identify ways to insure viability of these important community 
resources. And then finally as the State continues to recover, 
please note that we are doing so with an eye towards long-term 
systems redesign.
    Louisiana recently received notice, this was on July 23, so 
the State is not sitting on these funds, we recently received 
notice of the $100 million primary care stabilization grant. We 
believe this large investment in primary care should be 
leveraged to result in approved delivery system. If these funds 
are properly deployed, we should expect to see significant 
relief on emergency departments in the region and improved 
preventive services for residents. The State, with its local 
partner, who you will hear from, hopes that as we work through 
details with HHS the opportunity to place explicit requirements 
for access, care coordination and quality, and IT will be made 
available.
    Above all, the State wants to insure that this Federal 
investment is sustainable and coordinated with State 
programming. We know that this increase in primary care, for 
instance, and the capacity will generate more demand for 
specialty services for which there is no ready funding 
available. We once again request the ability to use Federal 
funds to support these physician services. The State has been 
informed by CMS that flexibility in the use of the DSH funds 
will be considered only in the scope of a larger waiver request 
that ultimately shifts DSH funds to the purchase of insurance 
for uninsured individuals. Although coverage is a desirable 
goal of the State, we have done extensive analysis of this 
proposal and concluded that we have insufficient funds in the 
DSH program today to adequately cover the target population.
    Currently, the State is criticized for supporting a 
centralized institutional base system of care. However, Federal 
rules dictate this approach. The rule, which is waivable, 
paradoxically results in more patients relying on emergency 
rooms for non-emergent care. DSH funds require a State match 
and have a Federal cap. This simple waiver would require no 
additional Federal funds that is not already available to the 
State today, and I urge you to prevail upon the administration 
to allow the State to use DSH funds, up to but not in excess of 
our cap, as a way to provide critically necessary physician 
services today. Along with traditional Medicaid, this will 
allow us to sustain the care once the primary care grant 
expires.
    So I will end here. Thank you for the opportunity to 
testify and for your ongoing commitment to the recovery of the 
region, and Ilook forward to the discussion.
    [The prepared statement of Dr. Cerise follows:]

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    Mr. Stupak. Thank you. Ms. Richter, 5 minutes, please, 
opening statement.

  TESTIMONY OF ELIZABETH RICHTER, ACTING DIRECTOR, CENTER FOR 
MEDICARE MANAGEMENT, CENTERS FOR MEDICARE AND MEDICAID SERVICES

    Ms. Richter. Mr. Chairman and members of the subcommittee, 
I am pleased to be here today to discuss post-Katrina health 
care and the actions the Centers for Medicare and Medicaid 
Services have taken to help rebuild the Louisiana healthcare 
system. I am Elizabeth Richter, the acting director of the 
Center for Medicare Management at CMS and I am pleased to be 
joined today by Rear Admiral Kenneth P. Moritsugu, the Acting 
Surgeon General, to help answer any questions you might have 
about broader Health and Human Services actions.
    I will focus on two issues the subcommittee asked CMS to 
address, which are graduate medical education payment, and the 
Medicare area wage index. Since the first days after Hurricane 
Katrina, CMS has worked diligently to address issues related to 
medical residents displaced by the disaster. In particular, CMS 
has moved quickly to provide flexible funding through all 
available means of Medicare GME payment in three ways. First, 
the New Orleans hospitals asked CMS for a way in which host 
hospitals taking on displaced residents could receive payment 
for the training they were providing. In response, CMS 
immediately issued a provision in the existing regulations 
which allows hospitals that have closed programs to temporarily 
transfer their allotment of full-time equivalent residents paid 
for under the Medicare Program to the hospitals hosting the 
displaced residents.
    As a result, host hospitals that were already training 
residents at or above their cap could receive payment for 
training additional residents displaced by the hurricane. Our 
second initiative in order to provide relief where the programs 
have not or are no longer closed was to use the rule making 
process to publish a new regulation to allow closed hospitals 
an adjustment to their FTE count. The new rule allows the host 
hospitals to receive financial relief for the additional 
medical residents they have taken on in the wake of the 
disaster. The new regulations establish a new kind of emergency 
affiliation agreement to facilitate the sharing of residents 
between hospital situations where special waiver has been 
implemented in an emergency area during an emergency period.
    As a result, Katrina-affected hospitals were able to 
temporarily transfer residents anywhere in the country. Host 
hospitals were then able to receive payment without regard to 
the otherwise existing rules that affiliations be limited by 
geography and we also relaxed the shared rotational arrangement 
requirement. Under usual GME payment rules, a hospital is paid 
in the current year based on a 3-year rolling average count of 
residents. Therefore, the third action we took was to allow 
displaced residents from August 29, 2005 to June 30, 2006, to 
be excluded from the rolling average calculation.
    As a result, payment will be made in full in 1-year for the 
period when host hospitals would have expected the closed 
program provision to apply. CMS has been advised by our Office 
of General Counsel that the 3-year rolling average cannot 
otherwise be waived without a change in the law, thus 
exhausting CMS authority within the GME rules. CMS has 
authority to conduct demonstrations in cases where certain 
payment rules warrant the study to help achieve more efficient 
and effective administration of the Medicare Program. For 
example, there is currently an ongoing demonstration examining 
the effect of managing resident slots at the State level. 
Towards that end, CMS welcomes the opportunity to share 
information about the demonstration process.
    In the meantime, CMS remains committed to providing 
technical solutions within its authority to any concerns 
related to GME. I have reviewed the paper submitted by LSU and 
Tulane, and would be happy to comment in response to any 
questions you may have about their particular GME concerns. CMS 
has also been responsive to concerns about providers' requests 
for an increase in the area wage index to be reflective of 
reported increases in wage rates for health care facility 
staff. The wage index is a relative value based on wage data 
reported from hospitals across the country. There is a uniform 
national process for updating the wage index that will not be 
based on post-storm data until fiscal year 2010.
    Given the data collection, auditing, and budget neutrality 
requirements under the current wage index structure provides 
certain limitations, HHS recognized the rapid rise in wages in 
this affected area, and thus directed approximately $98 million 
of the $160 million in DRA provider stabilization grants be 
made available to compensate Louisiana providers for higher 
wage cost before the wage index is based on post-storm wage 
data. CMS would very much like to understand the impact of the 
grant funds, and if they are having their intended impact of 
offsetting the cost of persistent higher wages in Louisiana, 
including how wage issues are impacting other payers, namely, 
Medicaid and private pay patients.
    Due to the complex nature of the data issues across payers 
and programs, CMS also recommends an outside entity lead a 
thorough assessment of the issues the hospitals have raised 
across all HHS programs along private payers.
    In conclusion, since the March 13, 2007, hearing before 
this subcommittee, HHS has made $195 million in supplemental 
grant funding for health care rebuilding and provider 
stabilization efforts in the Gulf Coast region. Secretary 
Leavitt has made a personal investment and focus of energy on 
rebuilding of the Louisiana health care system, supported by 
continuous technical expertise offered by CMS and senior 
officials throughout HHS.
    CMS will continue to make relevant expertise available to 
the State as the two work together toward the goal of a high-
functioning, sustainable health care infrastructure. Thank you, 
and Dr. Moritsugu and I would be happy to answer any questions 
you may have.
    [The prepared statement of Ms. Richter follows:]

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    Mr. Stupak. Thank you. Mr. Neary, please, for an opening 
statement.

 TESTIMONY OF ROBERT L. NEARY, EXECUTIVE-IN-CHARGE, OFFICE OF 
  CONSTRUCTION AND FACILITIES MANAGEMENT, U.S. DEPARTMENT OF 
                        VETERANS AFFAIRS

    Mr. Neary. Good morning, Mr. Chairman, and members of the 
committee, thank you. I am pleased to appear before the 
committee today to discuss plans for the design and 
construction of a new VA medical center in New Orleans. In 
broad terms, the VA intends to construct a state of the art 
hospital in the New Orleans metropolitan area requiring 
approximately 1 million square feet to include 140 hospital 
beds, outpatient clinic capacity to receive 410,000 visits per 
year, a 60-bed nursing home, appropriate parking, and 
mitigation features to protect the medical center against 
natural and man-made threats. The VA presently has been 
appropriated $625 million of which $300 million has been 
authorized by the Congress, and we have requested the full 
authorization be enacted during this session.
    In February 2006 the VA and LSU entered into a Memorandum 
of Understanding to establish a mutually beneficial 
relationship to foster discussions regarding the future of VA 
and LSU medical care. The MOU led first to the establishment of 
a Collaborative Opportunity Study Group in March 2006 and then 
a planning group in September 2006. Work of the study group 
completed in June concluded that there were potential cost 
savings associated with a joint medical complex. The planning 
group then began to further develop the degree to which VA and 
LSU should collaborate. The planning group's report is due in 
September 2007.
    Subsequent to receiving that report, VA and the State will 
be positioned to make decisions on the extent of collaboration 
going forward in both programmatic and physical terms. We will 
then know specifically what will be built and by whom. In March 
the Department determined that a review of alternative sites 
would be undertaken. That search identified two viable sites 
meeting all of the requirements. Ochsner Health Systems 
proposed a site of about 50 acres approximately 4 miles from 
downtown New Orleans. Later it was determined that only 28 
acres were available, however. The New Orleans Regional 
Planning Commission in conjunction with the city, State of 
Louisiana, and several parishes proposed acquiring 
approximately 34 acres downtown adjacent to the site of the 
proposed LSU medical campus.
    My full statement contains a map outlining the site search 
and maps of the two sites. These two sites are currently under 
evaluation. Each site is rated according to established 
criteria, which includes such factors as proximity to 
affiliated medical schools, proximity to veteran population, 
access to highways and major streets, site characteristics 
including wetland and flood plain status and the existence of 
any environmental issues. In addition, VA has contracted to 
study the site from the perspective of suitability for 
construction and any characteristics which would impact the 
cost at each location. We are particularly interested in the 
potential for future flooding and what steps could be taken to 
mitigate against a repeat of the flooding of 2005.
    The VA is also required under the National Environmental 
Policy Act to assess the environmental implications of locating 
the new facilities at each location. A consultant will complete 
the appropriate environmental studies in accordance with NEPA 
and the Comprehensive Environmental Response, Compensation and 
Liability Act. The construction of these facilities is a high 
priority for VA. This is a large and complicated project, 
however, that will take time to design and construct. Our plan 
would enable construction to begin in February 2009 with 
completion in July 2012. A graphic of a more detailed schedule 
is included in my full statement.
    That concludes my oral statement. I would like to add that 
Congressman Melancon, in his opening remarks, asked that the VA 
commit to brief the committee on a monthly basis so I would say 
that we would be pleased to do that as long as that served the 
committee's purposes. Thank you very much.
    [The prepared statement of Mr. Neary follows:]

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    Mr. Stupak. Thank you. Ms. Catellier, are you going to do 
an opening statement?

  TESTIMONY OF JULIE CATELLIER, DIRECTOR, SOUTHEAST LOUISIANA 
                  VETERANS HEALTH CARE SYSTEM

    Ms. Catellier. Mr. Chairman, thank you for the opportunity 
to be here. We have made significant progress in the past 23 
months in meeting veterans' health care needs. Three new 
clinics opened in Slidell, Hammond, and St. John Parish, for a 
total of six permanent outpatient facilities. Eighty percent of 
our patients drive 30 minutes or less to receive their primary 
and general mental health care, which are offered at every 
location. Patients requiring complex care are referred to other 
VAs or cares obtained within the community. Plans are 
progressing to lease space for specialty care and ambulatory 
surgery. The ability to perform in-house procedures and 
surgeries will significantly reduce our costs. This year we 
will spend nearly $25 million for purchased care compared to 
$2.4 million pre-Katrina, a 10-fold increase.
    Laboratory services have been enhanced and currently are 
centralized in Baton Rouge. Pharmacy services exist at all our 
clinics and a $3.5 million project for a new pharmacy in New 
Orleans will be completed early next year. A diagnostic imaging 
center will open in New Orleans this fall providing the full 
range of radiology services. Dental care has been expanded to 
two locations, and currently there are no patients on the 
waiting list. In order to deliver patient focus, family-
friendly care, we tripled staff in our community and home care 
program. This includes a unique hospital-at-home program where 
clinician teams visit patients in their home to both shorten 
hospital stays or to avoid the need for hospitalization 
altogether.
    The home-based primary care program has grown from an 
average of 95 patients enrolled on any given day to 125, a 32 
percent increase. This is one example of how VA is reinventing 
care to meet the specialized needs of veterans post-Katrina. We 
recently implemented a new program through an agreement with 
our affiliate which allows VA physicians to admit and manage 
the inpatient hospitalization of veterans at the Tulane 
University Hospital. Veterans responded favorably to this 
initiative because it allows them to remain near their families 
in their communities while being treated by their personal VA 
team. In the past month, 45 patients were admitted to this 
program. To the best of our knowledge, this hasn't been done 
elsewhere in the country.
    Over half of our patients are diagnosed with a mental 
health disorder. Specialized mental health programs, including 
PTSD and substance abuse treatment are currently provided, and 
we are still acquiring additional space to expand those 
services. Psychiatric beds in metropolitan New Orleans are 
critically limited. Therefore, VA patients requiring inpatient 
care are most often transported by ambulance to VAs in 
Alexandria and Shreveport. This year we expect to admit 225 
patients for acute psychiatric hospitalization. A significant 
challenge for our mental health programs is the loss of nine 
psychiatrists or 41 percent of our pre-Katrina strength as a 
result of relocation. Patients are grateful for the 
Government's response and are seeking care with us in record 
numbers.
    We served over 30,000 veterans through June of this year. 
Of those, over 4,000 were new. On average, 1,000 outpatients 
are seen daily in our system. We project that by year end 
35,000 will be treated. That is 90 percent of our pre-Katrina 
level. There are currently 76 physician residents compared to 
120 pre-Katrina. To maintain the stability of our residency 
training programs and meet our obligation to educate America's 
physicians, we are working with our academic affiliates to 
place medical staff and residents at facilities throughout VISN 
16 until our full clinical program's return. I would be remiss 
if I didn't address the issue of recruitment and retention of 
professional staff.
    As a direct result of Hurricane Katrina, 57 physicians and 
70 nurses left our employment. These losses and the subsequent 
challenges and recruiting positions have resulted in delays in 
some of our specialty clinics. Losses include 90 percent of our 
orthopedists, over 60 percent of our otolaryngologists, half of 
our ophthalmologists, neurosurgeons, and rheumatologists. 
Lucrative recruitment packages have been drafted in an attempt 
to attract qualified professionals. A recent offer for a 
physician to move to New Orleans required a salary at the top 
of the pay scale, 3 consecutive years of annual $30,000 
recruitment incentives, and full moving expenses. The applicant 
declined.
    Louisiana veterans have every right to receive high quality 
health care they deserve and have come to expect, and it is my 
job to deliver it. Thank you for allowing me this opportunity, 
and I look forward to answering your questions.
    [The prepared statement of Ms. Catellier follows:]

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    Mr. Stupak. Mr. Williams, for your opening statement, 
please, sir.

     TESTIMONY OF CLAYTON WILLIAMS, DIRECTOR, URBAN HEALTH 
         INITIATIVES, LOUISIANA PUBLIC HEALTH INSTITUTE

    Mr. Williams. Mr. Chairman and members of the subcommittee, 
thank you for this opportunity to provide an update on the 
stabilization and expansion of a coordinated system of primary 
care clinics in the greater New Orleans region, and thank you 
for all you have done thus far to support our rebuilding 
efforts. The Louisiana Public Health Institute or LPHI is a 
private, not-for-profit organization with a mission to promote 
and improve the health and quality of life in Louisiana through 
public-private partnering. As it relates to the recovery of the 
health care delivery system, our focus has been on working with 
health care providers with a mission or mandate to provide 
access to everyone regardless of their ability to pay primarily 
through its support of the partnership for access to health 
care or PATH, which I have directed for the past 6 years.
    If all the components of the health care system were 
rebuilt as they were prior to Hurricane Katrina the people of 
greater New Orleans will likely be doomed to the same poor 
health outcomes that we have historically experienced, nearly 
the worst in the country. There is evidence that suggests we 
are even worse off than before the storm in some areas which 
makes the situation even more urgent. Therefore, now is the 
time to get it right and perhaps in so doing glean some lessons 
that will be of value for the rest of the country. Working 
closely with its partners, LPHI is striving to achieve a new 
health care system with a foundation of a network of public and 
private primary care clinics to facilitate access to the right 
care delivered in the right place at the right time to advance 
quality and reduce the cost of care.
    We don't need to start from scratch towards this vision. In 
the four-parish region there are currently 27 fixed site 
primary care clinics of varying size and scope delivering 
discounted services to everyone regardless of their ability to 
pay. The heroic group of leaders that have managed to establish 
these critical community resources in Katrina's wake should be 
commended. Since January, 2006, these clinics provided for more 
than 120,000 patient visits. While they have accomplished a 
great deal after Katrina, they are still in need of much 
support as they expand to meet the growing needs. We estimate 
that 35 additional primary care physicians will be required to 
meet the needs of the uninsured in the four-parish region. 
Since the March 13 hearing, the Federal Government has done a 
remarkable job of addressing the need for primary care.
    The announcement of the $100 million primary care access 
and stabilization grant on May 23 is evidence of the 
extraordinary work done by the subcommittee, HHS, including 
officials from CMS, HRSA, and SAMHSA to address this concern. 
We offer our sincere thanks to all in the Federal Government 
who made this happen. After responding to a public 
announcement, LPHI was chosen as the State's local partner in 
administering the grant, and I serve as the director of this 
program for LPHI. Since the announcement of the grant, LPHI, 
DHH, and HHS have worked steadily and tirelessly to put the 
pieces in place.
    As a result, we anticipate that the first payments to 
stabilize these clinics will be awarded by September of this 
year. The principal goal is to demonstrate increased access to 
primary care, behavioral health care, and related services. 
This grant represents an opportunity to do much more than 
simply distribute funds to primary care clinics assuming we can 
work together to address the many other areas of need. As the 
State's local partner administering the grant, LPHI is 
committed to establishing robust administrative systems to 
insure Federal funds are spent appropriately, working to 
advance the goals of the grant in an inclusive and transparent 
way with all major stakeholders, maximizing opportunities to 
insure the grant program is designed as a bridge to a well-
organized and sustainable system of care and providing 
technical assistance and incentives to advance quality and 
efficiency.
    LPHI takes very seriously its role as steward of taxpayer 
dollars, and therefore we will request an opportunity to share 
our proposed fiscal controls for up front review by the HHS 
Inspector General. And we and our partners have several areas 
of need that will have to be addressedto insure our success in 
alleviating the health care issues that persist in the region. 
LPHI will require assistance in either gaining approval for use 
of grant dollars to establish necessary health information 
systems or in securing additional funding for this purpose. 
Robust, standardized, fully implemented and network information 
systems need to be in place in the participating primary care 
clinics if we are to be successful in achieving, measuring, and 
reporting results as required in the terms and conditions of 
the grant.
    Despite this reality, health information systems are not 
allowable expenses under the grant terms and conditions. There 
are other opportunities to build mechanisms into the grant to 
help drive the development of a high quality, organized, and 
sustainable system of care. LPHI, DHH, and our partners will 
require continued flexibility from HHS as these program 
components are developed, so we can maximize the opportunities 
to build in incentives and performance requirements. Accessible 
and high quality primary care is an important part of a health 
system but good primary care must include linkages to timely 
diagnostic, specialty, and inpatient services, and there are 
several looming concerns in the health care system beyond 
primary care that I would like to express.
    We strongly emphasize the importance of continued and 
enhanced attention to helping alleviate critical health care 
workforce shortages; No. 2. flexibility in establishing payment 
mechanisms for necessary specialty care providers; No. 3, 
insuring the viability of our community hospitals; and, No. 4, 
providing support for the development of a new academic medical 
center to serve the region. In conclusion, it has been an honor 
and a privilege for LPHI to participate in today's hearing. 
Thank you for your outstanding leadership and responsiveness, 
and for your continued support of our efforts to rebuild a 
healthier, greater New Orleans. I welcome your questions.
    [The prepared statement of Mr. Williams follows:]

                     Testimony of Clayton Williams

    Mr. Chairman and members of the subcommittee, thank you for 
this opportunity to provide an update on the stabilization and 
expansion of a coordinated system of primary care clinics in 
Greater New Orleans, and thank you for all you and the Congress 
have done thus far to support our rebuilding efforts.

         I. Louisiana Public Health Institute (LPHI) Background

    The Louisiana Public Health Institute was established in 
1997 and is one of 25 Public Health Institutes nationally. LPHI 
is private not-for-profit organization with a mission to 
promote and improve the health and quality of life in Louisiana 
through public-private partnering at the community, parish and 
state levels.
    LPHI maintains a population-level focus on health 
improvement, and recognizes the relative importance of 
addressing all determinants of health through its programming--
from social, to environmental, to the influences that can be 
realized through the healthcare delivery system. LPHI places an 
emphasis on promoting equity and reducing racial and economic 
disparities in health outcomes.
    As it relates to the recovery of the healthcare delivery 
system in Greater New Orleans, our focus has been on working 
with healthcare providers with a mission or mandate to provide 
access to everyone regardless of their ability to pay. For the 
past six years, LPHI has advanced its work in this area 
primarily through its support of the Partnership for Access to 
Healthcare (PATH), which includes most of the public and 
private healthcare providers in the region that have 
historically provided healthcare to people falling below 200 
percent of the Federal Poverty Level.
    Since the day after Katrina and the breaches in the levy 
system that caused catastrophic flooding throughout the region, 
LPHI has been very active in recovery. In partnership with 
governmental, non-profit and private sector stakeholders at all 
levels, LPHI has:

     Convened the Greater New Orleans Health Planning 
Group which created the first comprehensive framework for 
rebuilding the health system of the region (Framework for 
Rebuilding a Healthier Greater New Orleans);
     Created StayHealthyLA.org in partnership with the 
Louisiana Department of Health and Hospitals;
     Conducted operations for the Louisiana Health and 
Population Survey on behalf of the LA Department of Health and 
Hospitals and the LA Recovery Authority, the first household 
population survey of parishes most affected by hurricanes 
Katrina and Rita (with technical assistance from the U.S. 
Census Bureau and the US Centers for Disease Control and 
Prevention); and
     Following the immediate aftermath, supported the 
recovery of community-based healthcare services (PATH and the 
Health Services Recovery Council), school-based health centers 
(School Health Connection) and behavioral health services 
(Behavioral Health Action Network).

II. Primary Care Recovery and Expansion In the Greater New Orleans Area

    If all components of the health system were rebuilt as they 
were prior to Hurricane Katrina, the people of Greater New 
Orleans will likely be doomed to the same poor health outcomes 
that we have historically experienced--nearly the worst in the 
country. Therefore, we agree with all previous major consensus 
planning efforts that NOW is the time to get it right, and 
perhaps in so doing glean some lessons that will be of value to 
the rest of the country. It is not too late to achieve this if 
we stay aligned at the local, state and Federal levels in our 
pursuit of healthcare equity, quality and efficiency for the 
people of Greater New Orleans.
    LPHI holds a fundamental belief in a healthcare system with 
a foundation of a public/private network of neighborhood-based 
primary care clinics to facilitate access to the right care, 
delivered in the right place at the right time to advance 
quality and reduce the cost of care at all levels. These 
neighborhood clinics should be portals to diagnostic, 
specialty, and acute care, and be linked to other supportive 
services through a coordinated system, and be under-girded by 
robust information systems. Advancing this vision is central to 
our approach to rebuilding.
    The Greater New Orleans region does not need to start from 
scratch to advance towards this vision. In the four-parish 
region, there are currently 27 fixed-site primary care clinics, 
of varying size and scope, delivering discounted services to 
everyone, regardless of their ability to pay. Most have been 
participants in the collaborative efforts of PATH's Regional 
Ambulatory Planning Committee which is staffed and supported by 
LPHI. These clinics include federally Qualified Health Centers, 
school-based health centers, hospital-based clinics of the 
Medical Center of Louisiana, university sponsored primary care 
clinics, private not-for-profit health centers, and faith-based 
organizations.
    The heroic group of leaders that have managed to establish 
these critical community resources in Katrina's wake should be 
commended. Since January 2006, these clinics provided for more 
than 120,000 patient visits.--In addition to primary 
healthcare, they provide preventive health services, obstetrics 
and gynecology, behavioral health, and some specialty care. 
While they have accomplished a great deal since Katrina, they 
are still in need of much support as they expand to meet the 
growing needs of the people of the region. We estimate that 35 
additional primary care physicians will be required to meet the 
needs of the uninsured in the four-parish Greater New Orleans 
area.

