LCMC Health plans to acquire three Tulane hospitals from the national chain HCA Healthcare, significantly increasing its footprint in the New Orleans area from six to nine hospitals in a $150 million deal, the system announced Monday.

Tulane Medical Center, Tulane Lakeside Hospital and Lakeview Regional Medical Center are included in the acquisition, which is expected to wrap up at the end of this year. 

Tulane’s move to a locally owned nonprofit from a for-profit national parent company was about “mission alignment,” said LCMC Health CEO Greg Feirn.

“If you think about LCMC health and our nonprofit mission and Tulane University being a nonprofit, both here located in New Orleans, where dollars are reinvested in New Orleans – from that standpoint, a partnership just makes sense,” said Feirn, adding that Tulane faculty have long worked at LCMC hospitals. “In a way, it’s tried and tested and it works, and I think HCA realizes it works.”

Under the new agreement, the majority of services at Tulane’s downtown hospital will move to East Jefferson General Hospital and University Medical Center in the next two years. All employees will be retained, according to a press release from LCMC, and patients who go to the downtown location will eventually move to the system’s other locations.

In addition to the $150 million payment to HCA, LCMC has agreed to invest $220 million in East Jefferson and Tulane Lakeside hospitals, both in Metairie, as well as Lakeview Regional in Covington. The downtown medical center, including a renovated Charity Hospital, will be repurposed to house a new nursing program, clinical research programs and more space for students in medical fields. Tulane University has committed $600 million to revamp the downtown campus.

After the deal is closed, LCMC will move services from the 235-bed building on Tulane Avenue over the next 12 to 24 months. The emergency room will remain open through that time, and Feirn said they will work with Tulane to decide whether it will remain open after the relocation of other services.

Two health care players in New Orleans

The move will transform the New Orleans area into a health care duopoly where just two systems – Ochsner Health and LCMC – will provide care for patients.

Such mergers, which are increasingly common nationally, help hospitals cut costs in a few different ways, said Walter Lane, a health care economist at University of New Orleans.

“There really are some cost savings – centralizing all the back office stuff, as well as the supply chain and things of that sort,” said Lane.

Secondly, a bigger system means more negotiating power for the hospitals against suppliers and insurance companies. In Louisiana, Blue Cross is the largest private insurer, with over 1.3 million members in the state, or nearly 70% of the market. 

“There’s no way that Blue Cross can now cut out either one of those two big hospitals, so that gives them a lot of bargaining power,” said Lane. “For the hospitals, that means that their revenues are higher, but then that also means insurance is a little higher.”

Consolidation of hospitals also typically results in higher costs for patients, according to multiple analyses of hospital mergers published in academic journals. 

The agreement is dependent on approval from the state Attorney General’s Office. 

The acquisition may also result in a larger group of residents that train to be full-fledged doctors in Louisiana, said Tulane University President Michael Fitts. 

“We really view this as an opportunity not only to attract residents, but to have them stay in Louisiana so that we can have more health care providers in Louisiana,” said Fitts. “You look around the country, doctors tend to practice where they trained.” 

‘An amazing shift’

LCMC started out as Louisiana Children’s Medical Center, a small but powerful player in New Orleans that garnered significant donations from the community. In contrast, many of the hospitals that LCMC Health now operates have been less profitable, acting as safety-net hospitals with a higher share of Medicare and Medicaid patients.

LCMC Health first expanded its portfolio with Touro Infirmary in 2009. The system has steadily scooped up contracts with sometimes financially-troubled hospitals since. It joined a public-private partnership with the state to operate University Medical Center in 2013, New Orleans East Hospital in 2014, West Jefferson Medical Center in 2016 and East Jefferson General Hospital in 2020.

“For LCMC, this is this is an amazing shift,” said Lane, who is also on the board of Ochsner-operated Slidell Memorial Hospital. “They’ve really moved into the big leagues.”

The Nashville-based HCA Healthcare has been a majority owner of Tulane Medical Center since 1995 in a 99-year deal that transferred 82.5% of the hospital to HCA and left the remaining 17.5% under Tulane University. HCA added Tulane Lakeside to the system in 2005 and Lakeview Regional Medical Center in 2017.

HCA previously tried to lease Jefferson Parish’s public hospitals, but years of back-and-forth negotiations were unsuccessful. LCMC ultimately purchased the struggling hospitals. 

“It’s going to be interesting to watch LCMC to see if they have a culture to take over all of this in such a short period of time,” said Lane. “When you look at the original Children’s Hospital, those guys had such a big pile of money; they didn’t have to worry about being efficient or operational things of that sort. They’ve had to change their nature dramatically over a very small period of time.”