Budget shows charity care to N.J. hospitals

With funds tight in Trenton, and Gov. Jon S. Corzine introducing an austere $29.8 billion state budget, the organization that advocates on behalf of the state’s 73 general hospitals is expressing appreciation that the budget calls for the same level of charity-care funding as last year.

“Faced with tough choices, the governor made the right one when he prioritized spending for charity care in this budget,” Elizabeth A. Ryan, president and chief executive officer of NJHA, told the state Assembly Budget Committee on March 24.

The good news for NJHA is the state is not slashing charity care funding by 15.5 percent, as it did last budget season. The bad news is the $605 million in proposed funding will still reimburse hospitals for less than half the roughly $1.3 billion in annual charity care they provide to uninsured patients.

“There’s still a dramatic gap,” NJHA spokeswoman Kerry McKean Kelly said after the hearing. “By no means is $605 million adequate to compensate hospitals. But we are realistic about this year’s budget situation and the economy.”

While NJHA is putting on a brave face, there likely will be fighting among the hospitals over shares of the funding, said Richard Goldstein, president of the New Jersey Council of Teaching Hospitals.

“If you can’t increase the pie, they’ll fight over the pieces,” he said.

Some hospitals this year receive as little as 10 cents on the dollar for charity care reimbursement, NJHA said. “By no means have we solved the charity care issue,” Kelly said.

And charity care costs are expected to rise during the recession as people continue to lose their jobs and health insurance, Goldstein said. Hospitals are required by law to initially treat people who walk into hospitals, no matter their ability to pay.

New Jersey hospitals report an increase in the number of charity care patients and emergency room visits, both signs that people are losing health coverage and are not going to private doctors when they are sick, Kelly said. And people are postponing elective procedures, such as knee replacements, according to a survey of hospitals in January and February. “That’s a worry for hospitals, because some of those procedures are important revenue generators,” because these patients usually have private insurance, Kelly said.

“Hospitals are not immune to an economic downturn,” said John Gribbin, president and CEO of CentraState Healthcare System in Freehold and chairman of NJHA’s board. “Hospitals struggle with the same financial difficulties that other employers face. Plus they hold the added responsibility of providing an essential public service at a time when a growing number of individuals are in need.”

Robert Wood Johnson University Hospital, in New Brunswick, provided $32 million in charity care last year and was reimbursed $8 million from the state, said Joshua M. Bershad, chief medical officer at the hospital. The hospital, meanwhile, is working to attract additional insured customers, “in several areas while exploring new services to create additional revenue,” he said.

Nearly half the state’s 73 general hospitals are operating in a deficit, NJHA said. Kessler Memorial Hospital in Hammonton closed March 12, and St. Mary’s Hospital in Passaic filed for bankruptcy protection on March 9. In the last two years, nine hospitals closed; since 1992, 25 have been shuttered. “Hospitals have always been financially fragile,” Kelly said.

While state charity care funding in the proposed budget remains level, the proposed budget cuts a total of $24 million to health care, including cuts to graduate medical education ($8 million), the Health Care Stabilization Fund ($4 million) and the Hospital Relief Subsidy Fund ($6.4 million), NJHA said.

Ryan said state government is contributing to the industry’s fiscal troubles by insufficiently compensating hospitals for the charity care and Medicaid patients they treat. The state this year plans to reimburse hospitals for less than half the $1.3 billion of charity care they will provide to the uninsured. Further, Medicaid, a state-federal partnership, reimburses hospitals at a rate of about 70 cents for each dollar of care provided, Ryan said.

On Aug. 8, Corzine signed several other bills that affect how hospitals operate. One requires hospital board members to complete state-approved training programs. Another bill requires every hospital to hold at least one annual meeting. The governor also signed legislation that prohibits hospitals from charging uninsured patients an amount exceeding 15 percent of the Medicare rate, while creating a sliding scale, based on income, to determine how much uninsured patients are billed.

The measures are based on recommendations by the New Jersey Commission on Rationalizing Health Care Resources. The commission released its final report earlier this year and, in part, suggested the state should determine which of the 73 hospitals are essential and worthy of state funding.