III. LPHI's Administration of the Primary Care Access and Stabilization 
                                 Grant

    The March 13, 2007 testimony to this Subcommittee from 
stakeholders at all levels emphasized the need for resources to 
support primary care for the people of Greater New Orleans, 
with an emphasis on the low-income un- and under-insured. Since 
those hearings, the Federal Government has done a remarkable 
job of addressing short-term stabilization needs and continuing 
efforts to expand existing primary care clinics. On May 24, the 
Secretary of the Louisiana Department of Health and Hospitals 
(DHH), Dr. Cerise, received a letter from the Acting 
Administrator of the US Center for Medicare and Medicaid 
Services (CMS), the Honorable Leslie Norwalk, announcing the 
availability of $100 million to stabilize and expand primary 
care clinics and behavioral health services. The announcement 
of the Primary Care Access and Stabilization Grant availability 
is evidence of the extraordinary work done by the Congress, 
this Subcommittee, and the Department of Health and Human 
Services, including officials from CMS, Health Resources and 
Services Administration and the Substance Abuse and Mental 
Health Services Administration to address this concern of the 
people of Greater New Orleans. We in Greater New Orleans would 
like to offer our sincere thanks to all in the Federal 
Government who made this happen.
    By responding to a public announcement, the Louisiana 
Public Health Institute was chosen as the State's local partner 
in administering the grant, and I serve as the director of this 
program for LPHI. Since the announcement, LPHI, DHH and HHS 
have worked steadily to put the pieces in place, and we have 
reached the following critical milestones:

     LPHI was chosen as the state's local partner in 
administering the grant.
     An application to CMS was completed and submitted 
by DHH with assistance from LPHI.
     The Cooperative Endeavor Agreement between LPHI 
and DHH has been fully executed.
     HHS issued the official Notice of Award on July 
23, 2007.
     The eligibility screening process and methodology 
for determining initial base payments to clinics has been 
finalized.
     LPHI released the Request for Applications to 
participate in the grant on July 27th, and a public meeting to 
address questions about the grant program and application 
process is scheduled for August 3, 2007.

    In the midst of the State's Legislative Session, the DHH 
staff worked tirelessly with LPHI to put critical elements in 
place to ensure timely distribution of funds to stabilize the 
primary care providers of the region. It is anticipated that 
the initial base payments to clinics will be announced by 
September of this year.
    The principal goals of the Primary Care Access and 
Stabilization Grant are to demonstrate increased access to 
primary care, behavioral health care, and other related 
services; and to ensure greater numbers of low income un- and 
under-insured individuals are being served in Orleans, 
Jefferson, St. Bernard and Plaquemines parishes.
    In its role as the State's local partner in administering 
the Primary Care Access and Stabilization Grant, LPHI has 
committed to: Establish robust administrative systems and 
controls to ensure the Federal funds are spent appropriately by 
all sub-recipients to achieve the goals of the grant;

     Work to advance the goals of the grant in an 
inclusive and transparent way with all major stakeholders;
    Pursue complementary resources to maximize the 
impact of Federal grant funds towards improving the health of 
the people of Greater New Orleans as they return;
     Maximize opportunities to ensure the grant program 
is designed as a bridge to a well-organized and sustainable 
system of care for the people of Greater New Orleans;
     Provide technical assistance and incentives to 
advance quality and efficiency among participating sub-
awardees; and
     Regularly convene forums among sub-recipients for 
region-wide health planning and coordination.

    This grant represents an opportunity to do much more than 
simply distribute funds to primary care clinics. Working 
closely with the healthcare providers in the region and DHH, we 
are committed to building in mechanisms that will help create 
an organized system of care that continue to serve the people 
of the region well beyond the three year grant period (granted, 
many other areas of concern for the healthcare system must be 
successfully addressed concurrently if we are to be 
successful).
    With this in mind, LPHI intends to use a portion of its 
administrative budget and other complementary resources to 
establish a Scientific Advisory Committee made up of local and 
national experts to anchor this program in best practices as 
the program is designed and implemented. In addition, we will 
continue to convene a stakeholder group to provide a mechanism 
for input on critical program decision-making, allow for 
regular communication among sub-grantees, and provide a forum 
for data-driven planning as sub-grantees grow primary care 
capacity in the region.
    LPHI takes very seriously its role as steward of taxpayer 
dollars. Therefore, we will request an opportunity to share our 
proposed fiscal controls and program integrity plans for up-
front review by the Department of Health and Human Service's 
Inspector General. As a responsible public health agency, we 
believe a pinch of prevention is worth a pound of cure in 
administration as well as healthcare delivery.

                           IV. Moving Forward

    We have several areas of need that will need to be 
addressed to ensure our region's success in alleviating the 
healthcare issues that persist in the region:
     We will require assistance in either gaining approval for 
use of grant dollars to establish necessary health information 
systems, and/or in securing additional funding for this 
purpose. Robust, standardized, fully implemented and networked 
information systems need to be in place in the participating 
primary care clinics if we are to be successful in achieving, 
measuring and reporting results as required in the terms and 
conditions of the grant. Despite this reality, health 
information systems are not an allowable expense under the 
grant terms and conditions.
     There are at least two more opportunities to build 
mechanisms into the Primary Care Access and Stabilization 
Ggrant to help drive the development of a high quality, 
organized, and sustainable system of care for the uninsured in 
the region. One is the development of the sub-contracts between 
LPHI and the participating clinic sub-awardees, and the other 
is the design of the methodology for making supplemental 
payments to them. LPHI and DHH will require flexibility from 
HHS as these program components are developed so we can 
maximize the opportunities to build in incentives and 
performance requirements that will help us improve access to 
sustainable high quality and comprehensive primary care.
     Accessible and high quality primary care is an important 
part of a high performing health system, but good primary care 
must include linkages to timely diagnostic, specialty and 
inpatient services. There are several looming concerns in the 
healthcare system beyond primary care that I would like to 
express. We strongly emphasize the importance of: 1) continued 
and enhanced attention to helping Greater New Orleans alleviate 
critical healthcare workforce shortages; 2) flexibility in 
establishing payment mechanisms for necessary specialty care 
providers; 3) ensuring the viability of our community 
hospitals; and 4) providing support for the development of a 
new academic medical center to serve the region.
    It has been an honor and privilege for LPHI to participate 
in today's hearing. Thank you for your outstanding leadership 
and responsiveness in the months since the March hearings, and 
for your continued support of our efforts to rebuild a 
healthier Greater New Orleans. I welcome your questions.
                              ----------                              

    Mr. Stupak. Thank you. Ms. Boyle, your opening statement, 
please.

  TESTIMONY OF KIM M. BOYLE, CHAIRMAN, HEALTH CARE COMMITTEE, 
                  LOUISIANA RECOVERY AUTHORITY

    Ms. Boyle. Chairman Stupak, Ranking Member Whitfield, 
members of the subcommittee, at this critical time in the 
rebuilding of the great city of New Orleans, it is an honor and 
privilege for me to testify this morning as a volunteer member 
of the Board of Directors of the Louisiana Recovery Authority 
as Chair of the LRA's health care committee, but also as a 
life-long resident of New Orleans. Thank you for the 
opportunity to bring to your attention the most pressing issues 
to address as we all work with your critical assistance to 
rebuild a sustainable health care system in the New Orleans 
region. Consistent with Congressman Melancon's inquiries, I 
cannot stress enough the monumental importance of the planned 
joint Medical Center of Louisiana in New Orleans and the 
Veterans Affairs medical center in downtown New Orleans to the 
sustainability of our health care system to the delivery of 
quality health care services to our citizens, and to the 
overall recovery, and more importantly rebuilding of our 
community.
    Second, we continue to need your help to address the 
immediate barriers that continue to plague the comprehensive 
restoration of health care services in the New Orleans region. 
As all of you are aware, Katrina was by far the single most 
devastating disaster in American history and Rita ranks third 
on the all time list, 1,500 lives lost, 1.3 million American 
citizens displaced, 200,000 homes destroyed, and 64,000 people 
who remain in FEMA trailers. The storms and the failure of the 
Federal levee system caused an estimated $100 billion in 
damages to homes, property, businesses, and infrastructure in 
Louisiana alone. Federal investments in Louisiana's recovery 
have been generous and crucial, and I would like to personally 
thank all of you and the members of the subcommittee for your 
persistent and consistent support of Louisiana's recovery.
    However, considerable needs remain unfunded. Federal 
commitments total $110 billion for recovery and rebuilding in 
five of the Gulf Coast States that were impacted by Katrina, 
Rita, and Wilma. Out of this $110 billion a little over $60 
billion was committed to Louisiana but half of that was used to 
fund immediate disaster relief services and insurance payments 
to policy holders under the National Flood Insurance Program. 
$26.4 billion is available to Louisiana for rebuilding critical 
services and infrastructure. Unfortunately, that is far short 
of our needs in such an unprecedented catastrophe. Therefore, I 
am here today to address what we can and should do to get the 
New Orleans region's health care system on its feet. I do not 
believe that anyone can dispute that the health care system's 
speedy, comprehensive, and sustainable recovery is of paramount 
importance to the future of the city and to south Louisiana 
itself. Uncertainty and blunt concerns about health care access 
has slowed our recovery, as well as rebuilding an undermined 
public confidence about the ability to return home.
    Business owners will not bring investments and employees to 
a city without available health care services. The citizens 
will not bring their children, elderly parents and family back 
absent available health services. As all of you are aware, the 
LRA's mandate from the beginning is building a stronger, safer, 
and better Louisiana, and the plans for a joint MCLNO as well 
as be a medical center in downtown New Orleans is a recovery 
project without peer and is without question the best option 
for the people of our city and the surrounding region. 
Congresswoman Blackburn referred to an agreement to move 
forward. The joint medical centers are integral to three 
critical elements of community recovery and the benefits of 
their co-location are innumerable.
    First, to address Congressman Melancon, the joint 
facilities will serve as critical providers of high quality, 
primary and specialty health care, and the MCLNO will also 
offer the region's only level 1 trauma center, and will be home 
to inpatient psychiatric care that is accessible by veterans. 
As a member of the LRA and as a resident of New Orleans where I 
grew up and I continue to live today, I am very concerned that 
not relocating the VA to downtown New Orleans will negatively 
impact the citizens of our region including our veterans, who 
do not have the means to travel to other areas for treatment.
    I am also concerned that relocating the VA could be 
destructive to the quality of care and diversity of treatments 
available at each institution by eliminating the sharing of 
LSU, Tulane, and VA physicians that were so prevalent before 
Katrina. The Louisiana American Legion specifically recognized 
veterans who have been the beneficiaries of the close proximity 
and the walking distance between the MCLNO and the VA downtown, 
as well as beneficiaries of their joint medical research and 
teaching. The facility, second, will anchor the region's 
medical education including the LSU and Tulane medical schools, 
graduate medical education, which many of you have addressed, 
and research programs dependent on shared clinical space in 
MCLNO and the VA.
    Relocation of the VA would have a devastating impact on 
medical education and research as well as the economy of the 
city of New Orleans. Third, consistent with our philosophy of 
rebuilding better and stronger the long-term economic revival 
and diversity of the New Orleans region is dependent upon the 
MCLNO and VA facilities serving as the clinical cornerstone of 
the emerging downtown biomedical district. This will stabilize 
this area. The plans include the development of a 60,000 square 
foot biomedical research incubator and an $86 million Louisiana 
cancer research center, which is a collaboration between LSU, 
Tulane, and Xavier, which will be located adjacent to the new 
joint hospitals.
    Now let me paint a different picture. The failure of the VA 
to return as a partner in the downtown biomedical district 
could condemn a viable economic engine to an embarrassing urban 
blight of abandoned empty buildings and have a devastating 
impact on our economy. Losing the VA medical center as a 
cornerstone of the biomedical district downtown will leave 
central New Orleans with a dark future. For all the reasons I 
have listed, what matters is that the pertinent leadership, a 
broad range of stakeholders, and the citizenry at large agree 
on what is best. Governor Blanco and the legislature have made 
good on their commitment to this project and a diverse set of 
community leaders have joined these State officials in strong 
vocal support for this project which include the American 
Legion, the Secretary of the Louisiana Department of Veterans 
Affairs, the New Orleans Regional Planning Commission, as well 
as the mayor, the Council, the Chamber, and many, many other 
groups.
    The citizens of New Orleans have also independently 
identified the joint medical centers as critical to recovery 
and have prioritized this initiative in the UNOP Plan, Unified 
New Orleans Plan, the Louisiana Speaks Regional Plan. Finally, 
I cannot emphasize enough what damage would be inflicted on the 
progress of community recovery and the public psyche and 
confidence if this partnership falls through. Our citizens are 
focused on rebuilding, not building back what was there before 
these devastating hurricanes, but rebuilding stronger, safer, 
and better to benefit the community. It is clear that 
rebuilding the VA medical center downtown would have the best 
and most positive impact on community recovery and public 
confidence in the future of this great city and state. Mr. 
Chairman and members of this committee, thank you for your time 
and attention today. I look forward to working with you as we 
advance the resurrection and rebirth of one of America's 
treasured regions. Thank you.
    [The prepared statement of Ms. Boyle follows:]

