1. Commission on Rationalizing New Jersey's Health Care Resources April 29, 2008 Department of Health and Senior Services

2. Commissions Process Established by Executive Order-October 2006 Established by Executive Order-October 2006 Comprised of 11 members and chaired by Dr. Uwe Reinhardt, Princeton University Health Economist and included 3 Cabinet members and Governors Office Comprised of 11 members and chaired by Dr. Uwe Reinhardt, Princeton University Health Economist and included 3 Cabinet members and Governors Office 6 Sub-Committees made up of commission members and industry stakeholders 6 Sub-Committees made up of commission members and industry stakeholders

3. Commission Sub-Committees Access and Equity for the Medically Underserved Access and Equity for the Medically Underserved Benchmarking Efficiency and Quality Benchmarking Efficiency and Quality Infrastructure of Health Care Delivery Infrastructure of Health Care Delivery Reimbursement and Payment Reimbursement and Payment Regulatory and Legal Reform Regulatory and Legal Reform Hospital/Physician Relations and Practice Efficiency Hospital/Physician Relations and Practice Efficiency

4. Commissions Charge Assess the financial and operating condition of New Jersey's general acute care hospitals against national performance levels Analyze the characteristics of New Jersey's most financially distressed hospitals to identify common factors contributing to their distress Develop criteria for the identification of essential general acute care hospitals in New Jersey Make recommendations for the development of State policy to support essential general acute care hospitals that are financially distressed

5. Commissions Findings Overview of Market: NJ Hospitals are in poor financial health NJ Hospitals are in poor financial health Services (ICU, surgery physician visits) are utilized at rates much higher than the national average Services (ICU, surgery physician visits) are utilized at rates much higher than the national average Nationally Hospital margins are improving but not in NJ Nationally Hospital margins are improving but not in NJ Without changes in practice patterns and reimbursement more closures are coming Without changes in practice patterns and reimbursement more closures are coming

6. Commissions Findings, cont. Major Causes of poor financial health: Major Causes of poor financial health: –Lack of universal coverage –Underpayment by public payers –Misaligned incentives between hospitals and physicians –Lack of transparency of performance and cost –Need for more responsible governance –Portions of the state are overbedded

7. Key Recommendations Develop an Early Warning System Develop an Early Warning System Increase Oversight of Ambulatory providers Increase Oversight of Ambulatory providers Require baseline hospital governance standards Require baseline hospital governance standards Provide a fund to assist distressed hospitals Provide a fund to assist distressed hospitals Limit uninsured reimbursement to Medicare rate Limit uninsured reimbursement to Medicare rate

8. Key Recommendations cont. Improve reimbursement to reward efficiency and quality Improve reimbursement to reward efficiency and quality Decide whether Charity Care should be concentrated on safety net hospitals Decide whether Charity Care should be concentrated on safety net hospitals Increase funding: Increase funding: – Medicaid physician rates – Inpatient mental health

9. Key Recommendations cont. Expand Community Behavioral Health Expand Community Behavioral Health Preserve Access to Inpatient Behavioral Health Preserve Access to Inpatient Behavioral Health Require enhanced hospital finance transparency Require enhanced hospital finance transparency

10. Status of Recommendations Legislation being drafted: Legislation being drafted: –Early Warning System –Annual Hospital/Public Meetings –Limit Uninsured Reimbursement to Medicare –Health Care Stabilization Fund –Enhanced Hospital Board Training

11. Status of Recommendations Commissioner is meeting with Boards around the state Commissioner is meeting with Boards around the state DHSS is requiring monthly reporting of key operational and financial metrics DHSS is requiring monthly reporting of key operational and financial metrics Developing Governance regulations Developing Governance regulations