Louisiana Department of Health Secretary Alan Levine today announced mid-year reductions in department spending of state general funds, and proposed utilization of other means of financing, in order to offset a $108 million deficit  in available funding. LDH's reductions are part of an overall across the board mid-year reduction plan for each agency to help address the state's mid-year budget deficit, and is supplemental to the Department's now downward-revised mid-year expenditure deficit in the Medicaid private provider program of $46.9 million.

"Governor Jindal made clear he wanted us to protect services for the elderly and the disabled as we approached the mid-year budget challenges," Levine said.  "He also has inspired us to find ways to provide the same or better services but at a lower cost.  With the budget challenges we face, it is important we be methodical and targeted while also recognizing the economic reality that revenues are simply lower and will likely be for some time."

Levine added, "Our approach has been to consider access to Medicaid services and to vital programs while acknowledging that in tough times, we cannot be everything to everyone. We have to be targeted in how we spend our resources."

Reductions in the non-Medicaid program offices are in line with the department's overall strategy of relying more on community-based care, rather than institutionalization, and to leverage the resources of the private sector.  "By relying less on more costly state-operated services when we have capacity existing in lower-cost, highly effective and proven private community-based services, we are able to deliver high quality, compassionate care to our clients at a lower cost to the taxpayer," said Anthony Keck, Deputy Secretary with responsibility for these program offices.

A transition task-force led by the Assistant Secretaries for each program office is working with LDH human resources and Civil Service to ensure employees displaced by these policies are provided, where possible,  opportunities to fill needed vacancies in other offices or departments.  In addition, the transition task-force is exploring retirement incentives and other initiatives to encourage private providers to hire state employees that are displaced as more individuals are transitioned to community-based providers.

 "Many of our employees will be highly sought-after in the private sector and we will do everything possible to match-up employees with employers," said Keck.

Reductions in state general funds (SGF) used for program offices and identified to help cover the Department's mid-year reduction are listed by program office below (with savings in SGF and total department spending highlighted, plus the number of eliminated positions, or "TO," included):

Louisiana Emergency Response Network ($355,551 SGF; $355,551 Total; 3 TO).  Savings will be realized as a result of contract expenditures that are lower than expected as well as the Governor's Executive Order, which implemented a hiring freeze for certain vacant positions.

Office for Addictive Disorders ($833,195 SGF; $893,731 Total; 5 TO).  Savings will be realized as a result of the Governor's Executive Order, which implemented a hiring freeze for certain vacant positions. Additional savings will be gained by reducing professional service contracts, travel expenses, contract services for outpatient services where other alternatives exist, and expiration of two non-TO job appointments.

Office of Aging and Adult Services ($959,090 SGF; $1,418,120 Total; 56 TO).  Savings will be realized as a result of reductions in personnel costs due to employee retirements and turnover that will not be replaced, as well as the Governor's Executive Order, which implemented a hiring freeze for certain vacant positions.  In addition, the Gateway program, which operates at Villa Feliciana Hospital as a step-down unit for clients from East Louisiana State Hospital, will be phased out as approximately 26 participants in this program will transition to community-based program settings.

Office of Citizens with Developmental Disabilities ($1,525,530 SGF; $8,506,476 Total; 479 TO).  Savings will be realized as a result of the Governor's Executive Order, which implemented a hiring freeze for certain vacant positions, renegotiation of certain professional contracts, and reductions in operational expenditures such as travel, supplies and acquisitions. In addition, because reimbursement rates for state-run homes are substantially higher than the private sector for the same level of service, OCDD has been successfully transitioning residents of state-run homes to privately-run providers. For instance, the average daily cost per person for a group home is $366 for a public home, and $208 for a private home - a nearly $60,000 difference.  The rate of $208 for a private group home is the highest rate paid.  Most are paid less, meaning the savings would be even greater.  This year, OCDD has already privatized two state-operated group homes successfully.  OCDD will accelerate this strategy this fiscal year by privatizing an additional 31 state-run group homes with 156 residents at Pinecrest, Columbia, Leesville, Northlake Supports and Services, Northwest Supports and Services, Acadiana and Bayou Region, as well as a vocational program at Columbia serving approximately 40 individuals.

Office of Mental Health ($5,997,455 SGF; $13,956,758 Total; 178 TO).  Savings will be realized as a result of the Governor's Executive Order, which implemented a hiring freeze for certain vacant positions. Various contracts for professional services, outreach, school-based services, case management and other counseling services will be discontinued where more effective or equally effective yet more cost-efficient alternatives exist. This reduction includes a total of $6.65 million in reduced UCC payments previously announced in December for the state's three inpatient psychiatric facilities. Central Louisiana Hospital will reduce supply costs, merge ancillary departments, eliminate vacancies and adjust staffing ratios requiring 32 position eliminations to achieve $1.3 million in total savings. Southeast Louisiana Hospital will reduce supply, professional and service contracts and other expenditures to achieve $2.2 million of total savings. East Louisiana Mental Health System will reduce medical supply and pharmacy costs, reduce service contracts, and adjust scheduling patterns to achieve $3.1 million savings.

Office of Public Health ($2,834,942 SGF; $3,363,751 Total; 45 TO).  This reduction includes $1.4 million of previously announced efficiencies to offset Medicaid cuts.  Additional savings will be realized as a result of the Governor's Executive Order, which implemented a hiring freeze for certain vacant positions, the use of new grant funds in the environmental epidemiology program to cover salary costs, the replacement of the STD medical director position with a less expensive contract for this service, a reorganization of management and administrative functions which will result in the elimination of 10 positions, the elimination of six vacant positions in the Environmental Health Program beyond those frozen by the Governor's Executive Order, and reduction of 20 family planning staff.

