1. 1 Charity Care Subsidy Funding Presented by ARMDS

2. 2 Charity Care Funding History 1978 – Hospital rate-setting system 1985 – Hospital Uncompensated Care Trust Fund 1991 – Health Care Subsidy Fund 1992 – Health Care Reform Act 1996 – Health Care Subsidy Fund renewed 2004 – Funding formula revised (base year of 2002 used) FY2008 – Base year changed to 2005

3. 3 Current Funding Formula Ranking system based on 2004 legislation “Relative Charity Care Percentage” Reimbursements based on Medicaid fee- for-service rates Increased Health Care Subsidy Fund – $384 million in FY 2004 to $583.4 million in FY 2005, 2006 and 2007* *Total funding for FY2008 is $716 million

4. 4 Funding Issues Subsidy distributions based on older Charity Care data. Actual cost of delivering Charity Care exceeds available funding Actual reimbursement rates range from 46% to 96% with only 11 hospitals receiving 96 cents on the Medicaid dollar. Demand for uncompensated care is growing faster than Charity Care funding

5. 5 New Funding Proposal $608 million for FY 2009 (a reduction of $108 million) Hospitals will be classified into three tiers based on Charity Care payer mix  Tier 1 – 5% reduction in funding  Tier 2 – 34% reduction in funding  Tier 3 – no funding Revised formula based on 2007 claims data $35 million Health Care Stabilization Fund

6. 6 Charity Care is preferred over Bad Debt; however, Medicaid is a better payer than Charity Care. Reimbursement is 46% to 96% of Medicaid rates Subsidy payments for services rendered are received much later Uncertainty with regard to subsidy formula Charity Care is payer of last resort Reimbursement at full Medicaid rate Payments are received in a more timely manner Medicaid has been more consistent and reliable over the years Hospitals are required to refer eligible patients to Medicaid Charity Care vs. Medicaid

7. 7 Charity Care Audit and Documentation Issues

8. 8 Political Landscape Timeline April 2007 – The State Commission of Investigation (SCI) issues a report critical of New Jersey’s Charity Care program. May 2007 – Assembly Speaker Joseph Roberts introduces “The Charity Care Anti-Fraud Act.” June 2007 – The “New Jersey Commission on Rationalizing Health Care Resources” led by Princeton Professor Uwe Reinhardt issues its interim report Fall 2007 – The 2007 2 nd Quarter Charity Care audit takes place. New interpretations of some gray areas of the regulations force hospital appeals. January 2008 – The New Jersey Commission issues its final report March 2008 – The New Jersey Department of Health and Senior Services (DHSS) issues a proposed funding formula in light of the projected State budget deficit. June 2008- Expected budget approval and final funding formula.

9. 9 Charity Care Regulations 101 Must Document Identification NJ Residency Income Assets Family Size Must also conduct a financial screening on the patient to determine if there is other insurance coverage or means to pay.

10. 10 Charity Care Audit 101 The DHSS contracts Riverbend to conduct quarterly audits of all Hospitals’ Charity Care write-offs. A sample of accounts is selected from the Hospital’s quarterly submission to Unisys. High dollar accounts are “over-sampled”. The auditors visit the Hospital and review a subsample of accounts for compliance. Accounts are reviewed for write-off amounts, compliance with documentation requirements, etc. Audited data are submitted to DHSS for use in the subsidy calculation.

11. 11 Stricter Audits The past 3 quarters have seen stricter interpretations by the auditors. Some Issues: Employer letters Attestations by spouses Other insurance coverage Hospitals see the need to become more proactive.

12. 12 Charity Care PFS and IT Departments Working Together

13. 13 Goals: Screen patients for Medicaid and Charity Care accurately and efficiently. Capture all documentation accurately and make information accessible. Assure that all claims are submitted properly and denials are worked in a timely manner. Make audit preparation more efficient.

14. 14 Issues for Charity Care and IT Reconciliation of claims (automation of pricing verification). Scanning all Charity Care documents into the system for easy storage and retrieval. Downloads and uploads to the Hospitals system for vendors to get referrals and send notes back to the system. Automated production of UBs for audit. Verification of payment information. Front end financial screening and verification tools.