Finances focus of hospital report
New Jersey's hospitals "are truly in poor financial health," says a long-anticipated state report, which recommends setting up a "distress fund" to provide money to only the most viable and necessary institutions.
The final report of the Commission on Rationalizing Health Care Resources, of which a draft copy was obtained yesterday by The Star-Ledger, points to a glut of hospital beds in Bergen, Essex, Passaic and Hudson counties as the major reason for the poor economic performance of several hospitals in that area of the state.
It identifies two markets with the highest concentration of hospitals lagging the statewide average when it comes to financial viability: the Hackensack/Ridgewood/Paterson area, with 15 hospitals, and Newark/Jersey City, with 16 hospitals.
"An oversupply of beds may be one cause of the financial distress," states the report, dated Dec. 10.
Financial pressures have already led to closings or bankruptcy declarations in that region, and the report warns of more to come.
"Based on the current financial picture, the residents of New Jersey should expect a wave of additional hospitals that will face potential closure in the next few years," the report said.
The 200-page report, which was supposed to be released last year, does not make recommendations on which of the state's 79 acute-care hospitals should be closed, but lays out criteria officials should use in determining which are "essential" and "viable" and deserving of financial support.
Those factors include whether the hospital serves a "vulnerable" population -- such as uninsured and poor patients -- and whether critical services such as trauma care are offered, the report said.
A hospital's overall financial health -- including its profitability, cash on hand and long-term debt to capitalization ratio -- should also be a consideration, the commission said.
Gov. Jon Corzine is expected to use the report to decide which hospitals will get a bigger chunk of the roughly $700 million the state spends each year to treat uninsured patients. The report also is expected to be used to sort out the myriad requests that come from legislators and hospital officials who frequently seek the state's help in bailing out failing hospitals.
The report became a point of contention during yesterday's confirmation hearing of Corzine's nominee for state health commissioner, Heather Howard. Several legislators questioned Howard as to whether the report's release had been held up until after she was approved for the state's top health job.
Howard said yesterday the final version of the report is due out later this month. The 13-member commission -- whose members include economic and health-policy experts, as well as physicians -- was created by Corzine in 2006 with an eye to improving health-care delivery in the state.
Lilo Stainton, a Corzine spokeswoman, yesterday described the report as a work in progress, addressing "an important issue we have been looking at for a long time."
"But a draft is a draft -- the governor hasn't seen it," she said, declining to comment further.
The extra aid the report proposes be targeted to "essential" hospitals would be largely in the form of supplemental Medicaid and charity-care payments. It also wants a separate Distressed Hospital Program to provide aid to those hospitals, with the money to come from an increase in taxes -- from 2.9 percent to 4.5 percent -- on privately run ambulatory care facilities, according to the report.
Future state aid should come with strings attached, the report said, including state oversight and requirements to improve board governance.
Elizabeth Ryan, the incoming president and chief executive of the New Jersey Hospital Association, said while she has not yet seen the report, her members were anxiously awaiting "a game plan" to help alleviate the distress they are experiencing.
"It would be my hope that when they talk about distress funding, they would be talking about new money and not just simply redistributing the (current) money," she said.
About half of the state's acute-care hospitals are operating in the red, and roughly 25 have closed since 1992, according to association officials. Among the latest are Union Hospital, which shut its doors Sept. 30, and Pascack Valley Hospital in suburban Westwood in Bergen County, which closed last month.
Others, such as Bayonne, Barnert in Paterson, Greenville in Jersey City and Saint James and Columbus, both in Newark, are hanging by a thread.
The downward trend in the finances of New Jersey hospitals, the report notes, comes at a time when hospitals nationwide are doing exceptionally well.
"This points to some fundamental problems in the hospital market in New Jersey that must be remedied if hospitals are to regain their footing," the report concludes.
Sue Livio may be reached at slivio@starledger.com or (609) 989-0802; Angela Stewart may be reached at astewart@starledger.com or (973) 392-4178.
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