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    Mr. Stupak. Thank you. I want to recognize the delegate, 
Donna Christensen, who is with us. She is not a member of our 
committee but she has been an ardent supporter of rebuilding 
the Gulf Coast regions, especially in the area of health care. 
She is a member of the Democratic task force. We appreciate 
your interest and being here with us today. Gene Green was 
here. He had to leave. Again, we are going to be going back and 
forth because we are in SCHIP on the floor today. Right now we 
have two votes. It is probably going to take us about 15 
minutes. Let us recess for 15 minutes. We will be back and then 
we will start with questions with this panel. Hopefully it is 
not a day where we are going to be bound around all day because 
of procedural votes on the floor and we can get to our 
questions. Fifteen-minute recess. Thank you.
    [Recess.]
    Mr. Stupak. For questions, Mr. Melancon is going to start 
off, 5 minutes, and we will probably go more than one round. Go 
ahead.
    Mr. Melancon. Thank you, Mr. Chairman. Let me start, if I 
could, with Mr. Neary. If you would, the first thing I need to 
ask you, and there has been politics being played with this VA 
Charity mess and what is going on with the site location and 
all; I would like to ask you very honestly, have there been 
people from the Hill, senators or representatives, that have 
called and injected their opinions as to how the VA should be 
proceeding in any way, shape or form, to your knowledge?
    Mr. Neary. Mr. Melancon, there has been a significant 
interest from the Louisiana delegation, of course, urging the 
VA to proceed as rapidly as possible to reach a conclusion. And 
other members of our oversight committees, I think have in 
hearings and by letter, I think, have urged the VA to take 
action to move as swiftly as possible to replace the VA medical 
center.
    Mr. Melancon. Has there been any one specifically directing 
or trying to instruct you as to what to physically do with that 
facility?
    Mr. Neary. Not that I am aware. I am not aware of any 
specific effort to direct us what to do with the facility.
    Mr. Melancon. I would appreciate it if you would check with 
the people in your office and find out. I don't think that is 
necessarily and totally true, that no one has been 
interjecting. You outlined that the VA is currently evaluating 
two sites, one in downtown New Orleans and the other in East 
Jefferson. On pages 5 and 6 of your testimony you outline a 
number of criteria that would be used to evaluate those two 
sites. Nonetheless, how does the VA intend to measure the cost 
to the psyche of the city if you choose to abandon the downtown 
location and move to a different parish? Isn't there 
significant value that must be ascribed to the decision to 
locate downtown? Doesn't this send a positive message that the 
Federal Government is willing to commit to rebuilding in the 
city? Similarly, what is the cost associated with moving the 
hospital to Jefferson Parish? Aren't you really saying you 
don't have faith in the city, the levees, maybe the Corps of 
Engineers or their ability to rebuild if you make that 
decision? And how are you accounting for the costs associated 
with the message that such a choice would send to the 
community? And let me preface before you say that I had not 
really intended on injecting myself into this debate but the 
more I look at it, I think as Ms. Boyle states, it is a recipe 
for disaster to start stripping the economic engines out of the 
heart of New Orleans.
    I have a lot of respect for the people and the elected 
officials and such of Jefferson Parish. They were very 
fortunate in a comparative way than were Orleans, and I just 
don't think that we ought to be playing political politics with 
a facility as important as the VA hospital. If you could 
respond to my question, please.
    Mr. Neary. Certainly, Mr. Melancon, thank you for that 
question. I think the best way for me to respond is to say that 
I am certainly not an expert in urban development and what 
contribution or project in the downtown area might make, but I 
certainly respect the opinions of a number of people who are 
here today who express the view that this project is critical 
to be in the downtown area. We do not have a cost or a value at 
this point that we think would contribute negatively or 
positively to a decision to locate elsewhere other than the 
downtown site, but we certainly recognize the value as has been 
said by others here of our association with the medical 
schools, Tulane, Louisiana State University, and literally 
medical schools all over America where we have close 
affiliations. We understand that value to the VA and will not 
lose sight of that as we move forward.
    Mr. Melancon. I have a letter here to Mr. Nicholson from 
the Governor, the legislature, the mayor, university 
presidents, and on down the line in Louisiana stating what they 
want. That is why I am still questioning why we are still 
debating it. Ms. Boyle, do you have any comments on what is 
going on with it?
    Ms. Boyle. Thank you, Congressman. I guess my primary 
comment would have been to focus on the letter that you have. I 
think that is the July 27 letter that is signed by Governor 
Blanco, Mayor Nagin, members of the city council, but more 
importantly for purposes of what the relevant stakeholders 
actually want is the fact that the American Legion, in its June 
convention, unanimously passed a resolution saying that they 
wanted the downtown site because of the synergy between the VA 
hospital as well as LSU and Tulane being there, as well as the 
fact that Major General Hunt Downer, who is head of the 
Louisiana's Department of Veterans Affairs, has signed on to 
that letter as being critical.
    So I think if you look at what the citizens of New Orleans 
want as reflected in the UNOP plan what members of the State 
citizenry wants as reflected in Louisiana Speaks but more 
importantly as what the elected leadership appoints leadership 
and people actually represent what veterans want, I think the 
downtown site makes the most sense from every shape, form or 
fashion economically, delivery of quality health care, and more 
importantly the synergies that exist between those two medical 
graduate education programs, the VA hospital, and then the 
upcoming Louisiana Cancer Research Center.
    Mr. Melancon. What message do you think would be sent by 
not putting the facility down there?
    Ms. Boyle. I think the message that will be sent to the 
citizens of New Orleans will be extremely damaging and 
devastating. The citizens believe that this is something that 
needs to happen. And I know you are aware of this fact, 
Congressman Melancon, but in the UNOP Plan, United New Orleans 
Plan, that was the No. 1 priority. That was the only thing that 
was unanimously agreed upon by the thousands of citizens who 
participated in that neighborhood planning process that we 
needed to have the VA in conjunction with Tulane and LSU 
downtown. And I think if the VA bluntly pulls out and moves to 
another parish, it will be extremely damaging to our public 
confidence in rebuilding the city to our psyche in rebuilding 
the city, and it will be very detrimental to the economic 
vitality of the city of New Orleans.
    Mr. Melancon. Mayor, I have let you sit quietly too long. 
What are your comments about this?
    Mr. Nagin. Congressman, it is obvious that this is a 
significant economic tool for the city of New Orleans, and for 
the reason if they were to leave and not come downtown, I think 
it has the potential to cause a domino effect that would 
threaten maybe LSU's need for a teaching hospital downtown, 
which could further threaten Tulane University's will to stay 
downtown. It could start a domino effect that could decimate 
our medical district. Just the construction costs of this 
facility alone are estimated to be at least $600 million.
    And the combined LSU and VA hospital could create 20,000 
jobs. If LSU and the VA leave, I think there are estimates that 
there are at least 4,000 to 5,000 related families that would 
move from the downtown area. It would be devastating, and it 
would be very counter to the President's pledge in Jackson 
Square that said he would do everything it took to rebuild the 
city of New Orleans.
    Mr. Melancon. Thank you. Mr. Neary, this letter that was 
addressed to the VA from all the players that are affected, or 
not all of them but the major players in Louisiana are saying 
this is what we want. There was, I understand it, at one point 
some question about a plan or putting up the money, the State 
has put up their money, so they put their money where their 
mouth is. How soon can we move to get this thing started and 
why do we need to keep studying?
    Mr. Neary. Sir, as I indicated in my statement, we are 
required by law to complete environmental due diligence. We are 
doing that now and----
    Mr. Melancon. If you were building a new facility, not 
replacing a facility.
    Mr. Neary. This facility that we are planning to build, 
whether we build it on the original 37 acres that LSU and the 
State had identified, whether we were to build it on the 
adjacent parcel that has been proposed or elsewhere, we are 
required to comply with those environmental laws and are in the 
process of doing that.
    Mr. Melancon. So how long before you are going to get that 
completed so you can break ground?
    Mr. Neary. That takes about 4 months to complete.
    Mr. Melacon. So that will put us about January when you 
will be ready to break ground?
    Mr. Neary. Well, no, sir. The facility will require design. 
First of all, there needs to be an acquisition of the property.
    Mr. Melancon. I will take just an announcement in January 
then.
    Mr. Neary. I would hope that there can be an announcement 
before January personally.
    Mr. Melancon. That would be better. We look forward to an 
October hearing maybe. Thank you.
    Mr. Stupak. Mr. Whitfield, questions?
    Mr. Whitfield. Thank you. Mayor Nagin, I know that you and 
Ms. Boyle both stress that the No. 1 priority that you would 
have is locating the VA hospital in downtown New Orleans. And 
we all certainly understand the sense of frustration that you 
have had as the mayor and other people have had working on this 
issue in New Orleans. But if you were asked to list two or 
three things in addition to locating a VA hospital in New 
Orleans that you think would be most beneficial and helpful to 
improving the health delivery system in New Orleans, what would 
those be?
    Mr. Nagin. To improving the health care delivery system?
    Mr. Whitfield. Yes.
    Mr. Nagin. Besides the VA and the LSU complex, I am very 
concerned about our private hospitals, and their inability to 
get uncompensated care done on a timely basis and at a 
reasonable compensation level. That to me is threatening the 
entire system in a different way but it is equally as 
devastating because many of our private hospitals are funding 
this care on their balance sheets. The second area that I would 
also ask for assistance is if there was a national call out to 
physicians and experts in the medical field that could come 
down and provide the critical services and fill the gaps that 
we would need on a year or 2-year basis and if there was some 
type of program to accommodate that.
    Mr. Whitfield. So when you say on a timely basis you are 
really referring to the fact that there are not enough 
physicians or health care workers there to actually see people 
today?
    Mr. Nagin. Yes, sir.
    Mr. Whitfield. So there are not enough providers to meet 
the needs right now?
    Mr. Nagin. Yes, sir.
    Mr. Whitfield. Now, Ms. Boyle, would you agree with the 
assessment, if I were to ask you to list two or three things 
that need to be done immediately to help improve the situation 
other than locating the VA hospital in New Orleans, what would 
you say?
    Ms. Boyle. Yes, Congressman Whitfield, I would agree with 
the mayor's assessment, and I guess I would phrase it as such. 
The labor shortage, I think, is extremely dramatic. I think Dr. 
Cerise spoke about that a little bit during his testimony, and 
I think on the second panel that will be discussed in more 
detail, but the labor shortage is really the root cause of the 
deficient capacity as well as the mounting financial pressure 
that plagues the region's health care system. And it is a 
problem on all levels. Many of our elderly people, and I have 
elderly parents who are back in the city with me, many of our 
elderly citizens are having a hard time accessing good quality 
health care, not through any fault of the hospitals that are 
providing care. I think they are doing a yeoman's job and they 
are going almost above and beyond the call of duty, but there 
is a very, very strong labor shortage.
    The mayor talked about the UCC issue. There is also the 
issue of community-based primary care which Mr. Williams can 
address certainly in more detail than I can, but for many of 
our citizens, I think that is going to be critical to 
rebuilding because, as you know, prior to the storm many of our 
citizens had to access emergency care through what is called 
the Charity, and we need to move away from that system into 
having the community-based primary care system and the graduate 
medical programs which obviously Dr. Miller and Dr. Hollier 
will talk about on the second panel.
    Mr. Whitfield. Now how many community health centers are 
operating right now in New Orleans?
    Ms. Boyle. I am going to defer to Mr. Williams on that 
number, sir.
    Mr. Williams. In the four-parish region there are 27 
primary care facilities, and there are mobile units as well.
    Mr. Whitfield. How many community health centers?
    Mr. Williams. How many federally-qualified centers?
    Mr. Whitfield. Yes.
    Mr. Williams. I need to get back to you with that exact 
number.
    Mr. Whitfield. OK. Now, Mr. Williams, your organization is 
the one really responsible for the dispensing of the $100 
million in DRA funds, is that correct?
    Mr. Williams. In partnership with the Department of Health 
and Hospitals, yes.
    Mr. Whitfield. And how does the disbursement work? Have you 
received the $100 million yet or is it in dribbles?
    Mr. Williams. We received the notice of grant award, or the 
State received the notice of grant award, from HHS on July 23. 
So next week, and we have already publicly announced it to the 
providers of the region. We are having a public meeting on 
Friday. We will have all of the applications for eligibility by 
the end of next week, and hopefully have funds to those 
providers by September.
    Mr. Whitfield. But the official announcement was only on 
July 23?
    Mr. Williams. The notice of award from the Federal 
Government was on July 23. There was quite a bit that had to 
happen behind the scenes in order to make that possible.
    Mr. Whitfield. Thank you.
    Mr. Stupak. Thank you, Mr. Whitfield. Mr. Neary, if I may 
go to exhibit No. 18 in the black book. This is the July 27, 
2007, letter that Mr. Melancon mentioned that we have been 
talking about here. It seems like it is signed by every leader 
in Louisiana saying, ``put this VA hospital downtown.'' My 
question is, who is going to respond to this letter, and who 
makes the decision whether or not the VA hospital goes 
downtown?
    Mr. Neary. When we complete the environmental review work 
and we have----
    Mr. Stupak. No, no. Who makes the decision whether the VA 
hospital goes downtown?
    Mr. Neary. The Secretary of Veterans Affairs.
    Mr. Stupak. So right now that would be Mr. Nicholson, 
right?
    Mr. Neary. Yes, sir.
    Mr. Stupak. So we should be going after Mr. Nicholson to 
get this thing moved, right?
    Mr. Neary. And I have spoken with Mr. Nicholson recently. 
He is very anxious to move this project forward as quickly as 
possible.
    Mr. Stupak. Then why are you looking at two sites? Why 
aren't you just looking at the downtown site for your 
environmental aspect? Why do have to look at two sites and 
waste money? Everyone is telling you to put it downtown but you 
are looking at a different site.
    Mr. Neary. Sir, there was a point in time when the site at 
Canal and I-10 that had been identified by the State prior to 
the storm, it became evident that that site was simply not 
workable. It doesn't have sufficient----
    Mr. Stupak. That was before the storm. We are talking about 
after the storm.
    Mr. Neary. After the storm----
    Mr. Stupak. They are all saying go downtown, so why are we 
looking at another site?
    Mr. Neary. The studies that are going on both in terms of--
--
    Mr. Stupak. That is just wasting time. If everyone says you 
go downtown why don't you study downtown and see if you can go 
there. If it doesn't work, then go. If I follow your timeline 
the soonest we are going to have a VA hospital in New Orleans, 
is 5 years, and that is if everything goes well. We know how 
quickly the Government moves. So it will be more than 5 years. 
It will probably be 10 years. So why don't we just cut to the 
chase, why don't we start studying this site that everyone 
agrees upon. The State of Louisiana has said we will put up the 
$300 million because the CDBG money last time when we were in 
New Orleans having our hearing in January 2006 HUD started 
screwing around with the money there. So New Orleans said we 
are sick of this game. We will give you the 300, we will put 
down the 300. We are willing to build it. We want it downtown. 
So why do we have these continual delays?
    Mr. Neary. Under the law the Secretary is not permitted to 
make that decision----
    Mr. Stupak. But the law doesn't say the Secretary has to 
look at two sites. He can look at one site if he wishes.
    Mr. Neary. Agencies are strongly encouraged to look at all 
available options when----
    Mr. Stupak. The law doesn't say strongly encourage. The law 
doesn't say you have to look at more than one site, does it? 
They just have to do a NEPA study on the proposed site, 
correct?
    Mr. Neary. That is correct.
    Mr. Stupak. When will that NEPA study be done?
    Mr. Neary. Approximately 4 months.
    Mr. Stupak. All right. It can't be done any sooner than 
that?
    Mr. Neary. The studies normally take 6 to 8 months, and we 
have it on an accelerated basis.
    Mr. Stupak. All right. Let me ask Mr. Williams. Mr. 
Williams, you said there is $100 million that was pledged to 
this area for the Louisiana LPHI. That is what you run, right?
    Mr. Williams. Louisiana Public Health Institute, LPHI.
    Mr. Stupak. LPHI. You said they should be seeing some of 
that money by September?
    Mr. Williams. Yes, if we stay on the schedule.
    Mr. Stupak. When the mayor says I haven't seen any money, 
the $100 million he is talking about, it is coming through your 
organization, right?
    Mr. Williams. That is correct.
    Mr. Stupak. So after September 1, 30 days or so, the mayor 
should see some money, right?
    Mr. Williams. Yes. They are already determined eligible.
    Mr. Stupak. Do you anticipate any roadblocks, any problems 
with moving that money?
    Mr. Williams. No.
    Mr. Stupak. Is it real money or is it funny money? Do you 
actually have it coming to you or do you have to start applying 
for paperwork as of September 1 to get the money?
    Mr. Williams. We have a contract with the State, and the 
notice has come from the Federal Government. We need to get the 
State legislature to budget the money through their process, 
and that is going to happen in the middle of August. Then we 
need to establish a contract with the city of New Orleans and 
there shouldn't be any further delay. They have $4 million 
carved out of the $100 million that they are already determined 
eligible for us, so it shouldn't--I don't anticipate any 
roadblocks.
    Mr. Stupak. OK. So September 1 we should see some money 
flowing to the mayor. Ms. Richter, there has been some 
testimony, and there will be some later today, in particular 
one CEO has provided written testimony to this committee 
regarding the impending financial pressures they are facing, 
and in that statement they say due to the continued closure of 
Charity Hospital, as well as several other hospitals, these 
five hospitals provide 95 percent of the hospital-based 
services in the metropolitan area. The five hospitals expect a 
combined loss of $135 million in 2007. This loss will grow to 
$405 million in 2009. What does Secretary Leavitt think of 
those numbers?
    Ms. Richter. I think, as I said, we are concerned about 
that. We want to understand better----
    Mr. Stupak. You are concerned, but what are you going to do 
about it? We are all concerned. But you have some power to do 
something. What are you going to do?
    Ms. Richter. Our short-term response really was in the 
provider stabilization grants that we already----
    Mr. Stupak. That was short term. We are 2 years out from 
this hurricane. What are we doing to help alleviate this? You 
have talked increased costs. Have you provided more money for 
increased labor costs? Nurses are more expensive, physicians 
are more expensive, insurance to even insure the hospital has 
gone sky high. Have you looked at any of these to do something? 
You mentioned in your testimony there are waivers that could be 
given but you haven't provided any other than the initial 
waivers. Why can't we continue these waivers? This area is 
still being devastated.
    Ms. Richter. Are you referring to the GME waivers?
    Mr. Stupak. GME, a couple others you had, the DSH 
hospitals, all these waivers that HHS controls. It seems like 
it is pulling teeth every time you come here. You say you look 
at it. We get a nice letter saying we are going to respond and 
nothing ever happens, and now you see hospitals losing $405 
million by 2009. They can't stay open like that.
    Ms. Richter. I myself can't speak to Medicaid 
disproportionate share issues that were raised.
    Mr. Stupak. How about the area of wage index. According to 
your testimony, it will be fiscal year 2010 before it will be 
updated. Now, can't we waive that because it costs more money 
to provide services in New Orleans, because it is a premium to 
have a nurse or a doctor down there so the area wage index 
which they base their reimbursements on you say won't be 
updated until fiscal year 2010? That is 3 years from now. Can 
that be waived? Can't you do that sooner?
    Ms. Richter. Medicare is designed as a national program----
    Mr. Stupak. Yes, but what is the Secretary's proposal in 
helping out with this shortfall?
    Ms. Richter. Well, again, as I said the short-term response 
that was within the Secretary's ability was the provider 
stabilization----
    Mr. Stupak. I know the short-term, but we are 2 years out 
now. What is his long-term response?
    Ms. Richter. I think as far as other things that could be 
done, we will have to get back to you on that.
    Mr. Stupak. Well, what about GME? You wanted to talk about 
GME, the 3-year rolling average.
    Ms. Richter. Yes.
    Mr. Stupak. Yes. You waived it for 1 year. You stopped it 
in 2006. Why can't you waive it again? We are still having this 
trouble with the GME.
    Ms. Richter. We have talked extensively with our Office of 
General Counsel, and they say that the----
    Mr. Stupak. But the mayor is getting tired of talking. He 
has been here 28 times. He hears this talk.
    Ms. Richter. I understand, Mr. Stupak.I am sorry about 
that,but the statute is very clear about the 3-year----
    Mr. Stupak. But there is a waiver. There is a waiver in 
that statute, and you have a right to exercise it if you wanted 
to.
    Ms. Richter. There is no explicit waiver within the 3-year 
rolling average portion which was why----
    Mr. Stupak. Under emergency circumstances you can waive it.
    Ms. Richter. Just for closed programs, programs that are 
completely closed.
    Mr. Stupak. You would agree with me medical service in New 
Orleans is still an emergency situation, isn't it?
    Ms. Richter. That is not the way the statute or the 
regulations are written.
    Mr. Stupak. I am not asking about the statute. I am asking 
you, do you believe the medical situation in New Orleans is 
still an emergency situation?
    Ms. Richter. Yes, but----
    Mr. Stupak. Great. Now it is an emergency situation. I have 
established that. Now you can get a waiver, can't you, if you 
yourself believe there is an emergency situation. You got a 
waiver under GME, that 3-year rolling.
    Ms. Richter. The emergency provisions are limited to 
entirely closed programs. That is the only situation we can----
    Mr. Stupak. Has the Secretary brought forth any legislation 
to address the issues, whether I need a 3-year waiver on the 
GME, I need a waiver on this wage index, have they proposed any 
of these if the waivers are only for a short period of time to 
correct the inequities we are seeing in Louisiana so they have 
a full working health care system? Has the Secretary brought 
forth any legislation like that?
    Ms. Richter. Not legislation. We have discussed extensively 
with various representatives of the interests in Louisiana, 
both the hospitals, the medical schools, with Dr. Cerise and 
with others the possibility of doing a Medicare demonstration 
that could in a budget neutral way that could alter some of 
them.
    Mr. Stupak. We don't want demonstrations. We want health 
care. We have 3 minutes left to vote. I hate to do this to you 
but we are going to have to run and vote. We will be right 
back. It is only one vote, and when we get there they will 
spring another surprise on us, right? So we will be back as 
soon as we can. We will be in recess. We will be right back. 
Mayor Nagin, I know you are dying to answer some of these 
questions. I will give you a chance as soon as I get back.
    [Recess.]
    Mr. Stupak. Let me again apologize for the interruptions. 
While these procedural games are being played on the House 
floor today, they are frustrating to us, but they are pale in 
comparison to the frustrations you must feel in New Orleans so 
we thank you for your patience, and I assure you that we will 
continue this hearing and get through this, and despite our 
continued interruptions we are going to stay with this issue no 
matter how long it takes. Congressman Jefferson, he is here. As 
you know, he has been at every other hearing we have had. He 
knows too well the problems you are facing, and we appreciate 
him coming to the hearing and sitting in. Thank you.
    I was ending with Ms. Richter and I talked about how she 
was going to talk about a demonstration project. We will get to 
that later because my time is up, as Mr. Burgess informed me, 
but I know Mayor Nagin wanted to say something either on the VA 
hospital or on that $100 million that is going to come to you 
by September. Not all of it, right, Mr. Williams? But some of 
it is going to come. You wanted to say something, and I said 
before I broke that I would give you an opportunity.
    Mr. Nagin. The only thing I want to say is if the check is 
in the mail, we look forward to receiving it.
    Mr. Stupak. Very good. The check is in the mail from the 
Federal Government. OK. The gentleman from Texas, Mr. Burgess, 
please.
    Mr. Burgess. Thank you, Mr. Chairman. I scarcely know where 
to start. Let me start with you, mayor, since you spoke last. I 
referenced a logjam. You said you are stuck. Can you put your 
finger on where the problem is? If we are going to exert 
maximum congressional committee authority to fix the problem, 
where do we exercise it?
    Mr. Nagin. Well, I think there are many good people, good, 
competent people, working on these problems, but unfortunately 
many of the laws are not written in a way that allow the 
flexibility that is needed for a disaster of this magnitude, so 
I would advocate a look at the laws associated with emergencies 
and making sure those laws are written in a manner where the 
Secretary can exercise some latitude in expediting funds. The 
second thing I would also point out is that there is this route 
that money must travel, and once you get it through the Federal 
bureaucracy then you are dealing with the State bureaucracy 
before you even get to a local bureaucracy. And those three 
elements tend to slow down the delivery of resources because 
government is traditionally not built for speed.
    Mr. Burgess. Yes, how can you straighten out that route? 
How can you take all the curves out of there?
    Mr. Nagin. Well, there are several ways that are already 
written----
    Mr. Burgess. Let me ask you this. Do you have Mr. 
Melancon's private cell number? Can you just call him up and 
say, ``I am having trouble with this, can you fix it?''
    Mr. Nagin. Yes, I can call him. I can call his wife. I know 
how to get him. Absolutely. I have both cell phones. So that 
helps.
    Mr. Burgess. Are you doing that?
    Mr. Nagin. Oh, yes. Yes.
    Mr. Burgess. OK. And they have been responsive to you?
    Mr. Nagin. He is very responsive.
    Mr. Burgess. I just got to tell you. I am a public servant, 
you are a public servant. I depend upon my constituency for the 
continuation of my employment as do you. I frankly don't 
understand why no one in an elective office has been held 
accountable. We beat ourselves up up here. We will beat up the 
Federal agencies some more in just a minute which is 
appropriate but at the same time from just the grass roots 
phenomenon, I don't get it.
    Mr. Nagin. Well, you are not alone in not getting it. And 
the only thing I can point to is nothing like this has ever 
happened before so we all are inventing solutions but 
unfortunately whereas we invent solutions, we always go back to 
laws that were created prior to a disaster like this.
    Mr. Burgess. Well, let me go to Ms. Richter. Let us talk 
about the laws just a little bit. You reference the wage index 
relief or the mayor did, through the wage index relief through 
the Deficit Reduction Act, but that was broadly dispensed 
throughout the State, maybe a little too broadly, and then went 
to some areas that weren't in as big a crisis as the Orleans 
parish, so do you need--does the Secretary need--the mayor said 
the Secretary may need some legislative fix, some latitude. 
Does the Secretary have all the tools he needs in order to get 
the money where it needs to be and not broadly disbursed to 
areas that are less in need? Do you need something from us in 
order to be able to do that? The other reference was made to 
this will be 2010 before there is more latitude. Is there 
anything we can do to condense that time frame? Is there 
anything we can do again to straighten out the curves in the 
road so the Secretary can get the money where it is needed?
    Ms. Richter. I think I will say that we will probably have 
to respond to that for the record for HHS issues broadly. 
Certainly I think understanding the cost structure now, the 
summary data that the hospitals had in their testimony is a 
good starting place, but I think as several people have 
mentioned today having a better understanding of what is 
driving the costs and how the costs vary across the different 
payers to what extent it is a Medicare issue, to what extent it 
is an uncompensated care issue, to what extent it is something 
else I think would be very helpful to understand better where 
healp would be best targeted, and so I think that is a critical 
piece as well.
    Mr. Burgess. Well, I do look forward to that response in 
writing. And let me just ask you this. I know HHS is not a 
business and doesn't function as a business, but if it were a 
business and wanted to go to its customer and ask how are we 
doing, who would the customer be? Would the customer be Mayor 
Nagin? Is the customer us up here? Who would the customer be? 
How would you gauge whether or not you are doing an effective 
job?
    Ms. Richter. I think we have a lot of customers. I think 
first and foremost the Medicare beneficiaries as far as our 
program, Medicaid----
    Mr. Burgess. OK. The Medicare beneficiaries.
    Ms. Richter. The beneficiaries, the providers that would 
work with----
    Mr. Burgess. Would the Medicare beneficiaries in the city 
of New Orleans, how would they respond to the question are we 
doing a good job?
    Ms. Richter. I would not presume to answer.
    Mr. Burgess. I wouldn't either but I think we can impugn an 
answer to that, and I don't think it is good and that pains me 
and I am sure it bothers people at the agency, and I do want to 
see us do our jobs better. Still no mistake about it, I think 
there is a lot of inertia on the ground and I heard a lot of 
talk about the discussion about the VA hospital, and I know 
Charity wants to build a new facility. Are we sacrificing the 
short-term improvement for what is happening with these larger 
projects? Are we sacrificing taking care of the patients for 
the sake of economic development in downtown New Orleans? Does 
anybody have an answer or a response to that? Dr. Cerise, do 
you have a feeling about that one way or the other?
    Dr. Cerise. Are we sacrificing care of patients for 
economic development?
    Mr. Burgess. Well, postponing being able to do--here I have 
got a piece of paper that says there was $101 million left on 
the table end of fiscal year 2006. That doesn't sound like a 
good thing to leave money on the table here. We have been force 
feeding you dollars up here. Again, I get criticized for that 
back in Texas, and yet you guys aren't getting the help you 
need, and there is money left on the table. And why is there 
money left on the table? I don't know the reason but I am 
hearing today that, well, we are working about different sites 
and competing sites with the VA, we are worried about what 
Charity is ultimately going to look like, what it resurrects 
from the ashes, but are we sacrificing what we should be doing 
in the short term for what may happen in the long term and as a 
consequence are patients suffering because we have our eye more 
on economic development or economic redevelopment rather than 
on patient care.
    Dr. Cerise. I don't think so. I think those things are 
happening in parallel. I am not familiar with the $101 million 
number. I know that there are some grant funds. For instance, 
we got an extension in the social service block grant funding 
that we asked for assistance with and you all helped us with 
that. That is a factor that you have heard people talk about 
workforce here, and having funds and then getting those funds 
out to people. For instance, we have got mental health dollars 
in the city that we will have unspent because of workforce 
issues because we are trying to--you just can't go hire 300 
social workers tomorrow.
    Mr. Burgess. Let me ask you about the workforce since that 
was brought up in the remaining time I have left, Mr. Chairman. 
How are you going to staff a new VA hospital and a brand new 
Charity Hospital if the workforce issues are so critical? What 
are you going to do to be able to overcome that? We build these 
gleaming new towers to medical science and if no one fills the 
halls that is a problem.
    Dr. Cerise. Yes, that is a good question. There is going to 
be--first there is a significant period of time when that 
construction is going to happen and their expectations of 
population coming back and rebuilding the infrastructure. In 
addition, a fair amount of that space, and I think LSU could 
probably talk to this better, is going to be transitioned over 
from their interim hospital or temporary facility, at least on 
the State side of that facility, so some of that activity will 
move over.
    Mr. Burgess. And where do you get the people to put in the 
clinics and the offices to take care of the patients?
    Dr. Cerise. And that is the work that is ongoing right now, 
the $50 million in workforce funds that we all are spending in 
the past 3 months. $11 million of those have been committed to 
over 127, I think about 127 positions, so they are just active 
trying to get people back into the area.
    Mr. Burgess. It is a long-term solution. Are you actively 
going into the high schools and colleges and trying to identify 
those people who would like a health care career whose families 
live in the area who aren't going to be pulled out by outside 
interests?
    Dr. Cerise. Absolutely. A great point. Funds have been put 
into our allied health programs to train more of our own nurses 
particularly but other allied health programs also realizing 
that we are not going to be able--everybody in the country is 
struggling with the workforce not to the same degree so we are 
not going to be able to pull them all in. We have to do a 
better job of growing our own and that work is underway.
    Mr. Stupak. The gentleman's time is expired. Mr. Melancon 
for questions. We are going to go a second round here.
    Mr. Melancon. Mr. Burgess, I guess that is one of those 
things if you build it, it will come. But being serious, let me 
ask, Ms. Richter, where is the Secretary today?
    Ms. Richter. He is in New Orleans for a long-standing 
commitment; he had to make a presentation.
    Mr. Melancon. Does he have any policy people down there 
with him?
    Ms. Richter. He does, I believe.
    Mr. Melancon. I just wondered. We heard in your testimony 
discussion of the GME program and how it functions. 
Unfortunately, what does not come across in your testimony is a 
clear understanding of that the region's concerns are regarding 
this program and what options are available to address them. 
Now it is my understanding that the Secretary has a point 
person that is constantly on the ground to deal with ongoing 
health care issues, Sonya Madison, maybe, is that correct?
    Ms. Richter. She is with him.
    Mr. Melancon. OK. So she is with him and you aren't. So 
what is Ms. Madison or whoever the Secretary has appointed 
saying to CMS are the main concerns of the med schools 
involving GME, and moreover what is this point person 
suggesting as policy approaches to address the GME issues in 
that region?
    Ms. Richter. I think the information that we are getting 
about the concerns of the medical schools especially are very 
consistent with the white paper that they submitted to the 
subcommittee. They are very concerned about the 3-year rolling 
average again as I stated. Our general counsel believes we have 
no flexibility in that area so we understand their concerns but 
we don't believe we have any flexibility within the GME program 
to address those. They are also very concerned about the 
affiliation agreements that they need to sign in order to 
reallocate their residents to the hospitals where they can best 
serve folks from the hospitals that are either closed or 
partially closed.
    A lot of those requirements really are an artifact of the 
fact that our----
    Mr. Melancon. Sorry to interrupt you, but I keep hearing 
the reasons why we are not moving forward. What you first need 
to do is go back and lock the * * * * * * *  attorneys in a 
room and start talking to each other, the people that are 
policy people, and what it is that they brought you and suggest 
and what it is that the program doesn't allow you to do and 
find out how you solve the problem, and if you can't solve it 
you need to bring it to us here in the Congress and say this is 
what it is going to take to move things forward. We have been 2 
years. Nobody is doing that. Mr. Cerise, have you all had any 
discussions where they said, OK, sit down with us and let us 
see if we can find some common ground to make it work?
    Dr. Cerise. We have certainly had discussions about this. 
We haven't been able to solve this 3-year rolling----
    Mr. Melancon. And when you come back, basically you come 
back with some answers or suggestions or just technical gobbley 
gook of how the program runs.
    Dr. Cerise. This one certainly is complex. We don't have a 
good pathway to how to solve this.
    Mr. Melancon. I am looking, Ms. Richter, at your testimony 
and on page 2 and on page 3, would you please bring that to the 
Secretary and ask him to read it and tell him if he can tell me 
exactly what it is that is in there because I will be damned if 
I can figure it all out. The Government and this Congress and 
the people that are here serving in Washington are here to take 
leadership. We have got a catastrophic event that occurred 2 
years ago, and if there are some people that don't want to 
rebuild New Orleans or don't want to rebuild the VA or don't 
want to rebuild the Charity or anything else, please stand up 
and tell us and quit playing games with the people in 
Louisiana, and you can send that message straight back to the 
Secretary because we have had enough time to move things 
forward and to find some common ground or at least to bring us 
some suggestions of what we can do legislatively to try and 
solve the problems.
    Do we have any suggestions from the Department? Has the 
State given any suggestions to the Department?
    Ms. Richter. I think the main suggestion that we have made 
to people that I mentioned in my opening remarks is that it may 
be appropriate for discussing whether a Medicare demonstration 
could address some of the regulations and rules that right now 
seem to be standing in the way of the situation, and we have 
already--I have already asked folks to make sure that that 
happens quickly.
    Mr. Melancon. How long have we been having those 
discussions within the Department?
    Ms. Richter. We have had discussions on this issue 
internally and with people in Louisiana and the affected areas 
for a long time about demonstrations.
    Mr. Melancon. A year?
    Ms. Richter. We have taken different----
    Mr. Melancon. Would a year be a reasonable time to say?
    Ms. Richter. I think it may have been longer than that. I 
think that Dr. Cerise said----
    Mr. Melancon. You can have a baby in 9 months. What 
legislation do you think the Secretary will support? Does 
anybody have--do you all meet with him, do you advise him? What 
is he saying?
    Ms. Richter. We would have to get back to you on that. We 
would be happy to.
    Mr. Melancon. When do you need to get back to me? Can you 
get back to me next week? I would ask you to go back and ask 
the Secretary when he can get back to us, please, with a formal 
letter and to give us an explanation what it is that the 
Department is doing. I would like some timelines on it, and I 
would like to know precisely what our expectations can be or 
should be. I think I have overrun my time. I yield back.
    Mr. Stupak. By nodding your head that was a yes, and then, 
Mr. Melancon, you will get a letter back to him?
    Ms. Richter. Yes. We will talk to people when we get back 
about timelines and things and get back to you quickly about 
that.
    Mr. Stupak. Mr. Whitfield for questions, please.
    Mr. Whitfield. Mr. Neary, back in February 2006, Secretary 
Nicholson issued a report to Congress about among other things 
the VA hospital in New Orleans, and in that report it said the 
VA believes that a new facility can and should be built within 
the city proper. Could you tell me if that position has changed 
at the Department or not?
    Mr. Neary. I think, as you know, we have narrowed the 
potential opportunities, potential sites, that we are looking 
at to two; one of them is downtown, one of them is in Jefferson 
Parish just across the line from Orleans Parish.
    Mr. Whitfield. We are assuming since they said this in the 
report that that must still be their goal to have it in the 
city of New Orleans. That was in the report to Congress in 
2006. Ms. Richter, Mayor Nagin and Ms. Boyle and others who 
live in New Orleans talk about the lack of health care 
providers, and he talked about a national call to bring 
physicians in and not able to provide health care on a timely 
basis. What about the public health service, are there 
physicians being sent there to assist in this effort or what is 
the situation on that?
    Ms. Richter. If I could ask Dr. Moritsugu.
    Mr. Whitfield. OK.
    Mr. Stupak. Doctor, before you answer you have to be sworn 
in.
    [Witness sworn.]
    Mr. Stupak. Go ahead, Doctor. If you would spell your name, 
please, and then answer the question.
    Dr. Moritsugu. Yes. My name is Kenneth Moritsugu. I am the 
Acting Surgeon General of the United States, and I understand 
the question, sir. Thank you very much, Congressman, for the 
question. As you are probably aware, the United States Public 
Health Service leaned forward and responded on behalf of the 
Department during the immediate crisis situation. We have 
continued to have presence within New Orleans although on a 
much lower level because the intent of the United States Public 
Health Service Commissioned Corps was never meant to be a 
longstanding presence in large numbers within the area. If 
anything, one might argue that that would be counter productive 
to the economic recovery of the area because by having external 
providers in the area, we would probably be taking services or 
providing services that otherwise private sector individuals 
would be providing.
    And so we have been very careful in terms of providing that 
recovery assistance but not necessarily being there in large 
numbers.
    Mr. Whitfield. But since everyone is saying that they don't 
have enough health care providers, can you on your own 
initiative provide additional physicians there for a period of 
time without any legal problems for the health service?
    Dr. Moritsugu. It is possible for us to assign health care 
providers to areas within the authority of the United States 
Public Health Service, sir.
    Mr. Whitfield. And so why haven't you done that?
    Dr. Moritsugu. Well, again, working together with the local 
and State leadership, we have been trying to make sure that we 
balance what I described earlier was coming in and otherwise 
undercutting the strategies to develop a robust community of 
providers who would settle there and remain there. If I might, 
sir, there are other resources obviously that might be 
available in addition to the Commissioned Corps of the United 
States Public Health Service that I think the Secretary and the 
mayor and the local communities have also been looking at.
    For example, the medical reserve corps who are a number of 
volunteers in the immediate area who in fact respond----
    Mr. Whitfield. Well, I know there are a lot of options but 
there does not seem to be the number there to meet it. 
Secretary Cerise, this has got to be one of your priorities. 
How do you address it?
    Dr. Cerise. Well, I appreciate the approach that was 
described because early on we did run through a transition 
phase where we had local providers who wanted to come back, and 
it was this balance between having people come in to provide 
the services and then being able to pay our own people to come 
back. We are at a different point right now. In fact, just over 
the past week or so we restarted the conversations with the 
Public Health Service to look if it is possible to deploy some 
teams to help provide some immediate relief while we take 
advantage of the workforce development grants that we have got 
to recruit people in, so as we grow our own and kind of replace 
those teams because we are in this position where we continue 
to have the workforce shortage.
    So I think it is something that we have begun to re-
explore. We went through that phase where you had a lot of 
bodies on the ground. We thought we could transition to local 
providers, but we continue to have a gap in a number of areas 
and so I appreciate Jean Bennett in your office, who has been 
with us over the past week talking to us about how we might do 
that.
    Mr. Stupak. The gentleman's time has expired. If I may just 
follow-up on that, Mr. Under Secretary, you heard the mayor 
testify there is a 47 percent increase in the deaths in New 
Orleans. Senior citizens have just given up and are dying. 
There is increased stress and increased mental health problems. 
Mr. Secretary, wouldn't you consider that a public health 
issue?
    Dr. Cerise. There is no doubt that we have got gaps in the 
delivery system down in New Orleans so we do have a public 
health----
    Mr. Stupak. Dr. Moritsugu, could you answer that? It is a 
public health issue in New Orleans, is it not?
    Dr. Moritsugu. Yes, it is, sir.
    Mr. Stupak. Well, would you consider it an emergency health 
situation with 47 percent increase in deaths since before?
    Dr. Moritsugu. I would consider it an emergency situation, 
sir.
    Mr. Stupak. OK. Then in an emergency situation can you go 
to the President or the Secretary of Health and Human Services 
to get some of this red tape cleared up to get the services 
they need down in New Orleans?
    Dr. Moritsugu. If you are talking about the assignment of 
Commissioned Corps officers to provide short-term relief, that 
is certainly possible at the request of the local communities.
    Mr. Stupak. OK. So Mayor Nagin would just have to request 
you to bring in more mental health people to help out with the 
mental health aspect of it?
    Dr. Moritsugu. Assuming we had those resources that we 
could bring in, sir.
    Mr. Stupak. Do you have mental health resources? We heard 
testimony that nine people left in one mental health facility 
here at the VA. Do you have those resources available?
    Dr. Moritsugu. We have mental health resources. I am not 
exactly certain the extent of the absolute need but would be 
willing to enter into discussions with Mayor Nagin and with the 
Secretary.
    Mr. Stupak. OK. We don't like long discussions.
    Dr. Moritsugu. I understand, sir.
    Mr. Stupak. OK. Very good, very good. Thank you. Ms. 
Richter, you said for the last year you have been discussing 
about doing a pilot program or demonstration project. Why can't 
you use your demonstration project you used in Utah when they 
had problems for graduate medical education, GME, you ended up 
allowing--CMS allowed the States to receive the money and then 
they disbursed it to the hospitals. Why can't that system work 
here in Louisiana?
    Ms. Richter. That is certainly a model that we would be 
prepared to discuss with the hospitals.
    Mr. Stupak. I don't want discussions. You have been talking 
about it for a year.
    Ms. Richter. Demonstrations are voluntary under the 
Medicare statute and the hospital----
    Mr. Stupak. OK. So if Mr. Cerise would ask that, you would 
do that, use the Utah model? You already got it demonstrated. 
It worked in Utah. Why can't it work in Louisiana?
    Ms. Richter. The hospitals would have to agree to 
particpate in it and there are differences. Utah, for instance, 
has one medical school and so there are different issues in 
Louisiana because of the two medical schools and the 
interrelationship between them.
    Mr. Stupak. But the money wouldn't be going to the medical 
schools. It would be going to the State to reimburse for the 
residents so we don't have to have this 3-year rolling average 
because they are at different hospitals who have not been part 
of this GME before. That is what happened in Utah. Why can't it 
work in Louisiana? Mr. Cerise, could it work in Louisiana?
    Dr. Cerise. We have had discussions of that. There are 
potential----
    Mr. Stupak. So you talked about the Utah plan?
    Dr. Cerise. We had someone from Utah come down and speak to 
folks in Louisiana.
    Mr. Stupak. So it won't work?
    Dr. Cerise. There are issues with hospitals that own slots 
right now that would be put at risk with a model like that so 
you would have to have broad agreement to do that. And so what 
is being proposed on this 3-year rolling average is something 
that is less--I would say less risky for the hospitals and much 
more straightforward, and that is for a limited time period 
give relief of these partial payments as residents move from 
one site to the other.
    Mr. Stupak. It could be tweaked. It could be worked out, 
right? The issue is the money going to the hospital that 
doesn't have established GME, therefore, they are on a 3-year 
average. They get about one-third of the money they should be 
receiving so why can't we just give it to the State like you 
did in Utah where they have a program and you just send it to 
the hospitals? The hospitals are willing to do this but they 
don't want to do it at two-thirds hit.
    Dr. Cerise. We are certainly open to solutions that will 
allow the 3-year rolling average issue to be adequately 
addressed in the program. If the State can play a role in that, 
we would welcome the ability to do that.
    Mr. Stupak. Ms. Richter, Dr. Cerise testified at our last 
hearing that the State has been seeking a waiver so it can use 
the DSH money that I talked about earlier, mentioned that to 
you earlier, that otherwise would go through the State's public 
health system, and it uses this DSH money to support physicians 
seeking to keep their practices open in the area. Why can't CMS 
work with the State on making that happen?
    Ms. Richter. I really don't have the ability to respond to 
that right now. It is not a Medicare issue, but I would be 
happy to get you a response.
    [Ms. Richter responded for the record:]

