A bill that would reimburse New Jersey hospitals and doctors who continued to treat patients after two HMOs went belly up last year cleared the state Senate last week and is expected to become law.
It's another example of a state stepping in to help providers left with big bills because of a health plan's financial troubles (See related story, p. 36).
Under the New Jersey bailout plan, half of the $100 million owed to those who provided services to the now-bankrupt HIP Health Plan of New Jersey and American Preferred Provider Plan would come from the state's tobacco settlement. The other $50 million would be collected from the state's surviving HMOs over three years. Providers have agreed to forgive $50 million of the original $150 million debt.
The bill, which had already cleared the Assembly, passed easily with a bipartisan vote of 34-1. New Jersey Gov. Christine Todd Whitman is expected to sign it into law this week.
"Our bill provides a compromise by spreading the costs throughout the healthcare industry," said Assemblyman Christopher Bateman, who sponsored the bill.
HMOs have lobbied hard against the bill, arguing that it would set a dangerous precedent by forcing taxpayers and health insurers to clean up after failed competitors. And now they are planning to sue.
"We're preparing our litigation as of this moment," said Paul Langevin, president of the New Jersey Association of Health Plans.
Langevin called the bill unconstitutional because it forbids HMOs from passing on the costs to members. The state's HMOs lost $26 million in 1998; the bill would add another $17 million in losses annually, he said.
"If this is about preventing insolvency for health plans, then I'm missing something," Langevin said.
But hospitals and doctors maintain they stepped in when patients and the state needed help, and should be compensated.
One such provider, St. Peter's University Medical Center in New Brunswick, N.J., provided space and drugs to a group of HIP oncologists who had no office or supplies to treat 100 cancer patients.
"The feeling is that these hospitals and physicians delivered their services in good faith and should not be left holding the bag," said Kerry McKean Kelly, spokeswoman for the New Jersey Hospital Association.
HIP, once the state's fourth-largest HMO, was liquidated last spring, two years after being bought by PHP Healthcare Corp. of Reston, Va. Because PHP was based out of state, New Jersey regulators were left with few options when the HMO stopped paying providers. The state took over the smaller American Preferred Provider Plan in December 1998.
Last month, the HMO industry offered to pay $20 million less for the bailout in exchange for agreeing not to take the matter to court and to pay the full amount in July instead of over three years. But the medical community refused the proposal, saying it had already compromised enough.