The gist: Lafayette General Health will use a new federal tax advantage program, created by the 2017 tax overhaul, to develop near the Oil Center and invest in healthcare startups. The hospital announced the move at an information session about federal Opportunity Funds, held Wednesday.
Opportunity Funds are a new form of investment vehicle that provides tax advantages meant to spur investment in Opportunity Zones.
Opportunity Zones are low-income census tracts that were nominated by local governments, selected by governors, and approved by the federal government last summer.
Lafayette’s Opportunity Zones include the Oil Center, UL’s main campus, downtown, and the University Avenue corridor from downtown up past I-10 almost to Carencro.
LGH has already been investing in real estate. Over the last few years, through the Lafayette General Foundation LGH has established a Real Estate Investment Fund (REIF), which acquires, finances, or develops real estate that LGH leases.
Now it has plans for developing Hospital Drive. Big plans, in fact, including a 3 to 5 story medical office building that will be a new home for the Cancer Center of Acadiana and LGH’s neuroscience work. This development will also include housing for LGH’s medical residents and retail space.
The project could breath new life into the Oil Center. The Oil Center could have been River Ranch, LGH CEO David Callecod told conference-goers, because it’s a safe walkable community with retail and restaurants; it just never had much housing. The Hospital Drive development project will create a live/work/play experience for LGH’s medical residents, with the longview of encouraging them to start their practices in Lafayette once they graduate medical school.
Opportunity Funds are ideal for enabling LGH’s aspirations. While LGH was already investing in real estate, because the Oil Center was selected as an Opportunity Zone LGH can create an Opportunity Fund to provide additional tax advantages to recruit investors to help fund the development project.
And real estate may only be the beginning. Opportunity Funds can also be used to invest in companies. For some time, LGH has been investing in health care startups through its Healthcare Innovation Fund. And it’s currently looking at making an investment in a company that may be relocating its headquarters to the Oil Center. If that company is successful, then in the future LGH’s Opportunity Fund could provide additional investment capital to fuel further growth of this as-of-yet-unnamed startup.
LGH is already reaping rewards for investing in startups. At the event, Cian Robinson, executive director of innovation, research, and real estate investments at LGH, announced that the fund had its first successful exit. Start-up HealthLoop was purchased last fall for $200 million. LGH invested around $1.5 million into the company, clearing $4 million in just a few years with the sale. LGH is currently raising funds for its second Health Innovation Fund.
Lafayette General Health warns that it will stop running UHC unless the Legislature fully restores funding to the hospital
LGH President David Callecod issued a stern warning to Gov. John Bel Edwards(https://lapolitics.com/wp-content/uploads/2018/04/UHC-040318-.pdf) that if the Legislature can’t find money to fund Lafayette’s University Hospital & Clinics, which LGH runs on the state’s behalf, then LGH would be forced to stop operating the training hospital and its urgent care clinic. Callecod put a June 30, 2018, deadline, the end of an “anticipated” special session, before LGH would vacate UHC and fire its 800 employees. LGH would also demand a refund of the “unused portion” of its near $16 million in prepaid rent for this year.
LGH took over operations of UHC in 2013. Previously, LSU’s medical school had run the hospital as a teaching facility. Under LGH’s management, the hospital still serves as a training ground for the state’s medical residents and as an essential source of care for Lafayette’s disadvantaged. The urgent care clinic at UHC, which LGH opened after assuming control, takes Medicaid payments. It’s one of the only clinics in town that does that. Callecod’s letter notes that the facility served 54,000 patients last year, many of them poor and uninsured.
Callecod signaled this move last month(http://www.katc.com/story/37718147/lafayette-general-health-warns-uhc-will-close-if-lawmakers-cant-find-solution-to-budget-crisis). Gov. Edwards’ proposed budget, announced at the beginning of this year, cut $650 million in state health funding, precipitating this confrontation. While it may not be surprising, it nevertheless shows just how bad things have gotten around the state’s budget deadlock. Jeremy Alford of LaPolitics reports that Callecod’s threat is not empty rhetoric. Should LGH follow through, the economic and social impact would be tremendous.