    Although HHS has made considerable strides in addressing 
the continued health system recovery problems in the greater 
New Orleans area, the Department is currently not in favor of 
approving the use of Medicaid disproportionate share funds for 
physician reimbursement in region 1 because such funding is not 
consistent with the Medicaid statute.
    Section 1923(g)(1)(A) of the Social Security Act imposes a 
cap or hospital-specific limit on the amount of DSH payments 
that may be made to a hospital in a fiscal year. This annual 
payment is equal to a hospital's uncompensated costs of 
furnishing hospital services to persons eligible for Medicaid 
or who have no source of third party coverage. The components 
of the hospital-specific DSH limits were further clarified in a 
1994 all-State Medicaid Director letter to include the 
unreimbursed costs of allowable inpatient and outpatient 
hospital services. A recent decision from the Departmental 
Appeals Board (Docket No. A-06-05, decision No. 2084, May 18, 
2007) upheld this definition of allowable hospital costs under 
the hospital specific limit. This decision upheld a 
disallowance taken against a State that included physician 
costs in their calculation of DSH eligible costs.
    Generally, physician services are not recognized as 
inpatient or outpatient hospital services. They are usually 
separately billed and reimbursed under a fee schedule for 
physician professional services. Moreover, under Medicare cost 
and payment principles, physician services are recognized as 
professional costs, nit hospital costs. Because of these 
statutory limitations, Louisiana may not use DSH funding to pay 
for uncompensated physician costs or other uncompensated costs 
eligible under the hospital-specific DSH cost limit.

    Mr. Stupak. OK. Who would be the person we would direct 
this to? Whose desk does it fall on?
    Ms. Richter. The Director of the Center for Medicare and 
Medicaid State Operations is Dennis Smith. The Acting Deputy 
Administrator is Herb Kuhn. The Secretary would also be an 
appropriate person.
    Mr. Stupak. OK. So Secretary Leavitt would be able to 
answer that for us?
    Ms. Richter. I would assume technical help----
    Mr. Stupak. He is in New Orleans today, right, the 
Secretary?
    Ms. Richter. Yes, he is.
    Mr. Stupak. Is it true that today HHS just announced 
changes to the inpatient perspective payment system? Do you 
know if they did that today, Health and Human Services 
announced changes in perspective payment system?
    Ms. Richter. It is imminent, yes.
    Mr. Stupak. Believe me, they did, and that provides a major 
source of Medicare revenue for the hospitals. Is Louisiana 
going to take about $2 million, $3 million, $100 million, hit 
underneath this program? Is the Secretary down there announcing 
that program?
    Ms. Richter. He is not announcing the inpatient perspective 
payment system rule, I don't believe.
    Mr. Stupak. So places like Louisiana are going to be cut, 
right, underneath this new system?
    Ms. Richter. I think you are referring to the proposed 
rule. I don't believe that the final rule has been announced 
yet, and I can't really comment on----
    Mr. Stupak. A proposed rule takes place, right, takes 
precedent there over the current rule?
    Ms. Richter. The current rule is modified in response to 
the public comment and we can't really say what is in it until 
it is announced.
    Mr. Stupak. Well, take it back to the Secretary if they put 
in the inpatient perspective payment system as proposed today 
that is a $300 million hit for Louisiana, it goes contrary to 
the President's promise to restore this area. Mr. Melancon, you 
had a question?
    Mr. Melancon. Yes, I just needed to ask, is Ms. Madison the 
person that is on the ground that is supposed to be the person 
that is working between Louisiana's hospitals and medical 
center, the VA, and whoever else to solve the problems?
    Ms. Richter. She is certainly the Secretary's 
representative, yes.
    Mr. Melancon. Does she not talk to you all?
    Ms. Richter. We talk.
    Mr. Melancon. Do you talk about Louisiana?
    Ms. Richter. Yes, we do, sir.
    Mr. Melancon. We are 2 years out. Is the sense of urgency 
gone?
    Ms. Richter. I don't believe it is, sir. I think it takes 
time to work something out as complex as the Medicare Program 
but I don't think it is for a lack of effort or lack of 
interest.
    Mr. Melancon. But I haven't seen anything put forward. 
Local hospitals have come up with suggestions and thoughts that 
they wanted to bring the people at CMS but we don't hear 
anything after that. Are you all just--what actually happens 
when you get an idea, when somebody brings you in a thought, a 
suggestion, an idea of how to make something work? What is the 
process from there?
    Ms. Richter. I think we assess it both for policy reasons 
and for legal reasons about what the appropriate response would 
be. I would say that I think the Department----
    Mr. Melancon. Is there a step in there that says take 
action? Would you please go back and see to get one in there. 
That seems to be the problem. Bureaucracy wants to talk but we 
need to be doing more than talking. In a statement from Dr. 
Quinlan with Ochsner, he had addressed issues affecting the 
hospitals and long-term what our needs are. I don't think this 
is a new piece at all, and I just wonder have you seen it, have 
you read it, have you discussed it, have you taken any action 
on it?
    Ms. Richter. I read it recently when I got a copy of it in 
the past several days. I think we are aware of their concerns. 
We discuss things frequently, both Ms. Madison and her staff, 
working through the entire Department, not just the Medicare 
Program to address issues of concern to health care providers 
in Louisiana. I think that the provider stabilization, the 
workforce fulfillment, all the DRA grants are an example of the 
Department taking action and aggressive action within its 
capabilities to respond to some of the crises in the area. The 
$100 million primary care grant that was announced on July 23 
is an example of that.
    Mr. Melancon. A while ago we talked about responding. What 
I would like for the Secretary to respond to is the red ink 
that is bleeding at these hospitals and what it is that the 
Department proposes to do or suggests that we do, or help to do 
so that we can solve this problem. We have to solve the GME, 
and I would like to see in writing what it is that he suggests 
we do or hope that we do and give that to us in writing, and 
with the DSH dollars to compensate physicians. You ought to 
bring the folks down here to meet with our staff. They seem to 
move more in 6 months than the Department has moved in 2 years, 
and I would hope that if maybe you can meet with them, we could 
help you all find ways to solve the problems or to suggest to 
us ways that we can help solve the problems, so if you could 
take those suggestions. And, Mr. Chairman, I would like to ask 
that that be given back to us within probably some time in 
September and if you would consider an October, November 
hearing with the Secretary.
    Mr. Stupak. We will certainly look forward to another 
hearing on this whole issue, and I am sure that HHS will get 
you those answers and that letter. Before I yield to Mr. 
Burgess, Mr. Mayor, the Under Secretary indicated that if asked 
he would be able to provide some services for you to cut down 
on that 47 percent increase of deaths, the increased mental 
health, the stress, and other things that senior citizens 
giving up down in New Orleans. Hopefully you will take him up 
on that offer.
    Mr. Nagin. I heard an offer of sorts. I am not sure what 
the offer is. It would be nice if we could get a letter from 
them outlining exactly what is available so that we could 
respond to it. If not, I will send a letter of request but I 
heard if, maybe, possibly, we think we can.
    Mr. Stupak. I would suggest, Mr. Under Secretary, if you 
would, would you write the mayor and tell him what services you 
could help out especially in the mental health area to cut down 
on these deaths, 47 percent increase. We have to see what the 
cause. What can we do? As you agree, it is a public health 
emergency. That is what the corps is for. We should do it. 
Mayor, you may want to express your concerns there. And if 
necessary, the Energy and Commerce Committee, Subcommittee on 
Oversight and Investigations will do a letter to try to keep 
you guys all talking together. With that I will turn to Mr. 
Burgess of Texas for questions, please.
    Mr. Burgess. Thank you, Mr. Chairman. Is there anyone on 
the panel who can speak to the state of the Louisiana State 
budget currently? Is it a budget that--is the State budget in 
crisis also or is it doing OK? Are Federal funds the only 
source of funds to help Mayor Nagin, help the hospitals? Are 
there any State funds available to restoration of health care 
in New Orleans?
    Dr. Cerise. There was roughly over a billion dollars in 
health care related appropriations in the past legislative 
session ranging from pure State funds for things like mental 
health primarily to extend services not only in the New Orleans 
area but around the State dealing with the Medicaid program and 
being able to pay higher rates for providers of all sorts to be 
able to address some of these issues that we are talking about 
today, extending insurance coverage to individuals, so there 
has been a significant investment of State funds coming out of 
this past legislative session as well.
    Mr. Burgess. Our investment was $100 billion and the State 
spent a billion. That is a startling ratio but is the State 
budget itself, is it in balance? Is the State able to do the 
work that it is going to be required to do as far as 
rebuilding?
    Dr. Cerise. I am not the best person to talk to in terms of 
rebuilding. The State budget is certainly in balance.
    Mr. Burgess. Mr. Mayor, how is the city budget?
    Mr. Nagin. The city budget is in balance but it is 
primarily being balanced by the continuous support from the 
Federal Government through community disaster loans.
    Mr. Burgess. So the city is basically doing everything, all 
that it can right now with the resources that it has available. 
We really shouldn't look to the city to be able to provide any 
additional help, is that correct?
    Mr. Nagin. Yes, unless you want to buy some swamp land in 
New Orleans east. We are using every available resource that we 
have.
    Mr. Burgess. If it is packaged along with the kind of 
physicians deal that we heard about earlier maybe so. Let me 
ask you this. We are sitting here. It is August 1. And we are 
kind of in the middle of hurricane season, but we are just 
coming up to the worst part of it. So I guess, Dr. Cerise, if I 
could ask you, as bad as things are we all know they could be 
made worse by another bad weekend so what are you doing 
currently to prepare for that? Do we have some things that we 
have done differently now where we won't look to see this same 
sort of activity again? We have ways to get people out of the 
hospitals that are there?
    Dr. Cerise. Certainly there has been a large amount of work 
that has been done at the local level, at the State level, and 
at the Federal level, looking at the issues you are describing. 
There have been laws enacted that put a different set of 
requirements on our health care facilities in terms of how they 
will have plans in place and report on those plans, more burden 
put on the State agencies to monitor those plans to see if they 
are actionable, and each individual plan can be carried out and 
it is not relying on the same set of resources. And HHS has 
given an enormous amount of support in this process as well 
with the State putting people on the ground, looking at 
individual facilities, counting people, counting assets that 
you would need, and so we are counting on the local providers 
to have primary responsibility, the local government----
    Mr. Burgess. They are pretty stressed and you got a 
workforce issue, right?
    Dr. Cerise. What is that?
    Mr. Burgess. If you are counting on local providers you got 
a big workforce issue.
    Dr. Cerise. Right, and to complete, where there are gaps 
the State is being asked to address those gaps, and where we 
realize there are gaps too big for the State to address we are 
asking the Federal Government to address those gaps. And so I 
do believe that we are in a much better place and we have 
learned from the experience of Katrina, and I believe that we 
are in a much better place if something were to happen this 
weekend.
    Mr. Burgess. I just have to tell you from the perspective 
of someone who got a call in the middle of the night because a 
friend of a friend who used to date someone who knew a mayor in 
one of my towns called me and said, ``Can you help us get 
patients out of New Orleans who are ventilator patients?'' And 
I asked aid where are they and they said ``I-10 and the 
causeway.'' That didn't make any sense to me until I saw the 
news the next night and saw indeed that there were ventilator 
patients at I-10 and the causeway. And I just have to tell you 
that can't happen again.
    I think in your position with the State, and certainly, I 
know Mayor Nagin is sensitive to this as well, there has to be 
a way to get the help to the people who need help because if 
the same thing happens again your city is already in despair, 
and you would have a lot more people who would need help 
getting out of the tough situation. We didn't do a good job 
last time. Let us be darned sure we are not caught in that same 
maelstrom again. And that would be the only thing I would offer 
additionally, Mr. Chairman. I will yield back. Thank you.
    Mr. Stupak. Thank you, Mr. Burgess. That concludes the 
questions of this panel. Let me thank each and every one on the 
panel. Mr. Mayor, thank you for coming. I am sure we will be 
seeing you again. We will keep on this issue. This panel is 
excused. I would hope that Ms. Richter and the Surgeon General 
Moritsugu would stay and listen to the second panel and answer 
any additional questions that may arise and also to learn a 
little bit more of the plight of these hospitals and providers 
that are on our second panel. Thank you all for coming. We will 
have the next panel.
    I will call our second panel of witnesses to come forward. 
Our second panel, we have Ms. Diane Rowland, Kaiser Family 
Foundation; Mr. Mark Peters, West Jefferson Hospital; Mr. 
Leslie Hirsch, Touro Infirmary; Mr. Patrick Quinlan, Ochsner 
Health Systems; Mr. Gary Muller, West Jefferson Hospital; Mr. 
Mel Lagarde, Tulane University Hospital, Chancellor Larry 
Hollier, LSU Medical School; Dr. Alan Miller, Tulane University 
Medical School; and Dr. Gary Peck. Would they all please come 
forward? It is the policy of the subcommittee to take all 
testimony under oath. Please be advised that witnesses have the 
right under the rules of the House to be advised by counsel 
during their testimony. Do any of you wish to be advised by 
counsel? Seeing no one make an indication, I take it you do not 
have counsel with you.
    [Witnesses sworn.]
    Mr. Stupak. Let the record reflect all the witnesses 
answered in the affirmative. We will hear from this panel. 
Before we do that, I am going to have to run down to the floor. 
I have been asked to come to the floor on SCHIP. I am going to 
ask Mr. Melancon to take the Chair. I will be back as soon as I 
can but I have to run down. And with that, Dr. Rowland, would 
you like to start with your opening statement, please, 5 
minutes. Your full statement is part of the record. And please 
give your opening statement.

TESTIMONY OF DIANE ROWLAND, EXECUTIVE VICE PRESIDENT, HENRY J. 
KAISER FAMILY FOUNDATION; EXECUTIVE DIRECTOR, KAISER COMMISSION 
         ON MEDICAID AND THE UNINSURED, WASHINGTON, DC

    Ms. Rowland. Thank you, Mr. Chairman, Mr. Whitfield, Mr. 
Melancon, and members of the committee for this opportunity to 
be with you today to focus increased attention on the health 
care needs of the people of New Orleans. We have just completed 
an analysis that looks at the health care challenges facing the 
population based on a survey we conducted in the fall of 2006 
of 1,500 adults over the age of 18 in Orleans, Jefferson, St. 
Bernard, and Plaquemines Parishes. It was clear from the survey 
responses that the priority of the population of the city of 
New Orleans is to get medical facilities up and running. It was 
their top priority after repairing levees. What we saw in this 
survey is that nearly half of the residents report health care 
coverage and access problems; key components of an accessible 
quality health care system are not there.
    One in four have no regular provider of care other than an 
ER. Many face new health and mental health challenges and 
problems since Katrina. One in 10 households with children 
reported to us that they had a child in their home who was 
troubled or not getting needed medical care. Even though some 
of the most frail and vulnerable may not have been able to 
return home to New Orleans, the population in the city still 
faces physical and mental health challenges that underscore the 
importance of improving the availability of services as well as 
improving access to both health and mental health services.
    Predominant among the health problems, health coverage 
remains a major obstacle to obtaining access to health care. 
One in four non-elderly adults in the area is uninsured. In 
Orleans Parish, nearly a third of the adult population is 
without health insurance and 70 percent of those uninsured are 
African-Americans. There is also a brighter story in Louisiana, 
however. The Medicaid and LaCHIP programs have helped to 
provide coverage to children. So, we see no difference between 
African-American households and white households in the percent 
of uninsured children; less than 10 percent are uninsured 
documenting the importance of health care coverage to both 
reduce racial disparities as well as improve children's access.
    For residents using the health care system, most report 
that they had more difficulty with relocated doctors, fewer 
hospitals open, and those open with strained capacity. One of 
their major worries is that they will not be able to get the 
health care they need in post-Katrina New Orleans. Many of the 
previous users of Charity Hospital together with the broader 
uninsured and Medicaid population were disproportionately 
affected especially with the closure of Charity Hospital, but 
they are not alone. What we saw was a leveling effect of 
Katrina on all of the people of the New Orleans region, 
reducing their access to health care services and further 
creating barriers for them to obtain needed care especially 
preventive health services that are so important to maintaining 
health.
    As the people struggle to rebuild their lives, establishing 
a health care system that provides preventive and primary care 
services and specialty care when needed is essential to 
recovery efforts. Among the things that can be done and should 
be considered are ways to broaden coverage especially for 
adults to both promote their access to care but also to reduce 
the uncompensated care burden, especially that physicians will 
feel. This will help bolster financing for physician and clinic 
services as well as hospital care. We need to be able to 
provide alternatives to health care for those now relying on 
ERs. The health care payment policy needs to be used as a tool 
to help reshape the way health care is delivered by allowing 
flexibility in the use of the Medicaid DSH funds for non-
institutional services and to reimburse physicians and by 
providing additional support to rebuild the inpatient and 
outpatient mental health services that are now facing chronic 
shortages.
    Obviously, investing in rebuilding a high quality health 
workforce is a critical component for the health care system. 
Facing the higher labor costs, the need for GME reforms as so 
adequately discussed in the prior panel are critical to having 
a health care system that will work for all residents of the 
New Orleans region.
    Determining the future scope and role for the public 
hospital, the VA hospital, and the academic health centers is 
essential both to establish a source of care for the poor and 
uninsured as well as to enable recruitment and training of 
health professionals so critical to a future health care 
system.
    I think, in closing, that we have learned many lessons from 
the New Orleans experience, and one of them is that we are not 
prepared to deal with the aftermath of a major disaster such as 
the Katrina event and the failure of the levees in New Orleans. 
We need a program that can respond quickly and that can provide 
more than short-term assistance. Cobbling together little 
solutions from programs like Medicare and Medicaid will not 
respond to some of the most immediate needs and the longer term 
needs that the city of New Orleans continues to face. So the 
lesson that I take away from our work is that we need to look 
in disasters at a way when the health care system has been 
fractured to rebuild that system perhaps with more 
demonstration authority and broader use today even of the 
Medicare as well as the Medicaid waiver authority to get some 
of these services going. The needs are great, and the time to 
fix them is not just 1 year, but 2 or 3 years, so we need to 
look at long-term solutions but also to provide immediate care 
to address the needs of the population. Thank you.
    [The prepared statement of Ms. Rowland follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Melancon [presiding]. Thank you so much, Dr. Rowland. I 
appreciate that. Mark Peters with the East Jefferson General 
Hospital.

