Last week, Louisiana Children’s Medical Center announced plans to purchase three Tulane hospitals for $150 million. LCMC, a local nonprofit that currently operates six New Orleans hospitals, will acquire Tulane Medical Center in New Orleans, Tulane Lakeside Hospital in Metairie, Louisiana and Lakeview Regional Medical Center in Covington, Louisiana. 

Tulane and LCMC both stressed “mission alignment” as a major driving force behind the partnership. 

“The bottom line here is, this is about improving the quality of health care in the Louisiana community,” Tulane President Mike Fitts said. “You have comprehensive medical systems, and then you have academic research institutions, such as Tulane, but the best quality care is when the two are integrated.”

Both Fitts and LCMC CEO Greg Feirn said they believe the alliance will lead to better patient outcomes.

Feirn said the deal is “a natural match of two nonprofit organizations, both based in New Orleans.” He said he wants to build off previous experience collaborating with Tulane and Louisiana State University at University Medical Center and Children’s Hospital New Orleans. 

“That hospital, academic medical center partnership with our faculty who are training the next generation, that fosters that collaboration and real innovation,” Feirn said. “That’s what’s so exciting for New Orleans.” 

Future of Tulane Medical Center

The agreement will also transfer services at Tulane Medical Center in Downtown to East Jefferson General Hospital and University Medical Center. The transfer will take place over the next one to two years. After this transition, Tulane Medical Center will ultimately be under the control of Tulane leadership.  

The university plans to launch a 200-student nursing program at Tulane Medical Center, and it will maintain some outpatient services as well as educational programs for medical students. These goals, which are separate from plans with LCMC, are part of a $600 million project directed toward revitalizing Tulane’s Downtown presence. 

Another major part of that project is renovating the Charity Hospital building, which closed after Hurricane Katrina in 2005. Expected to be finished by 2025, Tulane plans to make this the new home of the School of Public Health and Tropical Medicine. 

“[It] is symbolically huge, just because it’s the oldest school of public health in the country, and will be in one of the most iconic medical buildings in the United States,” Fitts said. 

Additional space for the Medical School and School of Professional Advancement is also anticipated at the Charity Hospital location. 

From for-profit to non-profit

Tulane’s previous partnership with Hospital Corporation of America, a national for-profit healthcare chain, came with challenges. Because for-profits aim to make money for their shareholders, “they may make clinical decisions that physicians don’t agree with,” Mark Diana, a professor in the Department of Health Policy and Management at Tulane University’s School of Public Health and Tropical Medicine, said. “Not all the physicians feel like HCA has been the best clinical partner.” 

Under the agreement, Tulane will lose its 17.5% hospital ownership stake previously held with HCA. However, Feirn said he expects Tulane to be highly involved in the decision-making process, including joint management councils, where Tulane faculty members will give input on strategic planning and capital investments.  

“If we make the right strategic investments, we get input, and we do well, then our academic partners do well,” Feirn said. 

Tulane and LCMC are already collaborating. As part of the deal, LCMC has committed $220 million in capital investment. That investment is primarily aimed at developing East Jefferson General Hospital into a flagship academic medical center where Tulane faculty, residents and medical students will have an expanded clinical platform. 

According to Feirn, those changes include enhancing infrastructures such as operating room space, improvements in intensive care units and emergency rooms and investment in labor and delivery. 

Fitts said he expects the university to be involved in every step of this process.

“We will be working with each other to decide the best way to deploy the 200 million,” he said. “We’ll have oversight over both a lot of the care and the residency programs there.” 

LCMC will have Tulane branding at their facilities and plans to retain all employees that worked under HCA, according to Feirn.

LCMC has experienced rapid growth within the last decade and, following this move, is poised to become one of two dominant health systems in New Orleans, creating a duopoly with Ochsner Health. 

Diana said healthcare consolidation can lead to improved efficiency and lower costs for hospitals through what is known as economies of scale. 

“As an example, [LCMC] may only have to have a certain number of highly expensive diagnostic equipment, like MRIs that they can use throughout the system. And so they get more efficient than if an individual hospital had to duplicate all that stuff,” said Diana. 

Unanswered questions

Questions about the deal’s effects on patient costs and quality of care remain open. Studies show mixed evidence as to whether recent surges in hospital acquisitions translate to improved clinical outcomes for patients. 

But multiple studies suggest hospital monopolies increase patient costs. With fewer competitors in a market, hospitals have more bargaining power with insurance companies.  That often translates to higher insurance premiums for patients. 

“If Oschner doesn’t give them favorable terms … you gotta go to LCMC. And so that does make it more difficult. And so there could be some of those increased costs from those negotiations,” Diana said. 

Over the next three months, the deal will be under regulatory review by the Louisiana Department of Justice and will need approval by the state’s Attorney General. But another question that remains is whether LCMC, whose share of Medicaid patients already make up 26% of its payer mix, can afford to expand its safety-net services. Largely unprofitable, these services provide healthcare to vulnerable populations regardless of insurance status. 

“New Orleans has done a lot to try to improve Safety Net community providers, whether it’s substantial enough or not, remains to be seen,” Diana said. “And I think the big question here is what’s LCMC going to do in that respect?”