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Before Hurricane Katrina struck in 2005, Charity Hospital was the pride of New Orleans. A 1930s Art Deco–style icon built with WPA funds, Charity was one of the oldest continually operating public hospitals in the country and was regarded as one of the most vital and successful. “Charity was one of the best teaching hospitals in the country, where students from Tulane and LSU did their training,” says Dr. James Moises, a former Charity emergency room physician, noting that it served 100,000 patients a year before the storm. Ad Policy

Today Charity is a skeleton of its former self, with smaller, temporary facilities. The interim coverage does not include “urgent and chronic outpatient care,” notes Moises, and reaches a vastly reduced patient population. Meanwhile, the money that has flowed from the state and federal governments to compensate for the storm’s damage to the hospital is set to be spent on a highly controversial new $1.2 billion complex on an entirely different site, separated from the downtown core by an interstate highway.

The abandonment of the old Charity Hospital stands as a potent symbol of the many disappointments and betrayals experienced by the residents of New Orleans after Katrina. The loss has been a huge blow to the poor African-American community Charity served—an outcome that is all the more tragic, critics say, because it didn’t have to happen.

Charity flooded only in the basement during Katrina. In an extraordinary act of dedication and volunteerism, a 200-person medical and military team brought in a 600-kilowatt generator, pumped out the water and prepared the hospital for service. It was cleaned (to a condition better than before the storm) and was “medical ready” within weeks, according to doctors and military personnel present at the cleanup, as well as Lt. Gen. Russel Honoré, the retired Army general who was commander of the joint task force on Katrina.

“I was one of the first state officials to tour Charity after the storm,” recalled State Treasurer John Kennedy in an interview for this article. “We were in desperate need of this facility. The lights and A/C were on. It was clean and functional.”

What happened next, critics charge, is that powerful forces in the state—including Louisiana State University, which operated Charity Hospital—conspired to block its reopening. For LSU, it is alleged, the hurricane and flood became the excuse to pursue a longstanding agenda to build a sprawling and expensive new facility with government support.

Kennedy says that after the storm, as Charity sat idle, he asked LSU hospital CEO Don Smithburg, “Why not move back in at least temporarily?” And, Kennedy says, Smithburg responded, “If we do, we will never get a new one.”

Repeated attempts to contact LSU representatives for comment on the claims in this article were unsuccessful.

According to three cleanup volunteers who requested anonymity, after the storm the hospital’s lights were on until LSU representatives rushed in to order the power turned off. Officials at Entergy, the power company, concluded that it could put Charity fully back into service “in just ten days.” But in an unusual move, the 82nd Airborne, the famed disaster relief unit, was pulled off the job by then–Governor Kathleen Blanco. Hospital police then locked out the volunteer workers.

In order to qualify for full Federal Emergency Management Agency compensation, the hospital had to demonstrate that the disaster damage exceeded 50 percent of the cost of rebuilding. The extent of the damage was the subject of a legal dispute between LSU and FEMA that dragged on for years. Under pressure from LSU, FEMA increased its estimate of damage from an initial $23 million to $150 million in 2008, and finally $475 million in 2010.

* * *

In interviews, participants in the post-storm cleanup described seeing signs of outright sabotage. When they entered the building they found that bathroom doors had been locked and needed to be kicked in by police and then propped open to let air circulate. Faucets in bathroom sinks had been left running at full blast, with folded sheets in the sinks to block drains. An electrician found fuel lines to the generator disconnected, reconnected them, and connected the restarted generator to the building’s distribution system. He was then chastised by LSU officials and ordered to disconnect it. The street grid connection was subsequently ordered cut.

A sworn, notarized statement by Army Staff Sgt. John A. Johnson calls into question LSU’s storm compensation claim. Johnson reported that the hospital had been cleaned and decontaminated, and attested that he had “arranged for the delivery of powerful state of the art generators from General Electric…delivered on-site in mid-September. LSU officials, in my presence, refused to accept the generators.” On three occasions, LSU officials “attempted to stop the work we were doing,” he stated. Johnson was never called to testify at the arbitration of FEMA’s dispute with LSU over the amount to be compensated.

Charity’s post-storm soundness was confirmed by one of the country’s leading architectural firms, RMJM Hillier. The state legislature enlisted the Foundation for Historical Louisiana, based in Baton Rouge, to conduct this independent study but did not provide funding for it, “probably not expecting us to pull it off,” notes foundation board member Sandra Stokes, who oversaw the effort. The foundation raised the $600,000 cost to hire RMJM Hillier, which declared Charity to be perfectly suited for renovation into a first-rate, state-of-the-art medical and teaching facility, exactly what LSU claimed it wanted. Based on the study, gutting and building a modern facility in the shell of Charity would cost an estimated $550 million. Such an approach would be the most cost-effective way to return quality healthcare and a top-rated teaching hospital, and could be accomplished in three and a half years’ construction time.