    TESTIMONY OF MARK J. PETERS, M.D., PRESIDENT AND CHIEF 
 EXECUTIVE OFFICER, EAST JEFFERSON GENERAL HOSPITAL, METAIRIE, 
                               LA

    Dr. Peters. Thank you. Good afternoon, Mr. Chairman and 
committee members. I am Dr. Mark Peters. I am the president and 
CEO of East Jefferson General Hospital located in Metairie, 
Louisiana. I serve as the chairman of the Metropolitan Hospital 
Council, as well as the current chairman of the Coalition of 
Leaders for Louisiana Healthcare. And I have been designated to 
present an overview of the specific problems facing five of the 
hospitals testifying here today. East Jefferson is a publicly-
owned, not-for-profit hospital on the east bank of Jefferson 
Parish adjacent to New Orleans. We are a 450-bed tertiary care 
facility with more than 700 medical professionals. We employ 
more than 3,000 people and are one of the largest employers of 
the parish.
    On behalf of the five hospitals represented here today from 
the greater New Orleans region, East Jefferson, Ochsner Health 
System, Touro Infirmary, Tulane Medical Center, and West 
Jefferson Medical Center, we appreciate the opportunity to 
speak to you about the severe and continuing consequence of 
Hurricane Katrina on our five hospitals. The region's health 
care infrastructure was decimated by Katrina and remains a very 
fragile shell. Due to the continued closure of Charity 
Hospital, as well as several other hospitals, these three 
hospitals provide 95 percent of the hospital-based services in 
the metropolitan area. We anticipate a combined loss of $135 
million in 2007. This loss will grow to $405 million by 2009.
    Nearly 2 years after Katrina, we testify today to share 
with you one very simple message. Our hospitals need your help. 
None of these five hospitals are financially secure. We are all 
coping with cash, cost, and staff issues on a daily basis. Our 
problems are similar even though we represent a broad spectrum 
of health care delivery. We stand together today to implore you 
to protect the patients in the New Orleans area from yet 
another crisis, one that is immediate, preventable, and that 
you can help us address. Over the past 2 years all five of our 
hospitals have testified before this committee and numerous 
other Louisiana and congressional committees explaining the 
dire circumstances we face. We have all received some form of 
Federal and State assistance but that assistance is simply not 
enough to sustain us.
    As the primary economic engines of the area these hospitals 
are not only important because of the patients we serve but 
also the people we employ and the economy we support. Without 
continuing and sufficient Federal assistance these hospitals 
must all consider making very difficult decisions that will 
negatively impact the quality of care and services we provide 
as well as employment to many in our region. As you will see, 
on page 10 of my written testimony when we compare the first 5 
months of 2005 to 2007 for these five hospitals, we have gone 
from a $13 million profit to a loss of $56 million. That is a 
negative swing of $70 million. Of that $70 million swing, $53 
million went to labor costs alone.
    Since the storm, our five hospitals have been working with 
Members of Congress, our State Department of Health and 
Hospitals, specifically the Louisiana Redesign Collaborative 
and the U.S. Department of Health and Human Services, as well 
as Chairman Donald Powell. I know that many members of this 
committee visited our area, some to provide direct assistance, 
others to learn, so that what happened to us never again 
happens on American soil. For these efforts we are extremely 
grateful. We are active and supportive partners in a long-term 
redesign effort. However, all who have analyzed our region's 
needs have reached the same logical conclusion, redesign must 
first begin by addressing immediate needs.
    While we have asked Congress to either adjust current 
programs for unique circumstances or for specific targeted 
funding neither approach has resulted in our financial 
stability. Therefore, we five hospitals have identified five 
problem areas and potential solutions for Congress' 
consideration that each of us will detail in turn. We, of 
course, gladly welcome your creative assistance on these or 
other funding sources. Relief from wage costs, help with rising 
non-labor costs, suspension of the 3-year rolling average for 
graduate medical education, nursing immigration relief and help 
recruiting and retaining nurses and physicians, and consistent, 
adequate funding for uncompensated care.
    The assistance from the Deficit Reduction Act for 
uncompensated care and from CMS to alleviate the wage index 
inadequacy was greatly appreciated. However, the funds were 
distributed equally among 31 parishes and 65 hospitals. Some of 
the hospitals that received funds are having very profitable 
years while the hospitals in the New Orleans metropolitan area 
struggle to remain financially viable. If the current Medicare 
wage index is not extended to reflect actual costs, East 
Jefferson General Hospital will continue to lose $2 million to 
$3 million per month. Using our current appropriate cost my 
hospital should see $18 million annually in wage index 
assistance. Instead, we received a one-time, $5 million payment 
through the DRA.
    Moving forward, we need a predictable, multiple year 
commitment to our region's health care providers. Also, our 
Nation will be 1 million nurses short by 2020. The situation is 
much worse for us. Before Katrina, East Jefferson had a 2 
percent nursing vacancy. Now it is 12 percent or some 90 
positions vacant. In 2006 we hired 60 American-trained, 
Filipino nurses. Due to immigration caps and stalls, we 
continue to wait for these new hires. These nurses will save us 
$300,000 per month in labor costs or $3.6 million a year. 
Filling all 90 positions would save East Jefferson $4.5 million 
per year.
    Every tragedy and disaster provides lessons to either avert 
the next one or mitigate the consequences. This disaster is no 
exception. I am often asked by my health care colleagues 
throughout the Nation, how can I help my hospital financially 
survive a disaster like this, a hurricane, an earthquake, a 
floor or a tornado. I would advise them that it is their best, 
long-term economic interest to close their doors. Why would I 
offer this advice? It was in our community's best interest to 
stay open and provide services to desperately needed. However, 
considering our financial outlook my hospital would have been 
better off closing than waiting for Federal and State relief. 
This is an appalling dilemma to face. Choosing between 
providing care for people in their time of greatest need or 
insuring the long-term viability of the hospital. Doing the 
right thing for our community meant that our hospital and the 
patients we serve may soon become victims of Katrina again.
    I urge you to use the lessons learned from Katrina to not 
only protect our fragile health care infrastructure but to 
adopt policies that improve disaster response in the future for 
all Americans. Thank you for the opportunity of speaking.
    [The prepared statement of Dr. Peters follows:]

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    Mr. Melancon. Thank you, Dr. Peters. I appreciate it. 
Leslie Hirsch with Touro.

   TESTIMONY OF LESLIE D. HIRSCH, FACHE, PRESIDENT AND CHIEF 
      EXECUTIVE OFFICER, TOURO INFIRMARY, NEW ORLEANS, LA

    Mr. Hirsch. Mr. Chairman and members of the subcommittee, 
thank you for inviting me to tell you about the continuing 
health care crisis in New Orleans. Each of my colleagues here 
today will speak to this crisis from their own perspective. 
Mine is that of the president and CEO of Touro Infirmary, an 
organization that in its 155 years of existence has overcome 
such challenges as yellow fever epidemics, Civil War, and the 
Great Depression. We are community based and not-for-profit. 
But now Touro, along with the entire New Orleans Hospital 
community, is facing a crisis unlike any other in our history 
or for that matter in the history of American health care.
    Never before has the entire medical infrastructure of a 
major American city been in danger of collapse but that is 
precisely what could happen if we continue on the present 
course. After temporarily closing 3 days after Katrina and 
opening less than 1 month later, we made the decision to forge 
ahead to restore Touro's operations, irrespective of the 
economic consequences. People were, and continue to be, in 
urgent need of medical care, and for us it was then, and it is 
now, a matter of mission and doing the right thing. That is our 
job and we are proud of it. But 2 years have passed since the 
greatest natural disaster in American history devastated the 
New Orleans area, and Touro and other continue to play a 
pivotal role in supporting New Orleans' recovery but the cost 
is staggering and if unchecked puts our future viability in 
jeopardy.
    Since Katrina, Touro's operating losses have mounted 
totaling many millions of dollars with no end in sight. Our 
bond rating has suffered, increasing the cost of borrowing. We 
are depleting cash reserves at an alarming and unsustainable 
pace. In post-Katrina New Orleans, the economic fundamentals of 
the health care market are broken. Our cumulative costs of 
uncompensated care, personnel, property and casualty insurance, 
and utilities have all dramatically increased and have outpaced 
any rate increases or one-time grants that have been provided. 
Touro's property and casualty insurance is up 342 percent. 
Utilities are up 48 percent, post-Katrina. I believe, however, 
that the unprecedented rise in the cost of health care 
personnel is the biggest challenge and the most costly. 
Recruiting and retaining nurses, physicians, and other health 
professionals is a daily struggle for Touro and everyone else 
at this table.
    However, the nursing shortage has had the greatest impact 
post-Katrina forcing us to heavily depend on contract labor, a 
very expensive form of staffing. And at Touro, for the first 6 
months of 2007, our costs of contract labor increased by $4.6 
million over the same time period the year before. Our full 
time equivalent contract registered nurse cost is dramatically 
higher than when they are our own staff. Our costs went up 366 
percent during that period. The Medicare wage index methodology 
won't recognize this as previously mentioned until 2010, but 
exacerbating the problem is that Medicare does not pay 
hospitals their full cost nor does Medicaid, thus, our 
hospitals are not paid full costs to begin with and we are 
falling that much further behind.
    Graduate medical education has been discussed at length 
today, and I will keep my comments brief here, and simply just 
say that we stepped up during a time of need when we needed to 
protect the graduate medical education system in New Orleans, 
and it was the right thing to do, but we are paying a heavy 
price today. We have reduced several residents, about 12 going 
into this academic year, but even with that this 3-year 
averaging which must be addressed is still costing us nearly $4 
million this year. During the last hearing, some of you 
mentioned what has been done, and some of those comments have 
been made here today. I would like to add to what Dr. Peters 
just said about the provider stabilization grants.
    In some respects it belies logic, and I think in retrospect 
if we look at the present circumstance of our hospitals and the 
losses that have mounted where was the logic and the 
methodology of distributing $90 million to hospitals, more than 
60 of them in 31 different areas designated by FEMA, different 
parishes, and as was stated some of those very hospitals are 
continuing to operate at a surplus. I don't begrudge them of 
that. They should. Every organization needs to operate at a 
surplus if it is going to continue to reinvest and move 
forward. But those monies would have been better spent in New 
Orleans. Touro received some $3.6 million of that money and for 
that we are very appreciative. Our annual need is three times 
that amount.
    In closing, I just would simply like to say that I agree, I 
won't repeat all the recommendations that Dr. Peters made, I 
agree with everything that he said so I won't be redundant in 
that respect. I will just simply say that the present situation 
facing Touro as well as the other hospital in Orleans and 
Jefferson Parishes is very critical. While I do not speak for 
the other institutions, I can say that if some change in our 
financial condition does not occur soon, we will be forced to 
re-evaluate the level of services provided to the community. In 
the long term we simply will be unable to sustain ourselves. 
Thank you for the opportunity to be here today.
    [The prepared statement of Mr. Hirsch follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Melancon. Thank you, Mr. Hirsch. I appreciate it. Dr. 
Quinlan, we have got one floor vote. It will probably be unless 
something changes about 15 minutes so we will take a break and 
then we will have--one procedural vote so we should be back in 
about 15 minutes. Thank you.
    [Recess.]
    Mr. Melancon. I want to apologize for the delays. We are 
having on the floor SCHIP which I think I don't need to explain 
to most people in the medical field, and there is debate and 
ongoing motions or as we would say commotions, so I think Mr. 
Stupak is still on the floor to speak and we will just go ahead 
and get started, and if he comes back I will move out of the 
chairman's way. I think when we stopped Mr. Hirsch had given 
testimony, and Dr. Quinlan was up to be next. And if you would, 
please, Dr. Quinlan.

TESTIMONY OF PATRICK J. QUINLAN, M.D., CHIEF EXECUTIVE OFFICER, 
             OCHSNER HEALTH SYSTEM, NEW ORLEANS, LA

    Dr. Quinlan. Thank you. We understand these things happen. 
We appreciate your being here, and I want to thank the 
committee members for their obvious interest and continued 
commitment. The commitment is the part that I really feel that, 
and that means a lot to us. And I would also like to recognize 
the staffers whose involvement who clearly searched for 
understanding and meaningful, timeful action, and that is why 
they are recognized by the participants here. I would like to 
just edit my comments today. Obviously, it is kind of a 
difficult time for everybody and rely on my submitted testimony 
for much of the detail of which most of you are exquisitely 
already familiar, but I would like to take this time to focus 
on the essential issues because often the more information we 
get the more confusing things become, and I would like to 
redirect the attention in the time we have to the plight of the 
five hospitals that, as it was mentioned, take care of the bulk 
of people in New Orleans, and I am talking about the region of 
New Orleans.
    Please focus on our immediate needs. If you took home one 
statement that would be it, the immediate needs, the immediate 
needs of our hospitals, the physicians and other health care 
professionals. The system consists of more than the building. 
It is all the people that work together to take care of people. 
The critical nature of the short-term needs have been 
recognized since the beginning by everyone. Unfortunately, it 
has been more about words and deeds but has been relatively 
lost in the search for long-term solutions. And you saw it 
happen here today. Most of the efforts and energy was expended 
about these long-term questions when we live with the immediate 
needs on a daily basis, and the consequence of that misplaced 
focus, I think has been expressed by my colleagues amply well 
rather than repeating it. The consequences are severe.
    Please lead the efforts to correct this problem. I felt the 
emotion that has to be focused around the things that we talked 
about or others and as the staffers have rightly done focusing 
on what can we do soon to make the effects felt immediately. 
Anything other than that is actually a distraction from the 
immediate needs. We were reminded that the hurricane season is 
upon us, and I promise you that in the event there is another 
disaster the people sitting here at this table, these three 
hospitals will be in the middle of it again. And unfortunately 
I hope that the same results don't occur for everyone. I did 
want to emphasize a few points that first there is virtually no 
money at present that is available for clinical care givers. 
Currently, and I will speak to my particular situation, 
currently we employ about 600 physicians and more than 120 
licensed mid-level health providers who receive no payment for 
the care of the uninsured.
    This acts as a significant drain for our health system 
because the lack of funding for both hospitals and Ochsner 
physicians and is a special problem for Ochsner. We have been 
successful in the recruitment of physicians and nurses. 
Currently we are bringing about 40 physicians on towards the 
last half of the year so we continue to do our job in the 
absence of payment. Second, well intended money to help our 
hospitals is not reaching us on a timely basis. That is a 
recurrent theme I know you have heard and will act on. 
Specifically, only $21.9 million of the $1.4 billion allocated 
by HHS and FEMA for Louisiana has reached the Ochsner Health 
Care System, the largest system in the State with 9,000 
employees, and who was really one of the anchor points in the 
crisis and since then for the region, and I emphasize region.
    Despite this generosity, we have experienced $65.5 million 
of additional un-reimbursed operating losses from Katrina, and 
that is the other issue is about operating losses. The problem 
is that dollars intended to help us and the immediate folks 
around us have gone to help a wide variety of providers who 
were not as impacted by Hurricane Katrina as Ochsner and the 
other hospitals testifying here today. These are important 
things for us. I will emphasize that we need to address 
Katrina-related expenses, specifically the cost of workers as 
it has been repeatedly emphasized. This cost has exploded, as 
well as the cost of utilities and insurance. These are direct 
operating costs of which we have no control and to which we 
have not contributed to any of the problems. You have heard 
about GME reimbursement.
    Immigration assistance is a real issue for us. Our system 
has 300 open nursing positions. We too have hired additional 
foreign nurses from the Philippines, and we have 100 now 
waiting for visas. So, if we need special action to address the 
critical issue of increasing the work pool, all we will do is 
aggravate the inflation spiral, which is one of the major 
contributors to our economic crisis today. Half of our expenses 
are worker related. We need to blunt that spiral and new 
workers are the only way in number that will affect that. And, 
finally, we need to consider new mechanisms for distributing 
appropriations in a way that is tied to things that are clearly 
in the public interest, to promote those kind of behaviors that 
are economically sound, and to and promote health for our 
patients. That is it in brief. I do feel that in view of the 
effect of the distraction of the downtown issues, I need to 
make a few comments.
    With regard to the VA, health care and economic recovery is 
important to us all. All of us together. We must and we need to 
find constructive solutions together rather than create an all 
or nothing alternative. This should not be a contest as it was 
characterized but I think in many ways it was accurately 
characterized because we are the ones who represent those who 
are in the middle which is the patients. It is easy to become 
energized about this. It is easy to become frustrated. We all 
have ample reason to be frustrated, but I find in my own 
position frustration doesn't make me smarter. What I need to do 
is settle down and find solutions together. I think Kaiser 
Family did an important study for us all, and you notice it is 
regional. New Orleans is a regional problem. The solutions have 
to be regional in nature, not just in word but in deed, and 
that is an essential issue here. Dollars and patients and 
disease do not respect political boundaries.
    We need to remember that because we are on the point. I 
chair GNO, Inc. I live in New Orleans Parish. GNO, Inc. is a 
development group, and I have spent a great deal of scarce time 
to promote the development of the city in particular. And my 
sentiments are simply that we have to learn to ask the right 
questions and make sure our understandings are current so that 
we don't find solutions that in fact don't fit the problem, 
that don't solve the problem. One of the few things I have 
learned as CEO is not that I have to find solutions. The art is 
to find the right question so that when it is addressed the 
problems are in fact resolved. So I would ask us to re-examine 
the factual basis of all of these things to make sure they are 
current and that what we do is consistent with those goals for 
the region.
    My major interest is in taking care of patients. That is 
what we do, be they veterans or anybody else, so whatever 
solutions we have need to go with those in mind. In particular 
with regard to the VA it became evident to me as I was trying 
to unravel this issue with everybody else that no one had asked 
the veterans what they thought, so we did. Now we have been 
criticized for asking the veterans. That escapes me. But that's 
OK. I don't mind that kind of criticism because it is our duty 
when you have a captive population to find out what their needs 
are and meet them as quickly as possible. I hear the need for 
speed, and we do it in a way that would be as accurate as 
possible to remove bias, so we had two independent surveys of 
1,200 veterans asking them where they wanted to get their care 
and from whom they would get it.
    That is a legitimate question and it is a kind of 
thoughtful approach we need to engage in as we sort out these 
problems so in terms of location for the VA which has become an 
issue in itself what I would like to say is let us put it in 
proper perspective of health care for everybody, economic 
recovery for everybody, but not losing sight that they are all 
patients. In my business as we do in our system is asking the 
patients of how we are doing, what their interests and needs 
are, and making sure that is first. And I hope that we can 
reboot here in a sense and become constructive together. The 
problem is too large and too complicated to attack successfully 
in a piecemeal fashion. We will live with those consequences 
long after we are all out of office and the consequences of 
good decisions will be great, the consequences of poor 
decisions will be lasting and destructive. So let us be 
constructive and let us be current. Thank you.
    [The prepared statement of Dr. Quinlan follows:]

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    Mr. Melancon. Thank you, Dr. Quinlan. Mr. Muller, if you 
would be next, please.

    TESTIMONY OF GARY MULLER, PRESIDENT AND CHIEF EXECUTIVE 
      OFFICER, WEST JEFFERSON MEDICAL CENTER, MARRERO, LA

    Mr. Muller. Good afternoon. It is a pleasure to be here. I 
am Gary Muller, CEO at West Jefferson Medical Center, and I 
feel like I am with my family who is the committee and who is 
the staff of the committee and who are my colleagues, every one 
of these people sitting at the table because we are 2 years 
post-Katrina and our situation is getting worse and we are all 
in this together to try to help to fix it. In the interest of 
time and not reiterating what a lot of people have said, I am 
going to focus on some issues that are specific to our common 
goal of the five hospitals and continuing to focus on that 
because that is the issue that is the problem. We can't get off 
that.
    West Jefferson was in good financial standing before 
Hurricane Katrina, and I think your charts and the graphs you 
have seen of the pre-Katrina numbers are specific to how good 
it was in terms of making a business work before and how 
horrible it is today. West Jefferson has had $48 million worth 
of operating losses since Katrina and since this subcommittee 
met, in March we have had $6 million more losses. If we were to 
meet again in 4 months, we would have at least $6 million more. 
We cannot continue like that. We are trying to solve our own 
issues as best we can. From a CEO standpoint you can only 
control so much, and what we can do is spend money wisely. We 
have implemented business improvement plans. We have negotiated 
with doctors in win-win situations to create cost savings 
programs. This month West Jefferson became the first hospital 
in Louisiana's history to receive the Energy Star award for 
energy efficiency from the Environmental Protection Agency.
    We can only trim costs so far. We have all done that. We 
hope not to do anything that affects patient care but what we 
need now is additional grant dollars and payment increases in 
some of the areas we have talked about today. I would like to 
explain to you five of the issues that are really a financial 
crisis for Orleans and Jefferson Parishes. Again, get your 
thinking down to the area. This is not a Louisiana problem. It 
is Orleans and Jefferson. For example, high labor costs are 
specific to us. Immediately after the storm we hired contract 
nurses, and we had almost 100 of them. We spent $12 million 
that year. The previous year we had spent $2 million, so we 
were already in a negative $10 million, and we did that to 
replace employees who left after Katrina but also to open more 
beds. We felt that the public needed to have access to health 
care. Nine hospitals closed. Three were left open. Several have 
opened since then. But without us doing that, people literally 
would not have been able to get care.
    To keep the doctors and the nurses in New Orleans, we can 
only do so much by hiring them but we are being put in a 
difficult position because it is also the levees, the schools, 
the businesses are not opening. What we are doing to get more 
nurses in the future, we are partnering with Our Lady of the 
Lake up in Baton Rouge, and they are going to open a nurse 
training program on our campus to groom our own nurses because 
we can't go and hire enough from the Philippines or from Texas 
and Kansas City to bring into Louisiana. We need to grow our 
own. We can do that but we need something like a wage index 
adjustment because the wages have gone up 25 percent, and our 
recruitment costs have gone up also.
    West Jefferson predicted that without operating income that 
our bond insurance companies would be asking questions why you 
are not making money, and it might seem sort of obvious to all 
of us on the team here, but they are very focused on making 
sure bonds get paid so they put us in technical default of our 
bonds at West Jefferson, and they put a mortgage on West 
Jefferson. They actually have a mortgage. That is costing us 
money, at least a million dollars in consultants and at least a 
million dollars in interest during the year, plus we don't know 
what they are going to do next. Now when they come in, they 
don't provide services to the community. They cut costs. And we 
are trying to do the best we can, and we continue to look at 
utilities, supplies, and all the other things, so we are going 
to continue to do that, andhope that we can get money to offset 
our operating losses very soon.
    So we are sort of a little different from everybody else in 
that respect. We are under a lot of pressure. Non-paying 
patients, the primary care clinics in our region received the 
$100 million grant which we support, but you need to be aware 
that this assistance should greatly increase the number of 
clinic patients which is great. You need to also realize that 
this will increase demand for inpatient and outpatient 
specialty care services at our five hospitals and at LSU 
further adding to our financial losses. In other words, if 
somebody comes in as an unreferred, we call them, uninsured 
patient to look for cancer care without insurance nobody else 
in town has these services so we are the ones, we are going to 
get into it even deeper with uninsured because of that.
    Graduate medical education. We were proud to have opened 
one of the two new teaching programs. The others continued, and 
I think Touro expanded and others did. We are working with LSU 
and Tulane to increase that, but we are losing money on that 
because of the 3-year rolling average, and you guys are focused 
on how to maybe get CMS to re-look at that. I can tell you, we 
can't continue to take more residents without having the funds 
to do it so we appreciate your help on that. Doctors, we made a 
commitment to keep doctors by giving them a subsidy after 
Katrina, and we had $2.5 million coming out of hospital funds 
in those six. We have also chosen to pay our doctors in full 
for their services in the emergency room, but it comes out of 
West Jefferson's budget, which is not funded by anybody except 
the funds that we have for patients. So it is deepening our 
bottom line, but I think Dr. Burgess continues to try to help 
us, but help doctors stay. We are doing all we can but we are 
getting further behind but we feel that is a commitment to the 
community.
    We are facing a category 5 financial storm which can result 
in the same thing. I think if it came again during August or 
September this year it would be worse. Even if ground were 
broken today on a new Charity Hospital, VA hospital, whatever, 
we are all talking 6, 8, 10 years to do something. We just 
can't hold out much longer. Again, our losses continue every 
month as all the hospitals do here. We want to continue to 
serve the community. We support everything you guys can come up 
with. If we have other ideas, we will continue to come up with 
those. I would welcome a GAO audit tomorrow. It can't be long. 
I would ask them also to look at the funds that have previously 
been spent and why they are not focused on region 1. They went 
all over the State. A lot of the hospitals in the State are 
doing very well. Let us spend the Government's money wisely and 
focus any funds that come on our region, Orleans and Jefferson 
Parishes.
    We really appreciate every one of you all, your staff, our 
colleagues here. We look forward to working into the future to 
solve this problem. Thank you.
    [The prepared statement of Mr. Muller follows:]

