Could a Louisiana hospital district hire a private management firm without public bidding?

Plain-English summary

The Acadia-St. Landry Hospital Service District asked whether it could contract with a private corporation to manage a hospital. The Attorney General said a hospital district had statutory authority to make a special services agreement for hospital management, operation, and administration, so long as the agreement benefited the district and notice of intent appeared in the official journal at least sixty days before the contract took effect.

The AG also said the public bid requirement did not apply to this management services contract. For a proposed fee tied to improved hospital performance, it said it knew of no prohibition, but again required the contract to benefit the district. The opinion separately quoted the statute's rule that construction work under such arrangements remained subject to public works bidding provisions.

Currency note

This opinion was issued in 2002. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Did the hospital district have to bid its management contract?
The AG said no. It treated the proposed arrangement as a services contract outside the public bid requirement discussed.

What notice did the district have to give?
The opinion said notice of intent to enter the special services agreement had to be published in the official journal at least sixty days before the contract's effective date.

Could the management firm be paid from improved performance?
The district proposed a fee that rose with hospital profits and might be little or nothing if performance did not improve. The AG said it knew of no ban on that arrangement, while insisting the agreement benefit the district.

Would construction under the arrangement avoid public bidding?
The quoted statute said construction work undertaken by such a hospital service district remained subject to the public works bidding provision.

Background and statutory framework

La. R.S. 46:1055 B authorized a hospital service district to enter a special services agreement for hospital management and set conditions for notice and district benefit. The opinion also quoted the statute's construction-work bidding provision. Its date line reads "JUL 0 8 ZOOZ" in the extract, identifying July 8, 2002.

Citations and references

• La. R.S. 46:1055 B
• La. R.S. 38:2211 et seq
• R.S. 38:2212, cited for construction work in the quoted statute

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/02-0229

Original opinion text

One American Place
DEPARTMENT OF JUSTICE
301 Main Street, Su=te 600
CIVIL DIVISION
P.O. Box 94005
BATON ROUGE
TEL.: (225) 342-7013
FAX: (225) 342-2090
RICHARD P. IEYOUB
70804-9005
ATTORNEY GENERAL

JUL 0 8 ZOOZ
Opinion Number 02-0229

90-A-1 Public Funds & Contracts
Mr. "J. Lee Wimberly
La. R.S. 46:1055
La. R.S. 38:2211 et seq
Attorney at Law
Vidrine & Wimberley
Acadia-St. Landry Hospital Service Distdct may enter into a
management contract pursuant to La. R.S. 46:1055 B without
P.O. Drawer 305
having to comply with public bid law.
Church Point, LA 70525

Dear Mr. Wimberley:

We received your request for an opinion on behalf of the Acadia-St. Landry Hospital Service District regarding the District’s ability to enter into a management contract with a private corporation.

La. R.S. 46:1055 B provides as follows:

In addition to the powers and duties set forth in Subsection A of this Section, the commission may enter into a special services agreement with any person, including but not limited to a hospital management firm or hospitals, to manage, operate, and administer a hospital or hospitals, or any part thereof, under the control of the commission for the benefit of the hospital service district. Any special services agreement may include a negotiated lease of the district’s facilities where the agreement provides for permanent improvements to be made, constructed, or placed upon the leased facilities in the amount of not less than one million dollars, providing that the term of the lease shall not exceed fifty years, and the lessor shall reserve all mineral dghts to any land involved. The term of aft such negotiated leases in force on July 1, 1987, may be extended by an additional term not to exceed twenty years, on such terms and conditions as may be negotiated between hosp#al service districts and their respective lessees. Any lease may be mortgaged, pledged, hypothecated, subleased, transferred, or assigned only for the purpose of financing the permanent improvements. The notice of intent to enter into a special services agreement shaft be published in the official journal at least sixty day prior to the effective date of the contract. However, any such hospital service district, including any such district which has contracted with an association or entity primarily engaged in the operation of hospitals to manage, operate, and administer a hospital or hospitals within the hospital service district, shaft be considered a public entity as defined under the provisions of R.S. 38:2211(A)(1) and all construction work undertaken shaft be performed in accordance with the provisions of

Page 2

Opinion Number 02-0229
Mr. J. Lee Wimberly
Attorney at Law
Vidrine & Wimberley
Page -2-

R.S. 38:2212. The provisions of this Subsection shall not apply to any facility of the charity hospital system of the state of Louisiana.
(Emphasis added).

Pursuant to this statute, a hospital service district is granted broad authority to enter into special service agreements for the management, operation and administration of a hospital. However, the agreement must be for the benefit of the hospital district. A Notice of Intent to enter into such an agreement must be published in the official journal at least sixty days prior to the effective date of the contract. Thus, the Acadia-St. Landry Hospital Service District may enter into a special service agreement for the management of a hospital provided that such agreement benefits the hospital service district and proper notice is given.

Louisiana’s Public Bid Law does not require that a contract for services be let by the public bidding process. See La. R.S. 38:2211 et seq. Our office previously opined that a hospital management contract need not be let by public bid. See Atty. Gen. Op. Nos. 97-250 and 84-1017. Therefore, it is our opinion that the Acadia-St. Landry Hospital Service District may enter into a management contract without having to comply with the public bid law.

You also question if the contract with the management company may include incentives for the management company. According to the information in your request, the District is considering an arrangement whereby the management company will share in the profits of the hospital at the end of its fiscal year if the hospital’s performance has improved. Alternatively, if the hospital’s performance does not improve or is unsuccessful, the management company will receive little or no fee. Again, La. R.S. 46:1055 grants a hospital service district broad authority to enter into a management contract. We are unaware of any prohibition of such an arrangement but simply reiterate that any such contract must benefit the District.

We trust that this adequately responds to your request. If you have any questions, please do not hesitate to contact us.

With kindest regards,

Yours very truly,

RICHARD P. IEYOUB
Attorney General

TINA VICARI GRANT
Assistant Attorney General
RPI/TVG/dam