But LSU had a different vision. Wanting more than just a new facility, it has long sought to get out of the business of being a primarily public service hospital and to become more of a private patient-centered institution. In 2003, LSU embarked on a planning process for a new facility to replace University and Charity hospitals, which were faulted for having as patients an “indigent population [that] constitutes a disproportionate share of its payor mix,” as the Site and Facility Master Plan prepared for the hospital system noted. In 2004, an entire wing of Charity was converted to private single-patient rooms for non–publicly funded patients. In 2007, a scheme to privatize healthcare for Louisiana’s poor, shifting the focus of LSU’s charity hospitals away from indigent care and toward academic training, was laid out in a report by the state Public Affairs Research Council. The report states, “However tragic the events that unfolded at the charity hospital in New Orleans during and after Hurricane Katrina in 2005, the closure of that facility opened the door for change.” And it calls for “bold political action…ow to impose a radical shift in the way health care for the uninsured is funded, administered and accessed.” It goes on, “Opportunity has arisen from the unfortunate circumstance created by the closure of the New Orleans charity hospital, which once served as the cornerstone for Louisiana’s now antiquated public health care system. Rebuilding undoubtedly will occur, but re-prioritizing, reforming and reshaping may not occur unless political leadership from the top insists upon it and forces the change.”

In the immediate wake of Katrina, LSU developed a plan to rebuild Charity as part of a new complex that would also include the Veterans Hospital, which had sustained a similarly minimal level of damage. Before the flood, the two hospitals had anchored a substantial medical district within the Central Business District. According to the first post-storm plan, which won federal approval, the two new hospitals were to share thirty-seven acres close to the downtown business core. This was provided for in the Unified New Orleans Plan (UNOP) of 2006, the post-Katrina, neighborhood-based recovery planning process required by FEMA and the Department of Housing and Urban Development as a condition to receive federal funds.

But in a series of singular moves, former Mayor Ray Nagin’s recovery czar, Ed Blakely, used $75 million in HUD funds as leverage to persuade the Department of Veterans Affairs to move its facility to a more densely populated, thirty-acre site even farther from the downtown core. Blakely even went so far as to threaten the VA at a public meeting on August 11, 2008, with the loss of those funds should they refuse to relocate. Thus, LSU obtained the whole original thirty-seven acres in the UNOP for the new Charity Hospital, now renamed University Medical Center. As a result, what was to be a joint complex with some shared facilities on thirty-seven acres ballooned into two stand-alone, totally separate hospitals on sixty-seven acres (twenty-seven square blocks).

No meaningful citizen input was allowed in this dramatic change. “Alternatives were never thoroughly and publicly discussed,” says Kennedy. “From day one, it was clear the powers that be were not going to consider any alternative.” The replacement plan and site was exempted from the Master Plan process approved last year by the City Planning Commission and by the City Council, which was supposed to ensure community involvement in such matters. While perfunctory public “meetings” were held on specific aspects, there was never a fair examination of the costs and benefits, nor any proof provided that the money is available to build both facilities, let alone a full discussion of the impact on the shape of the city. No elected body ever voted for the project.

So far, only the denser VA site has been cleared; work has just recently started on the LSU site. To make way for the buildings, the State of Louisiana used eminent domain to condemn and acquire the structures whose owners refused to sell. In the process, the working-class neighborhood known as Lower Mid-City, which had sustained a solid racially diverse population for years, with some homes handed down within families for generations, has been steamrolled. In Lower Mid-City, 265 homes—many of which had been restored with federal hurricane recovery funds—are being destroyed or moved. Dozens of functioning businesses will be displaced.

“This was a neighborhood of people who cared and looked out for each other,” says civil rights lawyer Mary Howell, one of a core group of people battling the project. “They shared kitchens, took showers in each other’s homes and watched out for each other’s property. Many of them came back after the hurricanes and rebuilt because the city asked them to.”

Howell’s law office occupies a small camelback house (a narrow “shotgun” with a partial second floor) a block from the footprint in this diverse but doomed neighborhood. She recognized “the relentless juggernaut” approaching the neighborhood before her neighbors did; they were still exhausted from the hurricane and from rebuilding their homes. “I never knew anything about this stuff,” Howell says, referring to urban renewal and historic preservation, with a spirited laugh. “I was used to the relatively simple life of police killing people. I understood the roles of all those players, but here was sheer cowardice of the entire political leadership that absolutely knew better.”

When she joined the board of the Foundation for Historical Louisiana, Stokes had never participated in a civic battle. “Besides the issues of sustainability and the reuse of historical buildings,” she says, “I was concerned with returning healthcare faster and cheaper and hated watching the government waste and social inequity of what was happening. We could have had everything faster at less cost, plus genuine economic revitalization.”