                        Testimony of Gary Muller

     Mr. Chairman and members of the subcommittee, thank you 
again for the opportunity to testify before you. Your continued 
support and dedication to our cause is truly appreciated. We 
are thankful for the work of your staff to maintain 
conversation with us with concern for our deepening wounds. 
Thank you, and the other members of Congress, for your visits 
to the area and your understanding of the full and long-lasting 
consequences of the most devastating natural disasters in 
American history.
     West Jefferson Medical Center is a 451 bed community 
hospital located 10 miles from downtown New Orleans. After the 
storm, we were one of only three hospitals in the entire area 
to remain open- several hospitals, including Charity Hospital, 
still remain closed. West Jefferson Medical Center was in good 
financial standings before Hurricane Katrina with a projected 
profit of $8 million in 2005. When I testified before you in 
March, West Jefferson had incurred $48 million in Katrina-
related operating losses. That number has since increased to 
$54 million- an additional loss of more than $6 million in only 
4 months.
     I want to assure you that I am here today to offer the 
facts regarding the operations at West Jefferson Medical 
Center. Our numbers have nothing to hide, our books are open 
and we are confident that we have done everything in our power 
to run our hospital in an efficient manner. We continue to 
pursue that cause intensively. Currently, West Jefferson is 
operating at 2 percent under its 2007 budget and loosing money 
daily.
     In fighting to provide the best possible care for our 
patients while spending our money in an efficient manner, we 
have implemented several business improvement plans and 
negotiated with doctors to create cost-saving programs. This 
month, West Jefferson Medical Center became the first hospital 
in Louisiana's history to receive the Energy Star award for 
energy efficiency awarded by the Environmental Protection 
Agency. We continue to make great strides in this direction.
     Fortunately, The West Bank of Jefferson Parish was not 
flooded by Hurricane Katrina and West Jefferson Medical Center 
was spared from extensive physical damage. However, West 
Jefferson experienced a large increase in patient volume as 
more than 1000 patient beds were closed in the New Orleans 
area. To compound the problem with an increase in overall 
patient volume, our hospital has also seen a 50 percent 
increase in patients that are uninsured. So even as we struggle 
to accommodate the increased patient load, fewer of these are 
paying patients leaving us with much higher costs and more 
losses.
     The healthcare situation in Louisiana has an uncertain 
future. However, these five hospitals testifying before you 
today will continue to provide high quality services as long as 
our doors remain open.
     The other four CEOs and I, and all of the patients we 
serve, are extremely grateful for Congress's response on behalf 
of all America to Hurricane Katrina. However not enough of this 
support has reached our hospitals, our doctors, our nurses, and 
our patients to remedy our ongoing needs. We urge the congress 
to review these existing allocations made to Katrina Disaster 
Funds with the current healthcare crisis uppermost in mind.
     I'd like to explain to you five of the issues that count 
for some major financial issues faced by these five hospitals 
from Orleans and Jefferson Parish.
     We continue to suffer losses due to higher labor costs. 
Immediately after the storm, we were forced to hire contact 
laborers because so many of our healthcare workers evacuated. 
At one time, we employed almost 100 agency or temporary, out-
of-region nurses to replace employees who left the area. In 
2006 alone, these increased labor costs amounted to $12 
million--double our costs in 2005. In summary, our nurses are 
twice as expensive while the patients that we treat pay half 
the cost. This is exactly why we continue to lose money.
     In order to keep nurses and doctors from leaving a region 
still struggling to reopen its schools, its stores and restore 
its quality of life, we have had to boost recruitment and 
retention packages by 25 percent. West Jefferson is also 
opening a new nurse training program on our campus as a long-
term solution to the nursing shortage. While we have received a 
one time grant to cover some of this additional labor cost, we 
need an ongoing fix for this ongoing problem. As requested 
before, we once again recognize the need for a Wage Index 
Adjustment to help us manage the greatly increased cost of 
labor.
     Non-labor costs present unique issues for West Jefferson 
Medical Center, but similar issues are shared by all five 
hospitals. Because West Jefferson, as a public hospital, 
remained open through the storm and immediately incurred 
millions of dollars in losses, we received a Community Disaster 
Loan. I'd like to take this opportunity to thank Congress for 
the CDL that we received in February 2006 as it enabled us to 
continue to provide services to the area. We'd also like to say 
thank you for recent Congressional action allowing this loan to 
be forgiven. We now find that FEMA regulations require us to 
wait until 2009, three full years after the storm, to apply for 
forgiveness. We hope Congress will urge the Administration to 
grant forgiveness immediately to relieve the burden of interest 
costs over the next three years.
     We have incurred further financial strains as West 
Jefferson Medical Center was recently declared in default of 
its bond insurance requirements. As we predicted, the 
operational losses since Hurricane Katrina, coupled with our 
unpaid business interruption insurance claim, have placed us in 
default with our bond insurers. This has resulted in the 
insurers placing a mortgage on our hospital and implementing 
other fees and restrictions on our operations. The impact of 
continuing to carry the CDL interest and the default of our 
bond insurance has added more than $2 million a year to our 
costs. In addition, with other businesses in the area we share 
increases in insurance rates, utilities, supplies and more. The 
accumulation of these costs continues to contribute to our 
millions in losses.
     My hospital has also seen a significant increase in non-
paying Emergency Room patients. With overall patient volume 
increases, Emergency Room wait time has peaked at around 14 
hours. In addition, the average length of stay for patients has 
increased from 6 to 7 days in just one year which further 
increased costs. Primary Care Clinics in our region received an 
additional $100 million grant recently, which we support. You 
need to be aware that this assistance should greatly increase 
the number of clinic patients. You need to also realize that 
this will increase demand for inpatient and outpatient 
specialist care services in our 5 hospital, further adding to 
our financial losses from the uninsured.
     Another shared concern is reimbursement associated with 
Graduate Medical Education. West Jefferson Medical Center 
became a teaching hospital after the hurricane in response to 
the needs of displaced medical students in the region. We have 
been supportive and understand the importance of our teaching 
program but, like others, are being penalized by the current 
GME reimbursement rules. Again, we lose money on every 
resident, but think it is vital to keep training medical 
personnel in our region as we depend on the vast majority 
remaining here after they complete their studies. We ask that 
the current reimbursement rules be reconsidered.
     In line with strains felt nationwide concerning workforce 
issues, we also face a similar but more severe problem. 
Although we have felt these strains from physician shortages 
for many years, currently, physicians are leaving our area at a 
rapid rate. Our hospitals have to offer large recruitment and 
retention packages to keep doctors and staff from leaving, and 
even still, keeping those highly trained workers has proven to 
be a very difficult task.
     As mentioned earlier, West Jefferson is currently treating 
more than twice as many uninsured patients than before the 
hurricane, while only being reimbursed for 45 percent of our 
costs. Every time an uninsured patient is admitted into our 
hospital, we lose money as West Jefferson Medical Center is 
only partially reimbursed for the treatment of these patients. 
However, we have chosen to pay our doctors in full for their 
services. This causes a deep and direct cut to our bottom line, 
but our patients and community would suffer more without an 
adequate number of doctors. As a public hospital it is our 
charge to serve all those who come in our doors--but unlike 
many public district hospitals that you may be familiar with, 
we receive no dedicated revenue from our Parish government.
     As chief executive officer of West Jefferson Medical 
Center, I am faced with these and other financial issues 
everyday. While we continue to offer vital services to the 
community, I struggle with meeting the financial demands that 
pull my hospital in multiple directions. Roughly two years ago, 
Hurricane Katrina forced the closure of more than 1,000 beds in 
New Orleans. We are now facing a Category Five financial storm 
which could result in the same. Even if ground were broken 
today on a new Charity hospital, our hospital would still have 
to wait three to five years for the completion of this hospital 
until some of these costs are alleviated.
     Since the 4 months since I came before you in March, West 
Jefferson has lost an additional $6 million. If I were allowed 
to make a presentation before you again in 4 months, unless 
changes are made, my story would be the same- more losses. Our 
hospitals can only serve the community so long while facing 
such mounting debt. I will leave it up to you to consider what 
actions will need to be taken if this continues.
     Once again, I offer many thanks to you, Mr. Chairman and 
members of the subcommittee for your attentiveness and 
understanding.
                              ----------                              

    Mr. Melancon. Thank you, Mr. Muller. Mr. Lagarde, if you 
would.

    TESTIMONY OF MEL LAGARDE, III, PRESIDENT/CEO, HOSPITAL 
    CORPORATION OF AMERICA, DELTA DIVISION, NEW ORLEANS, LA

    Mr. Lagarde. Mr. Chairman, members of the committee and 
staff, good afternoon. My name is Mel Lagarde. I am vice 
chairman of the Partnership Board and managing partner for 
Tulane University and Clinic, which is a two-hospital system 
with clinics and facilities in both Jefferson and Orleans 
Parish. Tulane University Hospital and Clinic is a joint 
venture between Tulane University and HCA. For over 160 years 
Tulane University Medical School has provided innovative 
medical education, cutting edge research, and quality clinical 
services to New Orleans. I was at the Tulane downtown campus 
during Hurricane Katrina. I was directly involved in the 
complete evacuation of all patients and employees from the 
facility.
    After being closed almost 6 months due to damage from 
Hurricane Katrina, Tulane reopened our main campus in February 
2006 and is providing services in the area most directly 
impacted by the hurricane. As someone involved in the 
overseeing the rebuild, I appreciate the opportunity to come 
before you to discuss Tulane's experience in providing health 
care to New Orleans after Katrina. Despite significant progress 
during the last 2 years, the New Orleans health care system has 
not recovered from Hurricane Katrina. Since then, these 
coalition hospitals have provided approximately 95 percent of 
the health care services in the New Orleans metropolitan area 
providing patients with essential health care services despite 
significant challenges including constrained resources, damaged 
infrastructure, and significantly increasing cost.
    After reopening one-quarter of our former size, we now 
maintain 306 of our 335 pre-Katrina beds that are downtown in 
Jefferson Parish campus. To date we have spent more than $250 
million repairing and restoring Tulane. This represents an 
important investment in the health of current and future New 
Orleans residents and the recovery of the greater New Orleans 
area. Tulane is the primary teaching hospital of the Tulane 
University Medical School. Tulane Hospital and its patients are 
essential to the education of medical students, residents, and 
fellows who serve the New Orleans area. As the result of 
significant work, we are currently providing training for 100 
percent of our pre-Katrina resident positions. The success of 
the medical school is closely linked to the success of Tulane 
Hospital, and we are committed to maintaining that connection 
into the future.
    The reopening of Tulane has also provided access to health 
care services for area veterans. After the Department of 
Veterans Affairs medical center closed due to flooding from 
Katrina, Tulane has granted staff privileges to VA physicians 
and permits them to treat VA patients at Tulane. We hope our 
support will permit the VA to rebuild in downtown New Orleans. 
The coalition hospitals play a vital role in the recovery of 
patient care needs in New Orleans and in the greater New 
Orleans area. Although the Federal and State government have 
provided recovery funds they are not adequate to address the 
challenges faced by hospitals serving post-Katrina New Orleans. 
The coalition hospitals' labor costs have skyrocketed as a 
result of city wide shortages of doctors, nurses, and other 
health care professionals.
    On an adjusted basis, Tulane's salary expenses for the 
first 5 months of 2007 as compared to 2005 are up 57 percent 
and contract labor expenses are up 73 percent. Other expenses 
have also increased for us. Our utility expenses are up 34 
percent. Insurance is up 33 percent. And interest expense as a 
result of borrowing in order to fund losses is up an extreme 
1,000 percent. Since we resumed operation in February 2006, 
Tulane has experienced operating losses every single month of 
our operations. In 2007 Tulane experienced $24 million loss for 
the first 5 months. All financial reports of Tulane University 
Hospital and Clinic, we willingly support a GAO audit. We have 
simply nothing to hide.
    All the coalition hospitals have experienced similar losses 
as a result of the critical shortage of help at providers and 
the higher insurance and utility expenses, increased bad debt, 
and sicker patients in post-Katrina New Orleans. Since 
reopening net of business interruption insurance and the $5 
million we received in Federal funding, we have incurred a loss 
of $173 million. On behalf of Tulane and the other hospital 
systems on this panel, I respectfully request that this 
committee financially support this coalition for the next 3 to 
5 years to permit the New Orleans health care sector to 
recover. Specifically, I request that the committee support 
funding by, one, redirecting existing Gulf Coast recovery funds 
to our needs, two, continue the current Louisiana uncompensated 
care cost formula of which approximately 70 percent is funded 
by the Federal Government, and, three, suspending the 3-year 
rolling average component for graduate medical education 
payments.
    Thank you members of the committee and staff for your time 
and attention. I will be happy to respond to any questions. 
Thank you.
    [The prepared statement of Mr. Lagarde follows:]

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    Mr. Melancon. Thank you, Mr. Lagarde, I appreciate those 
comments. Chancellor Hollier from LSU, if you would, for 5 
minutes.

  TESTIMONY OF LARRY H. HOLLIER, M.D., CHANCELLOR, LSU HEALTH 
       SCIENCES CENTER AND DEAN OF THE SCHOOL OF MEDICINE

    Dr. Hollier. Chairman Melancon, Ranking Member Whitfield, I 
am Dr. Larry Hollier, chancellor of the LSU Health Sciences 
Center and Dean of the School of Medicine. I represent the 
LSU's Schools of Medicine, Nursing, Dentistry, Allied Health, 
Public Health, and Graduate Studies. I also represent the LSU 
graduate medical education programs, the 10 LSU public 
hospitals, and 36 health care clinics spread across our state. 
When LSU representatives testified before this committee in 
March they expressed apprehension over the future of graduate 
medical education and health care delivery. Now while obstacles 
remain and we look at what needs to be done, my message is that 
solutions are evident, but we need your help to implement them.
    Nonetheless, we are finally moving forward. Two years after 
the storm, emergency rooms are still overwhelmed by patients 
who believe they have no choice but to use the emergency room 
for primary care. In an effort to relieve this demand, LSU is 
deploying satellite health clinics throughout the New Orleans 
area. These clinics are expected to be operational by October. 
We also continue to experience in New Orleans a severe shortage 
of mental health beds. While LSU is adding 33 psychiatric beds 
in leased space the lack of mental health facilities will not 
be substantially relieved until a new academic medical center 
with a 68-bed behavioral health unit can open.
    Private medical education is also a continuing concern. In 
the floods following Katrina, LSU lost seven of its nine 
teaching hospitals in New Orleans.
    We had a desperate scramble then to find new places to 
train our residents. We convinced very busy private hospitals 
to take in our residents and become part of our academic 
teaching network. They consented to do so in order to save our 
medical education system in Louisiana even though they realized 
that they were undertaking a financial burden for which they 
had not been able to plan. For that year following the 
hurricane, CMS granted a waiver that gave them full 
reimbursement for their GME cost. However, that was only for 1 
year. Since then they have been subjected to the 3-year rolling 
average wherein only a portion of their GME costs are 
reimbursed. This adversely impacts our ability to secure 
adequate training slots for our residents.
    We have repeatedly offered suggestions and requests to CMS 
regarding ways to fix this problem but to no avail. Perhaps 
this committee could urge CMS to give us a proposal to fix this 
problem by some mechanism that is acceptable to them.
    On another front LSU is participating in a medical home 
demonstration project in New Orleans that will provide 
coordinated patient care in satellite health clinics. We also 
continue to forge partnerships with faith based clinics and 
private hospitals to deliver primary care in the spirit of a 
redesigned health care system. This initiative will utilize 
health information technology to monitor quality, enhance 
patient charting, and track prescriptions. Our faculty practice 
has already purchased and started implementing an ambulatory 
electronic health record, and we are making that available to 
the various primary care clinics in the region to implement the 
integration of the medical homes with the delivery of tertiary 
care.
    However, we need the ability to use DSH dollars to help pay 
for physicians and clinic services. Without this flexibility 
the medical home model of coordinated care through community 
clinics will not become a reality in Louisiana.
     We believe that the key to our ability to move beyond 
recovery to revolutionizing Louisiana's health care system is 
construction of a new LSU academic teaching hospital. As you 
know, LSU and the State of Louisiana, in February 2006, signed 
a Memorandum of Understanding with the Department of Veterans 
Affairs to build a joint medical center in downtown New 
Orleans. Land acquisition has been accelerated, architects have 
been selected, and we are identifying the types of service that 
will be provided by LSU, Tulane, and the VA and those that will 
be shared.
    Governor Blanco and the legislature meanwhile recently 
substituted $300 million in State money for the Federal 
Community Block Grants to insure that the State can meet VA's 
construction time table. In short, Louisiana and LSU are ready 
to go. So, while we are making steady progress mostly on our 
own, we still need Federal help to complete our recovery and 
reform. We need a firm and immediate commitment from the 
administration, particularly the U.S. Department of Veterans 
Affairs, for the construction of a new academic teaching 
hospital. This new facility is critical to the future of 
medical training programs at both LSU and Tulane. I believe 
that is the only way to insure that we have an adequate supply 
of skilled medical professionals in the future.
    Contrary to assertions by some skeptics, this project is 
the avenue of escape from what has been described by our 
critics as a two-tiered health care system. It is the lynch pin 
of a reformed health care system. Moreover, this project 
represents the largest urban renewal project in the history of 
New Orleans, a facility that will serve as a beacon of hope and 
security for individuals and business seeking to return and to 
rebuild. Thank you for your time, your interest, and your 
assistance.
    [The prepared statement of Dr. Hollier follows:]

                    Statement of Larry Hollier, M.D.

    Chairman Stupak and distinguished members of the 
Subcommittee, thank you for this opportunity to update you on 
the painstaking progress being made as we continue to recover 
from the impact of Hurricane Katrina on Louisiana State 
University's professional medical education programs its ten 
public hospitals, and 36 health care clinics spread around our 
state.
    When LSU representatives testified before this committee in 
March, they expressed considerable apprehension over the future 
of graduate medical education and health care delivery.
    Today, on behalf of my colleagues, as Chancellor of the LSU 
Health Sciences Center in New Orleans, my message is one of 
hope that we are finally moving forward.
    With the support of Louisiana's political leadership, 
including Governor Blanco and the Legislature, we are deploying 
satellite medical clinics in New Orleans and the first stage of 
what will be a comprehensive, statewide electronic medical 
records system.
    In addition, LSU's Health Care Service Division has been 
working closely with representatives of the U.S. Department of 
Veterans Affairs to plan construction of a joint academic 
medical center in downtown New Orleans.
    Collectively, we have much work left to do and our medical 
training programs are still threatened, but the picture I will 
paint today is significantly more optimistic than it was four 
months ago.
    I will also briefly address a number of continuing myths 
about the joint hospital project, falsehoods that have caused a 
great deal of concern among indigent patients and our veteran 
population.
    Overall, although wait times for uninsured and underinsured 
patients at our hospitals and clinics are improved, they're 
still too long.
    We also need more bed space for mental health patients. In 
a few weeks, LSU will open 33 mental health beds in leased 
space at a former mental hospital in uptown New Orleans.
    We are adding diagnostics beds for mental patients at the 
Interim LSU Public Hospital, but there is an overwhelming need 
to do more, and this need will not be met until a new, 68-bed 
crisis intervention unit at the planned LSU hospital is opened.
    LSU and the state are planning early next year to deploy a 
``medical home'' demonstration project in the New Orleans area 
funded by the State of Louisiana.
    The project will provide coordinated, patient-centered care 
that utilizes partnerships and health information technology to 
improve health outcomes at reasonable costs while providing 
increased training opportunities for our medical students.
    Key to the effectiveness of this project will be new, 
satellite health clinics operated by LSU doctors, nurses and 
allied health personnel in areas where our patients live. Those 
clinics will be operational by the end of October, and will be 
in addition to the other community and faith-based clinics 
currently in operation.
    We believe this approach when eventually deployed statewide 
will relieve overcrowding not only at the Interim LSU Public 
Hospital in downtown New Orleans, but also at private hospitals 
throughout the state that have seen their emergency rooms 
overwhelmed by uncompensated care patients.
    When the New Orleans demonstration project is fully online, 
it will include an electronic health record, which our faculty 
physicians have already begun implementing. It will provide 
quality guidance and monitoring of the quality of care 
delivered. It will also include an innovative software program 
to enhance patient charting and prescription tracking, a 
service not limited to LSU-run facilities.
    We have already forged partnerships with faith-based 
clinics and private hospitals to deliver care in the spirit of 
health care redesign without depending on a massive infusion of 
Federal taxpayer dollars.Our graduate medical education 
programs, meanwhile, are another issue. Dr. Alan Miller from 
Tulane Health Sciences Center is testifying regarding 
suggestions of temporarily changing how GME is funded following 
major disasters. LSU is strongly supportive of the suggestions 
outlined in his testimony on GME and believe it would be very 
helpful in stabilizing GME in the New Orleans area.
    Prior to Hurricane Katrina, LSU annually trained 
approximately 627 residents and fellows in 95 programs. Today 
475 LSU residents are being taught in 76 programs, a 24 percent 
decline.
    Because nearly three out of four physicians, dentists, 
nurses, and other allied health professionals are trained by 
LSU and remain to practice in Louisiana, I believe we are 
facing a long-term shortage of doctors and other medical 
professionals that will be worse than forecast physician 
shortages in other areas of the United States.
    This view is based on the fact that LSU's GME slots are 
increasingly going to international medical graduates, 
especially in internal medicine and family practice. These 
young doctors will likely return to their home countries once 
they complete their training whereas in the past, the majority 
of our graduates stayed to practice in our state.
    Following Katrina, the New Orleans area lost an estimated 
50 percent of its medical professionals. At LSU, we lost more 
than 165 faculty. However, we have been aggressively recruiting 
and our efforts have yielded almost 200 new faculty members 
during the last fiscal year. We also expect to add more than 
100 new residency slots by next summer.
    We are encountering a pioneering spirit among new faculty 
members who are committed to helping us revolutionize 
Louisiana's health care delivery system.
    The key to that revolution is the construction of the new 
LSU/VA academic teaching hospitals.
    Over the past four months, LSU and the State Office of 
Facility Planning and Control have accelerated land acquisition 
and design team selection, and are mobilizing teams that will 
complete historical preservation and environmental evaluation 
and construction of these facilities.
    Of particular note in this effort is the governor and state 
legislature's decision to substitute state funds for $300 
million in Federal hurricane relief funds to eliminate any 
possible delay in the state meeting the Department of Veteran's 
Affairs timeline for beginning the joint project. Among those 
state funds is $74.5 million for the purchase of 37 acres of 
land along with design work for the project. Legal teams are 
identifying and expediting property acquisition, environmental 
assessments, and relocation matters. Architects for both 
facilities have been selected.
    The city of New Orleans and the State Division of 
Administration, meanwhile, have executed a Cooperative Endeavor 
Agreement to purchase an additional 29 acres of property 
adjacent to the LSU site for the exclusive use of the VA.
    The LSU/VA cooperative planning group, which includes the 
VA, LSU and Tulane University, has identified dozens of 
services that will be provided by each hospital. Many of those 
services, such as lab work and radiology, will be shared.
    Still other services will be purchased from each hospital. 
For instance, LSU will purchase EEG, Pulmonary and Audiology 
services from the VA, while the VA will buy Radiation Oncology, 
Dental, and Dietary services from LSU.
    LSU alone estimates it will realize more than $4.2 million 
per year in operational savings. Our business consultants 
estimate combined operational savings to LSU and the VA will 
exceed $400 million over 25 years.
    This facility makes economic sense. Cash flow will be 
sufficient to operate the facility, service debt, and finance 
the continued maintenance of the new facility thereby reducing 
reliance on state funds.
    Moreover, the joint hospitals project, which will create 
20-thousand jobs, will spur growth in biomedical and research 
sectors and serve as the single largest post-storm urban 
renewal project in New Orleans history.
    A recent letter from Governor Blanco to Secretary Nicholson 
urging the VA's continued collaboration with LSU to rebuild the 
VA facility in Downtown New Orleans was cosigned by Louisiana's 
legislative leadership, the presidents of LSU and Tulane 
Universities and the chancellors of their medical schools, the 
mayor of New Orleans, the director of the downtown development 
district, and a number of individuals representing veterans 
organizations.
    My testimony would not be complete without addressing to 
those who contend such a project should not be built in a flood 
zone. It is important that they keep in mind breaches of 
Federal levees by Hurricane Katrina's monster surge inundated 
80 percent of the city of New Orleans.
    Flood maps indicate both proposed sites for the new VA 
hospital were covered or threatened by up to two feet of water.
    Plans for the new LSU/VA medical center, however, include 
armoring both hospitals against hurricanes and terrorism. First 
floors of both facilities will be built at least 25 feet above 
ground and the two hospitals will be capable of sustaining 
operations for 30 days following any potential disaster
    Finally, let me direct your attention to opponents of the 
joint LSU/VA project who contend that the population of the New 
Orleans area will not be large enough to support the new 
hospital.
    Population estimates indicate people are slowly coming back 
to New Orleans. Since Katrina, an estimated 90 percent of the 
veteran's population in New Orleans has returned along with a 
like percentage of residents in Jefferson Parish which is part 
of the regional catchment area for the new academic medical 
center. The average age of the population in the catchment 
parishes for the new hospitals will be older than their pre-
Katrina population and will hence require more medical 
services.
    This project will stop the so-called ``Brain Drain'' of 
skilled, well-compensated medical workers while attracting a 
new generation of health care professionals. It will also meet 
the medical needs of veterans for generations to come.
    After nearly two years, New Orleans remains a shattered 
city on the mend, but the outlook for health care and medical 
education is steadily improving.
    Since the last time LSU representatives appeared before 
this committee, our institutions have begun aggressively 
working out and implementing solutions on their own, but we 
still need Congressional help.
    The message from New Orleans today is that we are making 
major progress in building a ``medical home'' based health care 
delivery model using an electronic medical records system that 
we believe will serve as a model for the nation.
    Mr. Chairman and members, thank you for this opportunity to 
discuss these issues. I will be happy to answer any questions 
you may have.
                              ----------                              

    Mr. Melancon. Thank you, Chancellor Hollier. I appreciate 
those comments. Dr. Miller, if you would, with the Tulane 
Health Sciences, 5 minutes, please.

