New Jerseys governor may have inked into law expanded state oversight of financially distressed hospitals, but industry insiders say it will do little to alter the sectors troubled operations.
Seemingly to underscore the point, Solaris Health System in Edison, N.J., closed acute-care services Aug. 13 at its North Plainfield, N.J., hospital after trying unsuccessfully to sell the 278-bed failing facility late last year.
Muhlenberg Regional Medical Centerwhich closed its doors less than a week after Gov. Jon Corzine signed four healthcare bills, including one that gives the state more power to intervene when hospitals falterprojected sharply accelerating losses that Solaris officials attributed, in part, to payments from public aid and private insurers that failed to cover costs. It was really the economics, said Steven Weiss, a Solaris spokesman.
Narrow margins and closures have dogged New Jerseys hospitals and a recent yearlong analysis underscored the sectors shaky performance. In a January report, the Governors Commission on Rationalizing Health Care Resources said that despite poverty and insurance coverage on par with U.S. averages, half the states hospitals lost money on operations in 2006 (Jan. 28, p. 8).
The legislation adopted this month that broadens New Jerseys ability to monitor foundering hospitals was among the measures drafted by the commission, known as the Reinhardt Commission after its chairman, Princeton University professor Uwe Reinhardt.
New Jersey hospitals must now disclose financial information monthly, and the law gives the health commissioner power to appoint a monitor and take part in the drafting and oversight of turnaround plans. The law singles out a half-dozen key financial figures for monitoring, including hospitals available cash, net margin and a measure of unpaid bills. Lawmakers required the state to adopt intervention guidelines set by the Reinhardt Commission.
Richard Miller, president and chief executive officer for four-hospital Virtua Health, Marlton, N.J., said that the states expanded role gives public health officials more control as New Jersey invests $44 million in a newly created hospital stabilization fund in fiscal 2009.
If theyre going to invest that kind of money it is likely officials want more oversight of spending and results, he said. Still, a monitor fails to remedy the underlying economic stress squeezing New Jersey hospital margins, Miller said.
Joan Quigley, vice president of external affairs for 401-bed Hoboken (N.J.) University Medical Center and a New Jersey Democratic assemblywoman, voted for the legislation to bolster state oversight of its $44 million investment in distressed hospitals and prevent last-minute appeals from hospitals that wait too long before seeking assistance, she said.
It remains to be seen whether the insertion of (a monitor) would turn around the factors driving New Jersey hospitals to the financial brink, said Kerry McKean Kelly, a spokeswoman for the New Jersey Hospital Association. She added that inadequate funding, particularly for the uninsured and low-income patients, remains an unaddressed and critical factor for hospitals.
The states 2009 budget scaled back hospitals charity-care subsidy by $111 million, or 15%, a move the trade group argued further jeopardizes hospital finances.
Weiss said declining state aid for charity care in the form of discontinued grants contributed to Muhlenbergs precipitous decline and closure. Solaris continues to operate outpatient care at its Muhlenberg campus, including imaging, dialysis, home-care, laboratory and diabetes services, and a satellite emergency room. The hospital lost $2.5 million on revenue of $149.6 million in 2006, the hospital reported in its 2006 filing with the Internal Revenue Service.
Other legislation signed into law last week includes a pricing bill, which prohibits hospitals from charging the uninsured with incomes below 500% of the federal poverty threshold more than 15% above Medicares rate for services. McKean Kelly said hospitals will see minimal financial impact from the pricing law. She estimated fewer than one out of 10 New Jersey hospital patients who earn too much for aid but lack employer insurance receive bills with sticker prices.
But for hospitals already financially constrained by private insurers and government payers, the mandate eliminates another revenue stream, she said. Its another frustration in a broken reimbursement system, she said.
Another requires hospitals to hold yearly meetings with community members.
The final piece of hospital legislation makes governance education mandatory for all hospital board members. A 2007 New Jersey law required only newly appointed directors and trustees to undergo training.