BusinessReport.com

Building a freestanding children’s hospital in Baton Rouge makes no sense from a financial perspective.

In every other sense, it’s the right thing to do.

So says John Paul Funes, the administrator of Children’s Hospital at Our Lady of the Lake Regional Medical Center who’s gradually transitioning into a job as president of the OLOL Foundation, where his first order of business will be fundraising for a new children’s hospital. If Baton Rouge needed a freestanding children’s hospital before Hurricane Katrina flooded New Orleans, Funes says, the need has become acute since.

New Orleans was home to the state’s only freestanding children’s hospital. While that facility has done a good job bouncing back from Katrina, the outmigration of pediatric specialists along with patient populations from the city means Baton Rouge can no longer rely on New Orleans for pediatric services the way it once did, Funes says. Meanwhile, OLOL’s Children’s Hospital, which does maybe 98% of the pediatric care in the Baton Rouge Metropolitan Statistical Area, has been bursting at the seams since Katrina.

“After Katrina we became the state’s largest pediatric facility for inpatient care, and that continues here two-plus years later,” he says.

OLOL Children’s Hospital, which is essentially a hospital within a hospital, has only 14 pediatric ICU beds, which can mean long waiting times in the emergency room for the least critical cases. Translated, your child could have a broken arm and still wait four hours to be seen. A freestanding hospital would solve such problems by providing more space and attracting more doctors, Funes says.

“Right now we’re at capacity, which makes it difficult to do several things,” he says. “Any time we interview a specialist about coming to Baton Rouge, the first question they ask is do you have your own hospital?”

The “build-it-and-they-will-come” approach doesn’t work in all things, but when you’re talking children’s hospitals, it does work, Funes says. And while Baton Rouge is lucky to have fine pediatric surgeons and cardiologists, in other pediatric specialties “there’s just a void,” he notes.

“There’s only one way to get physicians, and that’s to make sure they have a place to practice,” Funes says.

Not just that, but a certain level of commitment is expected: It’s got to be full bore, not halfway. Children’s hospitals, meanwhile, are very expensive to build and operate when done properly. Pediatric cardiovascular surgeons need state-of-the-art operating facilities, trained nursing staff and so on across the board.

OLOL is looking at about a hundred-bed facility with a price tag of $100 million to $150 million, with a groundbreaking in late 2009 or early 2010. It will be on land the hospital already owns, somewhere near the offices of doctors OLOL already relies on to operate its current children’s hospital—physicians who do double duty working on children as well as adult patients and who the children’s hospital can’t do without. A consultant is still mulling data to determine the best location.

To build it, OLOL will go the traditional route—bonds—for a large percentage of the cost. Medicaid reimbursements will cover part of it.

“Not unlike a lot of projects in the state, it requires partners,” Funes says. “The state will be another partner. We’ll need to make sure the reimbursement levels are something we can at least count on and budget for.”

Private fundraising will play a major role. Funes says a consultant’s feasibility study, due in early January, will show that fundraising opportunities are ripe in Baton Rouge for a children’s hospital. That’s good news, since margins are razor thin at children’s hospitals, which might explain why only 1% of them nationwide are privately owned. The hospital payor mix for Louisiana is about 30% commercial managed care and 70% Medicaid or uninsured—a lot of care for not much reimbursement.

Keeping the doors open once a new hospital is built is where philanthropic donations come in. Children’s hospitals tend to lose money, and OLOL’s will be no different. Funes estimates a $4 million annual shortfall, but says money generated from a “hefty endowment” from private sources should cover the loss and maybe then some.

Les Hixon, a pediatric cardiologist who specializes in congenital heart defects, says OLOL’s current children’s hospital is insufficient for a population this size, while a new one will help attract the pediatric subspecialties the city lacks and open up research opportunities as well.

“We want this population to have state-of-the-art medical equipment and facilities to care for the kids in our state,” he says.