  TESTIMONY OF ALAN MILLER, PH.D., M.D., INTERIM SENIOR VICE 
 PRESIDENT, HEALTH SCIENCES, TULANE UNIVERSITY HEALTH SCIENCES 
                    CENTER, NEW ORLEANS, LA

    Dr. Miller. Thank you, Mr. Melancon, Mr. Whitfield, staff, 
and members. Since the March hearing, and through your efforts 
a number of actions have been taken that will have an immediate 
impact on health care. We must turn our attention to long-term 
stabilization, specifically the supply of future doctors and 
graduate medical education or GME. Discussion must include 
keeping our training programs vibrant. I will focus my comments 
on the role of GME in providing the region's health care and 
future workforce, the role of the VA in patient care and 
physician training, and financial stability for the region's 
providers. The tragedy of Katrina has energized our young 
adults. Students flock to New Orleans to assist in rebuilding.
    This fall, our medical school will admit its largest class 
ever with no compromise in quality. As a result of damage to 
the medical infrastructure, we have voluntarily downsized our 
GME programs. Each year, the Tulane and LSU train fewer 
residents, Louisiana faces long-term problems in physician 
supply. Prior to Katrina, Louisiana ranked second in the 
percentage of physicians practicing in the State in which they 
trained, yet Louisiana was still well below the national 
average for physicians per 100,000. Our experience revealed 
flaws in the system for reimbursing GME that still impacts us 
and will be repeated in other cities if a disaster results in 
the total or partial closure of a major teaching hospital.
    Pre-Katrina both schools had their largest concentration of 
residents at the Medical Center of Louisiana at New Orleans, 
MCLNO, which was closed for 15 months post-Katrina. Although 
partially reopened, it can accommodate only a portion of the 
previous total residents. The financing of GME is a complicated 
maze. We have provided diagrams demonstrating the process 
before and after Katrina. We train residents at several 
hospitals and rotate those residents among them. The medical 
schools act as pay masters so the residents have consistency in 
salary and benefits. During the period of total and partial 
closure the medical schools remain responsible for education of 
the residents and pay their salaries despite being unable to 
receive reimbursement from the closed hospital.
    As a result, Tulane lost $6 million in fiscal year 2005-06 
and anticipates $1.5 million this year. This process has been a 
bureaucratic nightmare. This diagram that you see on the screen 
shows you the situation before on top and since Katrina in how 
the medical schools operated with hospitals and CMS to receive 
reimbursement and train the residents. CMS provided initial 
waivers that helped but fell far short of solving the problem. 
Currently, we must find teaching environments that meet 
accreditation standards but cannot get agency approval until 
after the training is in progress. Closed or partially closed 
hospitals must enter into affiliation agreements with host 
hospitals which then enter into agreements with medical 
schools.
    Our proposed remedy is pictured in the third diagram in the 
written testimony. When a teaching hospital that functions in 
partnership with a medical school for GME will be totally or 
partially closed the slots that cannot be supported should be 
put in the stewardship of the medical school giving the school 
greater flexibility in assuring training and continued 
financial support. GME payments would go the host hospitals who 
would reimburse the schools. This would continue as long as the 
originating hospital could not support its total approved slots 
and be adjusted annually. The process would be far simpler and 
assure the stability of the GME programs.
    Another challenge has been the 3-year rolling average by 
which CMS funds GME slots based on the average number of 
residents over the preceding 3 years rather than the actual 
count. This was waived for affected hospitals through June 
2006, despite the fact that the programs never totally closed 
as was stated earlier. Hospitals accepting additional residents 
report significant negative financial impact and have been 
unable to fully reimburse the medical schools. The difficulty 
in finding temporary hospital placements for residents was in 
part a function of Medicare's cap on the number of reimbursable 
training slots assigned to hospitals. Hospitals were reluctant 
to accept residents because of the negative financial 
implications of exceeding the cap.
    The process of resident placement is dynamic in a recovery 
period. Adjustments must be made as the original training 
hospitals reopen beds and as feedback from accreditation 
agencies mandate change. We request that Congress instruct CMS 
or if necessary pass legislation to provide further exemption 
from the 3-year rolling average for hospitals that take in 
displaced residents until a replacement MCLNO is completed. 
Prior to Katrina, Tulane provided approximately 70 percent of 
the care at the VA medical center in New Orleans which also 
provided training for 120 residents. The VA closed as a result 
of Katrina and today provides outpatient services in VA clinics 
and admits some patients to Tulane University Hospital.
    The VA's integration with the Health Sciences Centers at 
Tulane and LSU provided a critical synergy. The missions of 
these 3 institutions in patient care, education, and research 
are integrally intertwined. The quality of the health care 
provided to our veterans is enhanced by the association with 
the schools and the highly skilled clinical faculty. It is 
critical that construction of a new VA hospital in downtown New 
Orleans proximal to the two medical schools begin without 
further delay. Finally, I ask you not to forget the doctors who 
are providing uncompensated care. If hospitals are compensated 
and doctors are not who will admit, diagnose and treat. Once 
again, I thank you for your continued attention and support for 
the challenges that we face.
    [The prepared statement of Dr. Miller follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Melancon. Thank you, Dr. Miller. I appreciate your 
comments. Dr. Peck, if you would, please, 5 minutes.