The huge demolition-and-rebuilding project that is under way instead demonstrates the outsize influence exercised by LSU, the state’s flagship university, located in Baton Rouge. No elected official or other institution wields both the political power and claim to state funds that this institution appears to do. As Louisianans like to say, there are four branches of Louisiana government: executive, legislative, judicial and LSU. When Stokes talked with state legislators, she was told about the four branches “with a smile.” One legislator added, “Sometimes we think LSU has the most power.”

An administrative complaint filed by Howell on behalf of two longtime residents of Lower Mid-City in June 2010 with HUD Secretary Shaun Donovan faults HUD for allowing funds to be spent on a project for which those funds were not approved, and claims that the city’s application includes “false and misleading information.”

The complaint argues that the city’s and state’s use of the $75 million in HUD funds for site acquisition and relocation did not meet any of “the three national objectives of HUD, in violation of federal law.” The original application sought to justify the use of the funds under the objective of “prevention/elimination of slums or blight” but was then “materially altered, without appropriate authorization,” to seek funding under the “urgent need” category. (The third objective, to “benefit low and moderate-income” residents, was never mentioned.)

A March 23 letter from the state Office of Community Development/Disaster Recovery Unit insists the project satisfies what was called for in the UNOP, only represents a “design change” and is not “directly counter to the Recovery Plan” as charged. Howell notes, “I filed the complaint with HUD. HUD referred it to the same state agency that approved the grant in the first place. Needless to say, the state responded that everything is basically OK. It’s just ridiculous.”

The design of the complex calls for closing all the streets, erasing the street grid and minimizing pedestrian access, all adding up to a fortress-like campus. Only about one-third of the new LSU site is needed for the hospital complex; the rest is for six city blocks of suburban-style surface parking, temporary green space and future speculative development by LSU, which will compete with existing commercial space in the core, much of which is already vacant.

It is almost six years since Katrina. Charity sits empty. A quintessential New Orleans neighborhood has been razed, its inhabitants scattered. Residents report all the broken promises typical of 1960s urban renewal. Although more than seventy historic houses were moved, they have lost so much of their exterior or interior and architectural details that they are unrecognizable, and some have been moved to the shadow of the highway or other undesirable sites.

LSU is still far from successful in raising the $1.2 billion it needs to build the new complex. While $775 million has been marshaled for the project ($475 million from FEMA, $300 million from the state), the hospital board is counting on mortgage insurance from HUD to back the sale of low-interest bonds to cover the remaining costs. If HUD grants that request, the federal government will be holding the bag if LSU defaults.

“This whole project is built on a financial house of cards,” says Jacques Morial, son of legendary former New Orleans Mayor Dutch Morial, brother of subsequent former Mayor Marc Morial and a persistent critic of the project. Jacques Morial, a public finance specialist and investment banker with experience in healthcare issues, adds, “Its financial calculations are based on pre-healthcare [law] changes and in contradiction to it. And without Wall Street or HUD-backed financing, the state will likely have to back this loan in some way, allowing for no bonding capacity for other projects across the state, including roads, highways, bridges.”

If and when the complex is built, the state will have to come up with another $70–$108 million annually from the general fund to cover operating losses, according to a recent assessment by Kaufman, Hall & Associates, an independent healthcare finance consulting firm, which concluded that the project, “as currently envisioned, is materially larger than is supportable.”

This is one of those tales in which the primary culprit is clear—LSU—but in which multiple power centers are complicit: former Mayor Nagin and his recovery czar, Blakely, on whose watch this began; current Mayor Mitch Landrieu, on whose watch it continues; Governor Bobby Jindal, who in January declared that “the hospital will be built” with the desired HUD mortgage insurance, and whose deputies, brandishing shovels, presided over a groundbreaking ceremony at the LSU site in April; the Obama administration, particularly HUD and Donovan, who could have pulled the plug along the way; and the New Orleans business community, which has served as a cheerleader for the plan throughout.

Mega-projects like this frequently cost more than anticipated, destroy more than required to meet a goal and move ahead outside a genuine public review process. But the context for this today is the national, state and local financial crisis. With Louisiana facing a $1.6 billion shortfall for the coming fiscal year, state workers are enduring a pay freeze and mass layoffs, while major service cuts are on the table—including to public hospital services for the poor. Yet LSU’s hospital project moves along in ways certain to drain state coffers.

In the end, the city too will spend more than it gets, the jobs will not be as many or as local as promised and the healthcare that finally comes will arrive at a stiff price. The waste of public funds on this project seems criminal in the face of the physical and human needs of this storm-decimated city. By the time the truth is clear, the destruction will have occurred, and New Orleans, like too many cities today, will be forced to spend endless funds and decades rebuilding its urban fabric.