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Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association NJHA Financial and Legislative Update NJ HIMSS-HFMA May 29, 2009.

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Presentation on theme: "Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association NJHA Financial and Legislative Update NJ HIMSS-HFMA May 29, 2009."— Presentation transcript:

1 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association NJHA Financial and Legislative Update NJ HIMSS-HFMA May 29, 2009 Sean J. Hopkins Senior Vice President, Health Economics New Jersey Hospital Association

2 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Hospital Issues 1.Poor financial performance 2.Low payments from governmental payers 3.Inadequate charity care payments 4.Competition from ambulatory care centers 5.High levels of physician ordered hospital services 6.Reinhardt Commission – Hospital Capacity 7.Legislative Focus/Future Considerations

3 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Hospital Finances:  YE 2007 average operating margin – 0.8%  Fifty percent of all hospitals operating in the red  Hospital bankruptcies – 5 in the last 18 months (PBI, Kessler, Bayonne, Barnert, Pascack Valley)  21 hospital closures since 1995  More closures pending (Greenville, Columbus, Muhlenberg)

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6 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Underlying Reason for Financial Instability:  Inadequate payments from governmental and commercial payers (Medicare $.89, Medicaid $.69)  Woefully under funded charity care payment program ($.55)

7 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Medicare Actions  2009 Bush budget proposed $2.9 billion in cuts to New Jersey hospitals over 5 years ($246 million in 2008)  Proposal is DOA in a Democratic Congress

8 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Charity Care  Mostly working uninsured  Hospitals mandated to provide all necessary care in all settings  1.3 million total uninsured (Plus 225,000 undocumented immigrants)

9 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Charity Care  State valuation $946 million (@ Medicaid rates)  Valuation at hospital cost $1.3 billion  State financial support - 2007 $583 million - 2008 $716 million - 2009 $573 million ( PROPOSED) (26 hospitals would receive $0)

10 Note: The Charity Care Subsidy began in 1993. The initial subsidy was set at $500 million. The level of documented services was not collected until 1994. * The Charity Care documentation for SFY 2009 represents an estimate by the NJ Department of Health & Senior Services. The Charity Care funding level represents the amount from the Governor's budget proposal. Final Charity Care documentation and funding amounts for SFY 2009 are subject to change.

11 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association SFY 2009 Corzine Budget Proposal  Cut Charity Care $143 million ($716 million to $573)  Cut Medicaid GME $10 million ($60 million to $50 million)  Cut Hospital Relief Subsidy $20 million ($183 million to $163 million)  Require Medicaid Co-Pays  Create a $35 million Hospital Stabilization Fund  Create a $15 million Asset Transformation Fund

12 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association NJ Acute Care Hospitals: Practice of Medicine Issues:  New Jersey has a high number of physicians compared to other states  New Jersey has a high percentage of specialists and IMGs  New Jersey has the highest utilization in the country for many key metrics  Dartmouth Atlas study on end of life care for Medicare

13 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association

14 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association NJ Acute Care Hospitals: Practice of Medicine Options:  Hospitals and state need to explore the reasons behind the elevated practice  Hospitals should perform internal analysis and attempt to alter physician behavior where appropriate

15 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association NJ Acute Care Hospitals: Regulatory Environment/CN: Issues:  New Jersey has more freestanding Ambulatory Care Centers (ACC) per 100,000 population than surrounding states  Most other states employ CN for ACCs  Rather than reduce cost, unabated proliferation of ACCs has lead to economic triage that has diverted profitable business away from hospitals

16 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association

17 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association NJ Acute Care Hospitals: Regulatory Environment/CN Options:  Allow hospitals some form of economic franchise  Monitor physician referrals  Require ACCs to report the same public information that hospitals must provide (e.g., UB claims data, audited financial statements

18 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association The Commission on Rationalizing Health Care Resources: Goals Assess the financial and operating condition of NJ hospitals Analyze characteristics of most financially distressed hospitals Assess current and projected demand by region Develop criteria for “Essential Hospitals” Make policy recommendations to support essential hospitals Review existing CN statutes for consistency Publish state healthcare resources allocation plan

19 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Major Findings NJ hospitals are truly in poor financial health Causes Gross underpayment by public payers Misaligned incentives between hospitals and physicians Lack of universal coverage Lack of transparency A need for better governance Excessive geographic hospital density

20 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Eight Defined “Hospital Market Areas” Morristown Hackensack/Ridgewood Newark/Jersey City New Brunswick Trenton Toms River Camden Atlantic City

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22 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Surplus Estimates show significant bed surplus in Hackensack, Ridgewood, Newark/Jersey City, Toms River  Each market could do with one less hospital

23 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Charity Care The state should examine if efficiency should be factored into charity care payments For Medicaid and charity care payments the state should reward efficiency and high quality

24 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Hospitals & Physician Relationships Models to align incentives should be explored Regulatory and reporting requirements should be added to ASCs Hospitals should explore use of “Practice Extenders” (hospitalists, intensivists, physician assistants, advance practice nurses and case managers) Payer fee schedules should be transparent through public disclosure

25 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Governance Board should be limited in size (less than 20) Terms should be fixed at three years Three consecutive terms maximum Reappointment only after a three-year layoff Open positions should require public notice Consideration should be given to adding an employee member

26 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Prioritizing Financial Assistance to Financially Distressed Hospitals What is the framework to determine which financially distressed hospitals are eligible for assistance  Identify essential hospitals  Determine how to support essential, financially distressed hospitals  Determine how to close non-essential, financially distressed hospitals  Determine how to improve state oversight and accountability

27 Essentiality and Financial Viability Framework for Evaluating Hospitals Allow market forces to govern Allow market forces to govern, but monitor financial performance for signs of deterioration Hospitals not likely to be candidates for financial support Hospitals to further examine for possible financial and other support Less Viable More Viable Less Essential More Essential Essential to Maintaining Access Financial Viability

28 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Supporting Essential, Financially Distressed Hospitals Essential, financially distressed hospitals should receive financial support Support should not be unconditional Hospitals receiving support should comply with management and governance conditions

29 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association How to Intervene State would have to enact legislation to allow for supervising hospital finances Intervention Would Be Graduated Stage I – Monitoring Stage II - Intervention

30 Source: New Jersey Hospital Association Copyright 2008, New Jersey Hospital Association Question and Answer


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