TESTIMONY OF GARY Q. PECK, M.D., AMERICAN ACADEMY OF PEDIATRICS

    Dr. Peck. Good afternoon. I appreciate this opportunity to 
testify today. My name is Gary Peck, and I am proud and pleased 
to represent the American Academy of Pediatrics. I chair the 
Academy's Disaster Preparedness Advisory Committee and I sit on 
the Board of Directors. I also am a former medical director and 
assistant State health officer for the Louisiana Office of 
Public Health as well as a former pediatrician who practiced in 
New Orleans.
    An effective health care system has two primary components: 
strong hospitals and related institutions, but an equally 
robust cadre of private practitioners in the community. We have 
heard a great deal about hospitals today and institutions. We 
have heard virtually nothing about the vitally important 
physicians in private practice, so allow me to share with you 
this afternoon the litany of issues faced by my colleagues in 
the New Orleans area.
    Many physicians faced the total destruction of their homes 
and office space, including medical records, equipment, and 
supplies. Physicians lost revenue during the weeks or months 
they were unable to practice. Many physicians who stayed in the 
region are only now--2 years later--seeing an adequate volume 
of patients to sustain their practice.
    Under the Stafford Act, physicians in private practice are 
considered for-profit entities like dry cleaners or liquor 
stores. As such, they are unable to access most forms of 
Government aid like the programs that assist hospitals and 
community health centers. The Louisiana Department of Hospitals 
and Health Program retains and recruits new providers, but has 
been the subject of a good deal of confusion, and its impact on 
retention, especially in pediatrics, is very unclear. While the 
greater New Orleans Health Service Corps will distribute $50 
million, 70 percent of that is earmarked for recruitment of new 
providers and only 30 percent for retention of existing health 
care workers in the New Orleans area.
     In the immediate wake of the storm, the entire Gulf Coast 
region experienced an influx of volunteer organizations 
providing free or low cost care to our residents. Local, 
private practitioners found their patients going to temporary 
facilities that were more visible, better advertised, and 
easier to access than their own practices. While certainly well 
meant, these efforts had the unintended consequences of 
diverting patients to temporary providers that fail to provide 
a medical home and deny needed revenue to local health care 
providers.
    With the loss of jobs after the hurricane, the number of 
patients covered by Medicaid or having no coverage at all has 
increased dramatically. Louisiana Medicaid now covers 
approximately 20 percent of all people in the New Orleans area. 
At the same time almost 65,000 fewer children are covered by 
Medicaid in the SCHIP program. We are faced with a paradoxical 
situation of having far fewer residents but a higher proportion 
of uncompensated Medicaid care.
    Physicians in private practice do not have the ability to 
charge more for their services. Pediatricians are locked into 
contracts with private insurances or Medicaid that prevent them 
from altering their rates. In fact, one private insurer, 
United, is currently decreasing reimbursement to New Orleans 
primary care pediatricians.
    The recruiting challenges faced by hospitals and health 
systems are as bad if not worse in physician practices.
     As caregivers for children, pediatricians do not treat 
Medicare patients and were therefore unable to benefit from the 
modest health provider shortage area increases disbursed 
through Medicare to Gulf Coast providers. Medicaid rates, in 
Louisiana average 60 to 70 percent of Medicare rates although 
recently the legislature has passed a measure that will raise 
our Medicaid payments to 90 percent of Medicare rates effective 
October 1.
    Pediatricians face very high overhead costs, particularly 
in the forms of vaccines, which must be purchased and paid in 
full up front with no guarantee that all of the doses will be 
administered or reimbursed. Pediatricians struggle to provide 
medical help, particularly for children with chronic or complex 
health needs. Usually they find the extra time and work 
involved does not get compensated. Children's mental health in 
New Orleans are woefully unmet; a recent study estimated that 
45 percent of children returning to New Orleans need mental 
health services.
    If we hope to rebuild a robust health care system in New 
Orleans that can provide quality, high health care to all 
patients. policymakers must recognize the crucial role that 
private physicians in private medical practices play in that. 
In pediatrics in particular, 85 percent of all patient 
encounters occur in privately owned and operated practice 
settings.
    In conclusion, I have two recommendations for the State of 
Louisiana. The American Academy of Pediatrics commends the 
State of Louisiana for its recent decision to increase Medicaid 
payments. Unfortunately, this increase is still insufficient to 
assure access to care for all children. Policymakers should re-
examine the emphasis of the greater New Orleans Health Services 
Corps on retention versus recruitment. The State's effort to 
establish additional community health centers and federally 
qualified health care centers should be reviewed to insure that 
it represents a long-term strategy that will best serve the 
needs of my area residents.
    The Louisiana Department of Health and Hospitals should 
affirm the vital role of private practitioners in the health 
care system by exploring creative incentives for supporting 
these practices and their efforts to serve their patients and 
recruit staff in their practices.
    The Federal Government must transform its goal in disaster 
medical care from providing short-term, temporary care to 
supporting the local health care system and its providers. 
After the immediate recovery phase, Federal efforts should 
focus on the reinstatement of local health care institutions 
and providers, rather than the provision of care through 
volunteers and short-term facilities. Health care providers, 
including for-profit private practices must be provided with 
aid to re-establish their operations. Patients must be 
encouraged and be assisted in returning to their prior health 
care providers to improve the continuity of care. The Stafford 
Act should be examined to identify avenues for providing aid 
for profit health care entities such as private practices, 
recognizing the vital role they play in a health care system.
     The American Academy of Pediatrics commends you, Mr. 
Chairman, for holding this hearing today to examine the ongoing 
challenges facing the health care system in my home, New 
Orleans. I appreciate this opportunity to testify, and will be 
pleased to answer any questions you may have. Thank you.
    [The prepared statement of Dr. Peck follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Stupak. Thank you, Dr. Peck, and thank you to the full 
panel for being here today and your testimony and your help and 
support in what we are trying to do in New Orleans. I apologize 
for being in and out but we have been on the floor with SCHIP. 
For questions, Mr. Melancon, please, do you want to start?
    Mr. Melancon. Thank you, sir. First, and a positive 
statement, Dr. Quinlan, don't feel bad for trying to take an 
opportunity and make it work for your hospital. No one faults 
you for that. The people that should be faulted for that 
happening in the sense of where the VA didn't go yet, where 
Charity didn't go yet or the people up here that have played 
politics with it and left it out there. I truly understand. Now 
our goal is, and I think what I heard from every one of you 
gentlemen and Dr. Rowland, is that we have got a lot of 
immediate problems that we need to address, and I think you 
have delineated those very well today. And if I can, I would 
like to rather than ask questions just kind of make sure I hit 
them and then let us talk about what we do from this point 
forward.
    I have been in office with every one of you, I believe, at 
some point in time in the last 2 years, and we have had these 
discussions. As Dr. Hollier, I believe, expressed it never went 
anywhere after you had the discussions with the bureaucracy. 
They listened, and then as I heard today, and I said where is 
the action switch, we haven't seen that. One is we have to 
remedy the situation with the bleeding, with the red ink, and 
address those issues in whatever way that we can try and get 
those things, take a direct attack at them through the 
legislation.
    Now the second one is the GME, the third is the DSH dollars 
to compensate physicians at the hospitals. I think I have got 
them all. They are not all inclusive, but what I would like to 
ask of the chairman and the ranking member is that at this 
juncture, the end of this meeting, that the staff of this 
committee become the mediator between the Louisiana medical 
community or the New Orleans regional medical community and the 
agencies we are dealing with and start trying to put something 
down that they can do with either the rules and regulations or 
that we can do through legislation here because it is entirely 
too long the process that has been ongoing. But is there 
anything that anybody other than your prepared statement, Mr. 
Chairman, if I am allowed with my extra 2 minutes that if 
anybody has any other comments or suggestions of things that we 
need to make sure to include.
    Dr. Hollier. I will just make one comment for emphasis. We 
keep hearing multiple comments being made in Washington that 
they would prefer that we not build a replacement University 
Hospital in New Orleans in order to help drive health care 
reform. We have been trying to change the system since before 
Katrina, and we are still committed to doing that, but what is 
often missed is that how one funds health care and how one 
provides graduate education and care for patients are related 
but different. It is important to recognize that the University 
Hospital, Charity Hospital, that we had before the storm not 
only trained residents but it had over 2,200 students that it 
trained.
    LSU and Tulane trained over 70 percent of the physicians in 
the State of Louisiana. All the health care professionals are 
dependent upon this training system. It has been very 
destructive to have so much opposition to building a hospital. 
I think all of my colleagues here that we worked with and the 
hospital CEOs have had concerns on their own about not being 
able to replace the workforce that they need, so this is an 
important thing we recognize. We need a place not only for the 
residents but to also train all these students that we have to 
train.
    Mr. Melancon. Let me ask one. When you have had the 
conversations after either our meetings or the last hearing and 
we thought maybe things would move, what kind of response did 
you get from CMS or VA or any of the agencies? Was it just they 
read to you what the programs provided and then left it or did 
they try and give you any suggestions?
    Dr. Miller. Particularly on the GME issues, I think what we 
have tried to do is educate on what the problems were and how 
we saw that they might be ameliorated, and what we got in 
return was education on what their regulations were and how 
they wouldn't allow what we wanted.
    Mr. Melancon. And when you presented to them the problems, 
what was their response? What did they do?
    Dr. Miller. It was similar to what you had this morning in 
the earlier panel.
    Mr. Melancon. A renumeration of the program.
    Dr. Miller. Yes.
    Mr. Melancon. Mr. Chairman, thank you.
    Mr. Stupak. Mr. Whitfield for questions, please.
    Mr. Whitfield. Thank you, Chairman Stupak, and I would 
thank you all once again. I know how frustrating it is to be 
sitting here so many hours when you have so many issues facing 
you. Chairman Stupak, I would follow up on the suggestion made 
by Mr. Melancon that it maybe would be helpful to have our 
committee staff be intermediaries to deal with this because 
every time we have a hearing and the people from the Federal 
Government, CMS, and other agencies may have the very best 
intentions but it appears that there is always an explanation 
of a regulation or a rule or a law or why you can't do 
something, why you can't address the issue, why it is an 
obstacle. And so all of us seem to be tied up in knots and not 
getting anywhere. And when Dr. Peters presents the combined 
financial statements of the five hospitals that he talked about 
for the first 5 or 6 months of this year and the combined 
losses in excess of $53 million, it makes you wonder--and, by 
the way, in March when you all were here we were talking about 
those losses as well.
    And so we have discussed the depleting of these cash 
reserves and the deficits and how long can you all really 
continue to operate? Where does this money come from? If you 
all would address that, you executives of those five, how long 
can you operate?
    Mr. Muller. Maybe I should start because I think I am a 
little different at West Jefferson because of the bond 
insurance requirements. We have to have an operating income 
quick. They are talking about September, another review by 
December, so if we don't have operating income, which would 
include grants and things that are immediate then we become in 
default. They take the mortgage. They can come in and operate 
West Jefferson. That would not serve the community.
    Mr. Whitfield. And what about you, Dr. Quinlan? What about 
Ochsner?
    Dr. Quinlan. Well, we made a commitment from the beginning 
that we are not going to put patients in the middle, and to 
date we have been reasonably successful at preserving services 
and we have committed the company to risk its existence to 
promote economic growth in addition to care. We keep scrambling 
to find new ways to stretch dollars and make them work but the 
losses make that progressively more difficult.
    Mr. Whitfield. Mr. Hirsch.
    Mr. Hirsch. We are in a similar position. I brought a 
deficit budget to our board in the beginning of this year. I 
have never in my career--I can't say that I have never operated 
at a loss before but I have never planned on doing it before 
the year started. And that budget called for going through 
about two-thirds of a board designated fund of cash to support 
our operations to the tune of about $20 million. And so we 
can't do that for another year or two. It is a spiral. To Mr. 
Muller's point, we had the same kind of issues. We are not in a 
technical default right now but I don't know how far away we 
might be from that. We had that last year as well so it is--the 
question gets asked what do you cut and when. I am not certain 
about that, but I know that it looms as a possibility. I am not 
prepared today to say exactly what but again in almost 30 
years, I have never seen a picture like this.
    Mr. Whitfield. Dr. Peck.
    Dr. Peck. This is a great question. I can comment on a 
couple of pediatricians. I know of two practices in New Orleans 
who are just getting ready to go under. They can't practice for 
much longer. And it wasn't just New Orleans. It is the Gulf 
Coast. There was a pediatrician who practiced in Bay St. Louis. 
He was very young. He went back to Bay St. Louis after Katrina 
and tried for 2 years to get things going and just ran out of 
money. I have two practices in New Orleans I know of that if it 
doesn't turn around they are having to leave the city just 
because of reimbursement costs. It is incredible.
    Mr. Whitfield. Well, thank you very much for that, and I 
know this next question is not related to the physician which 
is an important component of this obviously, but after our last 
hearing Dr. Quinlan and Dr. Miller and Dr. Hirsch signed a 
letter which they outlined certain solutions to this problem or 
at least helpful steps that could be taken. And one was 
relating to critical access designation so the reimbursed costs 
plus, and I remember at that hearing there was a lot of 
discussion about that but whatever happened to that suggestion 
and is that not possible or what is the deal?
    Dr. Quinlan. Actually we have looked into that further and 
we have different effects with the different hospitals based on 
the size of their graduate medical education program. Because 
of our size we have 350 residents and fellows that would 
actually lose revenue by that mechanism. Don't ask me how but 
we would. It is kind of an archaic accounting system. Others I 
think would benefit so the effects would not be the same.
    Mr. Whitfield. So some would benefit and some would not?
    Dr. Quinlan. That is correct.
    Dr. Peters. I would make the comment probably very general 
in nature. I think what it really takes at this point is to try 
to come up with some creative solutions. I think first 
acceptance of the data and maybe making sure that it is 
accurate, which we are convinced that it is, I think that that 
has always been a question mark with some of the agencies, is 
it really as bad as what maybe individuals anecdotally portray. 
So and not to be repetitive, but I think there have been a lot 
of dead ends with regulatory roadblocks, and I think I will 
speak for East Jefferson, we would welcome staffers being 
helpful to be intermediaries to whether it is thinking out of 
the box or really determine a type of cost-based reimbursement 
that would address this unique issue that exists.
    Mr. Whitfield. Thank you very much. Do you want to say 
something, Mr. Hirsch?
    Mr. Hirsch. I was just going to say that we would be 
supportive of cost-based reimbursement. It would help us. We 
have hit these same kinds of dead ends that we heard earlier 
with some of the questions that the Chair was asking, and we 
just hit dead ends on these kinds of solutions.
    Mr. Lagarde. For Tulane we would--critical access 
designation would negatively impact us with the same reason it 
would negatively impact Ochsner. The hospitals with the large 
teaching programs, I agree with Dr. Quinlan on this, it is 
impossible to understand but it would not benefit. It would 
have millions of dollars worth of impact to us to move to a 
critical access designation at this point in time.
    Mr. Stupak. But if the purpose is to give you critical 
access designation so you can be paid a premium for your 
services, not asking you to move or do other things, just that 
the reimbursement rate was at a critical access hospital rate 
wouldn't that be beneficial?
    Mr. Lagarde. In theory it would but the way the critical--
if critical access designation is amended from the way it is 
currently paid it potentially could be beneficial for all five 
hospitals represented here but the way it currently reimburses 
hospitals it would have an impact upon----
    Mr. Stupak. Because of your GME?
    Mr. Lagarde. Because of not only GME but also our indirect 
medical education costs as well.
    Mr. Stupak. We sort of see that from this side of dais, and 
we see it in sort of a separate situation like you would think 
you would be reimbursed your critical access for services 
provided, the emergency room, your GME, but one offsets the 
other, right?
    Mr. Lagarde. That is correct. Dr. Hollier was reminding me, 
it is a formulation, it is a formula driven reimbursement that 
doesn't fully account for the cost associated with large 
graduate medical education or direct or indirect medical 
education.
    Mr. Stupak. You want to waive those requirements so you can 
get reimbursed for services.
    Mr. Lagarde. I think as Mark Peters has mentioned this is 
something that we would probably like to have a good 
conversation about.
    Mr. Stupak. Dr. Peters, on the financial statements that 
you provided us, do you have any objection if this committee 
bipartisanly asks GAO to go through those numbers so we can get 
some quick verification? We will ask them to do it 
expeditiously because we need some verification and get back to 
HHS and others to move this process along.
    Dr. Peters. No, absolutely. We all welcome that and we 
welcome the rapid approach to that.
    Mr. Stupak. We talked today, and there has been discussion 
about like $195 million coming in to the area and another $100 
million is supposed to be available around September 1, and $26 
million for GME. You hear these numbers, and my folks back home 
are saying, man, you are pouring a lot of money in there, but 
then I look at your financials and it is not there, the money 
is not there, so how did we get to this point? Can you give us 
a little bit more? Has Secretary Leavitt or representatives 
from HHS engaged you in a dialog about these issues, the 
financial parts? Mr. Peters, do you want to start? How did we 
get here?
    Dr. Peters. I think it is probably a multi-factorial 
reason. One is I think the efforts have been diluted as we have 
talked about. I think that Medicare wage index money is a good 
example that went to 31 parishes, 60 some hospitals. That 
diluted its impact on the hospitals in our area. I think that--
--
    Mr. Stupak. The wage index--let me stop you there. So 
because people were not in your hospitals, what happened to the 
wage index? Did they take it down on you? Did you get less 
money?
    Dr. Peters. Well, first off the dollars came as a grant. It 
was not stepping----
    Mr. Stupak. I see what you are saying. It was spread out 
too.
    Dr. Peters. Change in the dial, the new setting that would 
pay us at a different level for every Medicare patient that is 
admitted to the hospital which is again one thing that is an 
immediate partial solution to the problem because there is a 
process already in place. There is a way to audit it. We do 
Medicare cost report, et cetera. So I think that that is a huge 
area of opportunity. I think second maybe stepping aside from 
dollars, I think that there has been maybe too much emphasis 
looking at long-term reform and not the immediate needs. And I 
think what the testimony of my colleagues has expressed today 
health care providers continue to want to do the right thing 
and keep taking care of patients in spite of all this bad 
stuff. None of us are businessmen at heart and if we were we 
probably would have about half the beds in place. So I think 
not enough attention to address the short-term needs which 
honestly would help us have more ability to look at reform as 
we move forward.
    Mr. Stupak. Define your short-term needs. From listening to 
the last panel with HHS it seemed like the short-term needs 
was, OK, the hurricane was over, things calmed down, we are out 
of here. But I see your short-term is a little bit longer than 
what----
    Dr. Peters. To fill a gap that exists to get us back to 
break even because the other thing we have not talked about----
    Mr. Stupak. Was that short-term going to be 2 years, 3 
years?
    Dr. Peters. I think we would say 3 years, 3 years to fill 
that hole because the other thing that has happened is that we 
have all cut back on expenditures. We have all not bought some 
of the things we would have normally and there is going to be a 
huge price to pay at a later date. The other thing that I 
wanted to mention to Congressman Whitfield's question is how 
long can we all go. The other thing that has happened that we 
all appreciate now is how intertwined our fates are and whether 
it is East Jefferson, West Jefferson, Ochsner, Touro or Tulane 
if somebody cuts services tomorrow it is going to make my 
situation worse because this is all that is there. And with all 
due respect to the new facility, the VA, where it should be 
located, this is that immediate issue that if as Gary talked 
about he is forced out of his own control to do something we 
are all going to pay the price and it starts back that downward 
spiral. And that is not even talking about how much that impact 
will be on whether somebody is going to come back to New 
Orleans.
    Mr. Stupak. Well, you must have had these conversations 
with HHS. What is their response? We certainly understand it up 
here but what is their response? What are they doing to help?
    Dr. Peters. They listen. They will say we will try to 
evaluate and look at some of these solutions, and again there 
have been partial solutions. East Jefferson got $5 million for 
the Medicare wage index. That is a lot of money but relative to 
where it should be if current data was being used it to a 
degree it is like me saying here is a quarter, go have a great 
lunch. It is nice you got a quarter but I don't think it is 
going to buy you much of a lunch. We appreciate that effort but 
it just hasn't taken care of it, and we are frustrated too. We 
are very frustrated. But also why we are here is we are still 
trying to come up with solutions.
    Mr. Stupak. Dr. Miller and Dr. Hollier, I mentioned earlier 
to HHS that the Utah demonstration project for reimbursement of 
your GMEs, could that work in your situations or am I just off 
base?
    Dr. Miller. After that, I talked a little bit with 
Secretary Cerise and with Dr. Hollier regarding that. Something 
of the modification of that plan could possibly work for us. I 
think the plan itself is too broad to apply because you don't 
really need to apply it to the hospitals that are open and 
taking care of their own GME slots. It really only needs to be 
applied or something like it applied to the handling of GME 
slots from a closed or partially closed facility. So if there 
were 600 some odd slots at MCLNO prior to the storm, if you 
could put those 600 slots into some type of stewardship, 
whether the stewardship was administered by the medical schools 
in proportion to what proportion of those slots they handled 
before or by some type of oversight, that would go a long way 
to solving the problems. We would be able to place those 
residents in hospitals that could handle them with the proper 
teaching environment.
    The funds would flow so that the medical schools and the 
hospital supporting the GME were reimbursed, and it should take 
away any of the 3-year rolling average problems.
    Mr. Stupak. I don't mean to interrupt you, but could the 
two of you put together a proposal of the modified Utah, get it 
to us, and we will try to coordinate that with Secretary 
Cerise, and maybe we can start pushing HHS. So what I have been 
hearing again today is DSH payments, we have to get that fixed. 
We could do a waiver there. The GME, we need to fix this one. 
The wage index, we have to get back and take a look at it now. 
Any other areas I am missing? I know we still got the BA issue.
    Dr. Quinlan. I think the other issues would be don't forget 
immigration to increase the labor pool. Those are caught up in 
the visa problem bottleneck. And remember the wage index refers 
just to that. It is a workforce issue but there are other 
expenses around insurance and utilities that are significant 
contributors, and there are other smaller ones but this problem 
is not one thing. It is hard for people to understand. It is a 
lot of things that go against us and a little bit that doesn't 
go for us. In aggregate, that is how small companies develop 
large deficits.
    Mr. Stupak. I am looking at this financial and I see 
utilities are up 32 percent, your employee contract labor is 
162 percent increase. This is pre and post-Katrina. Then I am 
looking at insurance, business interruption, that is up 35 
percent. Bad debts up over 30 percent, so I can certainly 
understand how these numbers multiply and if there are five 
hospitals it multiplies in a hurry. Dr. Rowland, if I can ask 
you just a couple quick questions on some financial things. You 
have heard the hospitals stating their financial situation and 
it sounds pretty stark. What would you recommend to the 
committee and some of the HHS areas they could address?
    Ms. Rowland. Well, I think that one of the issues that has 
clearly come out today is that our health policies and health 
reimbursement policies are based on a health system that is 
continuing and continuous and so you can go back to 3-year old 
data and move forward. I think there clearly needs to be for 
future disasters like this and to even help here to have some 
mechanism by which these rules can be flexible and suspended. 
Then if a crisis occurs you can have a demonstration program or 
an initiative that lets you weave together all these pieces 
that everyone has talked about today whether it is for special 
incentives for workforce or other componets.
    And I recall many years ago, when I worked at the 
Department of Health and Human Services, we had an initiative 
we called financially troubled hospitals. And it happened in 
New York, it wasn't Louisiana at the time, but we were looking 
at ways to use grant funds combined with waivers of Medicare 
and waivers of Medicaid and put together a demonstration 
project that could really move in and provide the funding. And 
the other piece that I have heard today is that it not 1 year 
or 2 months. It is over a long period of time and that instead 
of focusing on what the health system will look like in 2020, 
we need to focus on how to get enough of the resources there to 
get them over the hump, and the hump I think is a lot higher 
than what we had said before. But clearly looking at one of the 
lessons out of this I think is to really put together some kind 
of a disaster-related assistance so when a health system is 
disrupted as that in Louisiana you have some ability to go in 
whether it is an earthquake in San Francisco or whatever.
    And we clearly just see a patchwork approach, and I think 
that is why there are so many stumbling blocks about trying to 
put one piece together and another piece doesn't work.
    Mr. Stupak. I am sorry. I am way over my time. Mr. Burgess, 
do you have questions? I am sorry. I didn't see you down there.
    Mr. Burgess. That is all right, Mr. Chairman. Cheerful 
persistence is my motto today. Let me just ask a question I 
had. I probably ought to ask this of Mr. Miller because I 
remember we talked about this in October 2005 when I was there. 
Community development loans were monies that you all needed to 
keep your operations going. Actually I think you wanted those 
to come in the form of Federal grants and they actually came in 
the form of loans. But my understanding from information I 
received is there was $100 million left on the table at the end 
of September 2006 that was not subscribed. What was the reason 
that you couldn't utilize that money, that the hospitals 
couldn't utilize the money? Was it because they had to be paid 
back? Was that a problem with your bond holders from East 
Jefferson and West Jefferson's perspective?
    Mr. Muller. Actually a couple things. The formula again for 
receiving any amount of money comes from your revenues lost and 
the CDL. We had actually applied for almost $50 million and 
ended up getting $30 million, so that $20 million was left on 
the table East Jefferson, Jefferson Parish, Orleans Parish, 
whoever got the CDLs. The formula drove a lower number. The 
second thing----
    Mr. Burgess. So then let me just interrupt you for a 
second, then that money left on the table could not be 
accessed? You didn't get another bite at it?
    Mr. Muller. No.
    Mr. Burgess. Does anyone know what has happened with those 
dollars since then? When the time limit expired did those 
dollars come back to the Federal Treasury or maybe that is 
something we need to find out, Mr. Chairman. I don't know what 
happened to those dollars.
    Mr. Stupak. That is a good point. That is a good point. 
What happened to them? If it was designated for you and you 
couldn't use it because of the formula based upon past old 
information if that money has been designated why can't we get 
it back?
    Mr. Burgess. And let me just, reclaiming my time, let me 
just ask have we done anything legislatively to alleviate some 
of the burden as far as the repayment of this? Has anything 
happened to your understanding in either the House or Senate 
where they made a legislative fix that these loans would 
convert to perhaps grants where repayment would not be 
requested?
    Mr. Muller. Well, it was approved in the Iraq war bill, 
part of the Iraq war bill, to have them forgiven. Again, we 
said that is wonderful. What we have found is that the process 
of forgiveness is going to take several years, and that is the 
problem.
    Mr. Burgess. Again, reclaiming my time, this was in the 
supplemental that we just passed in June, is that correct?
    Mr. Muller. In June, that is correct. It was in the bill. 
It was forgiven. We said wonderful. I believe the rules came 
out like end of July or something and we found that it would 
take several years to do it. I am not going to get into how 
they decided this but it is a legislative way of doing it.
    Mr. Burgess. Mr. Chairman, I know we are not a legislative 
committee but maybe we could put our staff to work on this if 
there is language that we can write that would make this money 
available and make those loan forgivenesses accelerated so that 
you guys aren't in hot water with the New York bond holders and 
can continue----
    Mr. Stupak. That was not the intent of Congress, that is 
for sure. Maybe HHS wrote the rules that way but that is not--
--
    Mr. Burgess. We actually wrote part of the rules that way.
    Dr. Quinlan. Can I make a point?
    Mr. Burgess. Please. I wish you would.
    Dr. Quinlan. Not all institutions are eligible because we 
are not governmental agencies.
    Mr. Burgess. And that is a very good point. Had these been 
handled as grants rather than loans perhaps Ochsner would have 
had the availability of some of those funds. And again, Mr. 
Chairman, I would just suggest that if we are looking for 
legislative fixes that may be something that we ought to 
investigate.
    Dr. Peters, I do need to ask you, and I thank you for 
outlining the five issues, the target issues, that you brought 
to our attention. And based on your understanding of what is 
available, what do you see--I know my time is brief. Maybe the 
chairman will indulge me a similar amount of time that he had. 
What do you see as the fixes that are amenable that could be 
done from the Federal agency, from HHS, from the standpoint of 
State government, and the standpoint of congressional activity? 
Are there things that come to mind that leap off the page 
looking at those five targeted areas where if HHS would do 
this, if the State would do that, and if Congress would do the 
other things that your lives would be improved.
    Dr. Peters. At the State level, I think that what we would 
really like to see is a consistent, more than a 1-year response 
of how we could plan from compensated care dollars. Our State 
goes through a legislative process every year. It is always 
unclear how that will settle out so we are really interested in 
consistency, again, over the next 2 to 3 years to let us 
effectively plan.
    Mr. Burgess. Let me just interrupt you for a second. Have 
you found a sympathetic ear at your State legislature for that 
concept?
    Dr. Peters. I think that the State legislature has been 
very engaged in this process. I think they have wanted to come 
up with some solutions.
    Mr. Burgess. I hope they have.
    Dr. Peters. I think one of the challenges that remains is, 
how much should be directed to New Orleans as it relates to the 
other part of the State, so that is a recurrent issue both at a 
State and Federal level of everyone has problems these days and 
health care is not wonderful anywhere, so we face that 
challenge. At the Federal level----
    Mr. Burgess. Let me just interrupt you there for a second. 
I just have to ask this, and it may be inappropriate and I 
apologize in advance if it is, but other States were affected 
by this disaster. Are they having the same types of 
difficulties vis-a-vis their State legislatures with the 
distributional issues that have been brought to our attention 
this morning? Is it unique to where you are living or is it in 
fact all of the States that have been so affected have found 
the same problems?
    Mr. Melancon. If I could, if you would yield for a second, 
I think I can explain something. What happened in Orleans 
Parish is that the entire----
    Mr. Burgess. We have experts that we asked--you and I can 
talk any time.
    Mr. Melancon. The difference of what happened is on the 
budgetary problems the State constitutional amendment says they 
have to balance the budget every year, and they don't do 2 
years of projections. That is----
    Mr. Burgess. You and I can have that discussion.
    Mr. Melancon. I yield back. Thank you.
    Mr. Burgess. Is there anyone on the panel who has a feeling 
about that? Is there something that is unique to Louisiana or 
is in fact Alabama and Mississippi having similar sort of 
difficulties?
    Mr. Lagarde. Wearing my HCA hat, we operate hospitals in 
Lafayette, Louisiana and also Gulfport, Mississippi. Neither of 
their total of four hospitals that we operate in these other 
communities, as well as we operate a hospital on the north 
shore of--none of our hospitals anywhere else other than in 
Orleans and Jefferson Parish do we have this fact pattern. As 
far as the metrics, the normal operating metrics of hospitals 
and hospital expense management issues, revenue issues, totally 
out of whack, and Orleans and Jefferson Parish in relation to 
anywhere else that we do business.
    Mr. Burgess. OK. I think, Mr. Chairman, that is something 
at some point this committee does need to follow up on. Let me 
go back to Mr. Peters, and then again from the standpoint of 
the Federal agency and from legislative action, are there fixes 
you see that aren't over the horizon that are within your grasp 
or within the capabilities of the Federal agency or this 
committee?
    Dr. Peters. I think a very rapid meeting of the minds that 
says, OK, we have this gap, how can we best accomplish fixing 
that, or something that comes close to that that is acceptable. 
We in this conversation talked about cost-based reimbursement, 
critical access designation, adjustment of the Medicare wage 
index. I think the numbers need to be plugged in and think 
about how can we come up with the solution and then create 
whether it is waivers or legislative changes to make that be 
accomplished and not have the perspective of we can't do this 
because of this rule or that rule.
    As you have heard, we all have some different structures 
and different needs, and so I think thoughtful analysis of all 
of those potential solutions so that we don't create a solution 
that partially solves the problem or helps two out of the five 
of us which then doesn't really solve the New Orleans 
situation.
    Mr. Burgess. Very good. And, Mr. Chairman, again, I would 
ask that perhaps that is something we can task our committee 
with trying to draft whatever language would be necessary. And 
then finally, Dr. Peck, in the time I don't have remaining, let 
me just ask you because it did come up earlier about 
preparedness for the current hurricane season that is ahead of 
us, how do you feel--obviously a hurricane planted square at 
New Orleans again would be--strike the community with an 
additional disaster do you have a feeling as to the level of 
preparedness?
    Dr. Peck. I certainly have concern. Something you could do 
is certainly look at the Stafford Act again. I think the 
Stafford Act needs to be reexamined at and potentially have 
some rewriting of the Stafford Act so it can help for-profit 
health care providers for the immediate recovery of a 
situation. Should it happen next weekend, private practitioners 
could be of benefit from that, and I think you would go a long 
way to help that region and that part of America.
    Mr. Burgess. Very good. I just want to thank everyone for 
being here and for your indulgence today. We have had things 
happen on and off the floor that have kept us away, and I 
apologize for the time I wasn't here. It wasn't because your 
issue is not important to us, and some of the most venerable 
names in American medicine, Charity Hospital, Ochsner Clinic, 
these are words I heard all my life growing up because my dad 
was a physician too. These are cherished medical institutions 
in our country and we are really privileged on this committee, 
Mr. Chairman, to be able to be participating in saving these 
institutions. With that, I will yield back.
    Mr. Stupak. I thank the gentleman.
    Mr. Melancon. If I may, Dr. Peck, in your testimony you 
mentioned the monies from the DRA are going to bolster the 
greater New Orleans Health Service Corps in the fact that the 
bulk of the money will be going to attract or recruit new 
providers.
    Dr. Peck. Yes, sir. Of the $50 million that is going 
through, 70 percent of that is going to be for the recruitment 
of physicians to the area versus 30 percent that is going to be 
for retaining of physicians.
    Mr. Melancon. So very little that is going to help you or 
other physicians like yourself?
    Dr. Peck. That is correct.
    Mr. Melancon. Another question, the monies that they are 
talking about to attract physicians back in, will that also be 
available to the physicians that have hung in there if they are 
not back up to that level of income?
    Dr. Peck. Talking to the pediatrician in the city of New 
Orleans it is available but the restrictions and the confusion 
about the applications and all the restrictions within--three 
big practices that I know in pediatrics, and one of those had 
about a 99 percent Medicaid practice. The other one had a dual 
practice in Metairie and in New Orleans. It was not worth the 
effort, the issue or the detail, so of all the private 
practitioners that I know of in my region 1 of them ended up 
applying for it and receiving that care. It is certainly 
available for those that come out and if you did receive it you 
were pretty much insured--unless you really had a substantial 
practice--of insuring yourself at $33,000 annual salary.
    Dr. Miller. I do want to say that it is a good thing. I 
think it can be simplified and it can be made better but 
certainly this $50 million that is available, and it came in 
one pot of $15 million that was very heavily for primary care 
and recruitment, and then the second pot which more recently 
came to the State of $35 million, which does have more for 
retention and also more for specialties and allows more use by 
the teaching institutions is a good thing. It can be improved 
in the way that physicians who are currently in practice and 
have needs can access it, but I think it is a positive that 
came out of previous hearings.
    Ms. Rowland. Mr. Chairman, if I could interject. I think 
one of the ways to really help the existing physicians who are 
there is through some of these changes like we talked about 
with the DSH allocation to allow that to go to non-
institutional providers and to help physicians because 
currently there is no way to really provide for the 
uncompensated care cost that they may be incurring. I think you 
need a dual strategy, one that helps recruit people back but 
also helps to provide a reasonable income to those who are 
there practicing and seeking to re-establish----
    Mr. Stupak. Well, Dr. Peck or Dr. Miller, have you talked 
about the DSH payment concept to help you out? Have you looked 
at that if all if we can get a waiver here?
    Ms. Rowland. I think the State has already asked for such a 
waiver but it hasn't been granted.
    Mr. Stupak. Was it turned down or granted? The State asked 
for it, did they not?
    Ms. Rowland. They just asked for it but----
    Mr. Stupak. Or HHS.
    Ms. Rowland. But it has not been granted.
    Dr. Peck. I certainly don't know the immediate answer but I 
certainly can get that for you from one of the----
    Mr. Stupak. OK. I think it was turned down anyway or not 
ruled upon. That is one I think we should take a look at for 
those providers who tried to hang in there. Anyone else? Mr. 
Burgess.
    Mr. Burgess. To clarify, are you talking about the 
disproportionate share funds that were allocated for the fall 
of the last quarter of 2005 or have there been ongoing 
allocations for DSH funds for hospitals that are no longer in 
existence?
    Mr. Stupak. I am talking about 2005.
    Mr. Burgess. Then going forward, and I don't know if anyone 
can answer this, what has happened to that stream of 
disproportionate share funds for say all of the quarters of 
2006? If Charity was not able to see patients then what has 
happened to those funds?
    Dr. Hollier. Dr. Cerise could probably answer that but I 
believe that some of those funds were moved to where the 
patients were now being cared for in the other Hospitals. 
Lafayette got a large influx of patients. Baton Rouge got 
another large number of patients; so some of those budgetary 
funds were moved there where the patients were cared for.
    Mr. Burgess. Were any of those funds moved to East 
Jefferson, West Jefferson, Touro, Ochsner?
    Dr. Hollier. I think that is the problem we are talking 
about. They haven't been able to have that.
    Mr. Melancon. Mr. Chairman.
    Mr. Stupak. Mr. Melancon.
    Mr. Melancon. If I could, and I think we have a good pretty 
good handle on the issues that are here in front of us, and I 
would like to request, if I could, when you think about it we 
got what, a five-person staff for this subcommittee, the 
Department has about 5,000 people, and they can't seem to solve 
the problems, if we could ask for a meeting with the Secretary 
and Mr. Madison and sit down and go through the list and find 
out what their intentions are. We have talked about just trying 
to move this forward. We have tried to do it nicely. I had the 
same problems with FEMA. You bring it to public attention. They 
get a little bit of responsiveness and then all of a sudden 
they go back to wherever they came from and disappear, so, Mr. 
Chairman, I would make that request if I could.
    Mr. Stupak. We tried that a few times, but we will 
continue. Any other questions?
    Mr. Burgess. I will just say obviously the flooding we have 
had in Texas this spring nowhere near on the order of magnitude 
of what you have endured but I will just have to say the 
Federal agencies I have found were responsive when those 
requests were made, and I am still having a hard time 
understanding what is going on that makes this so difficult to 
solve. I know it was a big storm. I know it is going to be 
difficult to recover from it, but it just seems like we have 
more than our share of difficulty dealing with this. And, 
again, I just frankly don't understand what the problem is.
    Dr. Quinlan. It is a simple issue of scale. This scale is 
of such magnitude it simply cannot be dealt with by 
conventional means. It is that simple. The tools that are 
designed to address these kind of problems were designed to 
address exactly what you experienced in Texas and absolutely 
has nothing to do with what we have experienced in New Orleans.
    Mr. Burgess. But still after 2 years time and $100 billion 
from the Federal Government, it seems like we should be doing a 
better job. They had the same--and again I don't know really--I 
haven't traveled to Mississippi. I don't know the difficulties 
that they have encountered or where they are in their recovery 
but we don't have Mississippi at the table and they had the 
same storm. And I realize that New Orleans had three crises 
happen one right on top of the other with the wind, the water, 
and then the levees breaking. But still it seems like we should 
be in a better place now with all of the effort that has been 
extended. And I don't understand why it is so difficult to 
overcome that inertia and make some things happen.
    Mr. Melancon. If I could----
    Mr. Burgess. And again we have plenty of time to talk----
    Mr. Melancon. And I would like to but I wanted to invite 
you to come on a CODEL on the 12th through the 14th to New 
Orleans where we will sit down with all of the aspects of the 
community including health care, and you will get an 
opportunity to go to Gulfport and Biloxi and get a first-hand 
view and an opportunity to visit with those folks.
    Mr. Burgess. And I will tell the gentleman I wish he had 
disclosed that to me earlier. Obviously, my August schedule is 
pretty much set as is yours. It would be very difficult for me 
to get out of obligations, but I do think this committee ought 
to have a follow-up hearing on site, a field hearing like we 
did in January 2006. It is high time we did that, and maybe we 
can include some of the other sites as well.
    Mr. Melancon. If the gentleman would yield back, I agree, 
and of course getting a CODEL authorized when it happens, it 
happens, and then you move as quickly as you can and it 
happened at the end of last week so now we are trying to get 
people to go. And we understand that, and I understand your 
schedule and everyone else's, but it is difficult to explain 
without actually--and you can see it on TV, you can hear about 
it when people talk about it including you and I having 
conversations about it, but until you physically ride the mile 
after mile after mile after mile of devastation and vacancy, 
and it is----
    Mr. Burgess. Well, if the gentleman will yield, I have--I 
haven't spent a lot of time but I have made two trips to New 
Orleans, one with this committee and one as a guest to the 
private hospitals who invited me down there in October, and 
very kind to fly me in a helicopter around the Plaquemines 
Parish and saw the mile after mile after mile and saw the car 
dealerships that were inundated. And, yes, it is devastation on 
a scale that I have never seen before. But, again, I don't 
understand why we can't move this process forward. If it is 
inertia at the Federal level, let us get past it. If it is 
inertia at the State level, let us get past it. Again, I get 
criticized at home for the amount of money that the Congress 
has spent and yet it doesn't feel like we have done a darn 
thing. That leads to an internal conflict that I find very, 
very difficult to reconcile. We kept these gentlemen long 
enough, and I am going to yield back.
    Mr. Stupak. I think today and especially this last panel 
has pointed out a number of areas we can work on, and I think 
it is the Federal rules, regulations, and laws that are passed 
are not designed for a hurricane or disaster like this, and we 
have to find a way to get waivers and other creative ways to 
help these folks out in a bipartisan manner. We have asked for 
the Secretary to come. We have asked for Ms. Madison to come 
who seems to be holding the keys to many of these programs. 
They have refused us. So maybe we have one last weapon in our 
arsenal here we can use and maybe we ought to ask the Secretary 
once more to come and set a time and date at his convenience, 
and if he can't then we subpoena him or something. We have to 
get this thing rolling. I think we are all frustrated. Their 
financial ruin is sitting right there, and we have to move this 
thing along. If you have some good suggestions, we will work on 
it. Stay in touch. Chris Knauer and his staff will be working 
on this for the Energy and Commerce Committee, and both sides 
of the aisle have been great and they have been down there a 
couple of times and spoke with most of you. We will continue to 
work this. This is our third hearing. I am looking forward to a 
fourth hearing in New Orleans. I hope we have good news. It 
seems like we get a little impetus every time we have one of 
these hearing. Things start moving and then after about a month 
or two it falls apart again.
    And I am not casting any shadows at anyone at this table. 
We are here in Washington. I find it ironic that we have this 
hearing today. We asked the Secretary to be here. He couldn't 
be here, 600 feet away, but yet he is down in New Orleans. It 
sounds like the Federal Government just can't get coordinated, 
can we? But I will dismiss this panel, and thank you again for 
all that you do, and thanks for services you do for the people 
in New Orleans and this country. That concludes our 
questioning. I want to thank all of the witnesses for coming 
today and for their testimony. I ask unanimous consent that the 
hearing record will remain open for 30 days for additional 
questions for the record. Without objection, the record will 
remain open. I ask unanimous consent that the contents of our 
document binder be entered into the record. Without objection, 
the documents will be entered in the record. This concludes our 
hearing. Without objection this meeting of the subcommittee is 
adjourned.
    [Whereupon, at 3:45 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                        Committee Exhibit Binder

    Exhibit No. 5: Department of Veterans Affairs report, 
``Report to Congress on Plans for Re-establishing a VA Medical 
Center in New Orleans''
    Exhibit No. 6: Memorandum of understanding between U.S. 
Department of Veterans Affairs and Louisiana State University 
Health Care Services Division
    Exhibit No. 8: Letter from Dr. Alan Miller, Tulane 
University to Mr. Barton
    Exhibit No. 9: Letter from Karen DeSalvo, Tulane 
University, to Mr. Barton
    Exhibit No. 10: Letter from Frederick Cerise to Secretary 
Leavitt regarding immediate health care needs in the New 
Orleans region
    Exhibit No. 11: Letter from Thomas Koehl, et al., to 
Secretary Leavitt
    Exhibit No. 12: Letter of Thomas Koehl, et a., to Messrs. 
Dingell, Barton, Stupak, and Whitfield
    Exhibit No. 13: Letter from Norman Francis, et al., to 
Secretary Jackson and Secretary Nicholson
    Exhibit No. 14: Letter from President Cowen and Senior Vice 
President Miller, Tulane University, to Secretary Nicholson
    Exhibit No. 15: Letter from Greater New Orleans Healthcare 
Community Stakeholders to Mr. Stupak
    Exhibit No. 16: Letter from Greater New Orleans Healthcare 
Community Stakeholders to Secretary Leavitt

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