Office of the Secretary ($4,382,051 SGF; 4,383,051 Total; 12 TO) Savings will be realized as a result of the Governor's Executive Order, which implemented a hiring freeze for certain vacant positions, as well as reductions in travel, supplies and professional services contracts (for instance, reduce funding for ERP project, Information Technology consulting, discretionary).  In addition, state funds to be used as a match for the health information technology grant program under the American Recovery and Restoration Act are reduced by $1 million, leaving $4 million available for use as state match.

Developmental Disability Council ($60,982 SGF; $60,982 Total; no TO).  Savings will be realized by renegotiating contracts for regional resource centers.

Human Services Districts ($2,854,866 SGF; $2,854,866 Total). Four locally governed Human Services Districts provide outpatient mental health and addictive disorder services, services for persons with developmental disabilities, and other wrap-around and support services for the citizens of their parish or region. While the budgets of these districts are largely line-item appropriated by the legislature and passed through LDH, the Districts operate within their own governance and executive leadership, with the implementation strategy for reductions determined locally. Reductions include $511,332 for the Florida Parish Human Services District; $798,966 for the Capital Area Human Services District; $669,182 at the Jefferson Parish Human Services authority; and $875,386 at the Metropolitan Human Services District (New Orleans metro area).

Bureau of Health Services Financing/Medicaid ($46,900,000 SGF Medicaid Expenditure, $10,935,950 SGF Medicaid State Revenue; 40 TO)

As previously announced this year, the Medicaid program was facing an expenditure deficit.  Due to a revised estimate related to the H1N1 expenditures, the shortfall has been revised downward from the November 2009 forecast of $275 million in total funds to an estimated $248 million, of which approximately $46.9 million is state general fund.  The Department continues to address this shortfall as provided to the Joint Legislative Committee on the Budget.

The savings previously announced included a shift of $8 million state general fund in budgeted "uncompensated care" reimbursement funds expected to go unused by state hospitals.  Also, one-time funds of $16.1 million were generated from the settlement of outstanding cost reports previously reflected as uncollected accounts receivable, and $18.9 million in one-time funds as a result of public facilities collecting more from Medicaid and other sources than was budgeted.   State general fund savings of $3.1 million were realized through efficiencies in the pharmacy program by adjusting the payment methodology for generic medications and the adjustment of the average wholesale price as a result of a court settlement.  Additionally, a total of $9.4 million generated from the enhanced FMAP associated with unemployment through ARRA was also utilized.

In addition to what was planned for addressing the mid-year expenditure deficit, other initiatives to offset the new revenue deficit include the use of $66.1 million from the Medical Assistance Trust Fund - dollars intended to be used during the stimulus period, and which will help mitigate provider rate reductions.  Additional savings will be realized from a $1.2 million reduction in "clawback" payments for dually eligible individuals in Medicaid and Medicare Part D.  Finally, savings of $10.9 million will be realized through rate reductions and service efficiencies in the Medicaid private provider program.

The Department has made decisions based on numerous factors, such as access and policy goals, that have been and will be at the forefront while confronting budgetary challenges. For example, the state's Intermediate Care Facilities for the Developmentally Disabled and the New Opportunities Waiver program were exempted from rate reductions, while at the same time, the program offices are moving forward with the policy initiative of privatizing group facilities.  The Elderly and Disabled Adult waiver program also will not be reduced, as the department is continuing its strategy of utilizing resource allocation to reduce overall program costs.  Nursing home rates will be reduced by 1.5 percent on an annualized basis (0.5 percent for the final four months of the current fiscal year, when all reductions will take effect) with other program reductions at 5 percent on an annualized basis (approximately 1.7 percent for the final four months of the current fiscal year).

Savings realized in Medicaid administration, included the Governor's Executive Order which implemented a hiring freeze for certain vacant positions, resulting in a savings of $1.1 million and a reduction of 40 vacant positions. Additional savings were realized by a reduction in professional service contracts ($3.5 million), including $500,000 in efficiencies in the department's contracts with Unisys and with the University of Louisiana-Monroe for administrative functions within our pharmacy program. The remaining $3 million in savings will be realized by the abeyance of contracting for the department's Chronic Care Management Program and the Administrative Service Organization for behavioral management. 

Several principles guided LDH's rationale for reductions in the current fiscal year, including the department's goals for:

  • Mitigating the impact of this year's Medicaid rate reductions on the elderly and the developmentally disabled, and doing our best to preserve access for children. By utilizing MATF dollars, the department is attempting to mitigate rate reduction impact on payment to providers for children.
    Improving the efficiency of the Medicaid program.
  • Focusing programmatic changes on reducing administrative costs, programs that were not yet implemented, programs that were under-utilized or programs where other services already existed to serve consumers.
  • LDH has already begun working to identify strategic recurring cost-saving measures and rate reductions to implement in state fiscal year 2011, when there will likely be even greater financial challenges.

"Government must be innovative and must constantly be in search of better ways to provide quality service in a more efficient manner. We will continue to pursue policies to move Louisiana's health agenda forward while we ensure we are living within our means," Levine said.

The Louisiana Department of Health strives to protect and promote health statewide and to ensure access to medical, preventive and rehabilitative services for all state citizens. To learn more about LDH, visit http://www.dhh.louisiana.gov.

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