03/04/2007

The Hospital's Bill of Rights

By Brett Harwood

WHILE urban hospitals everywhere require intensive care these days, in New Jersey, they're on life support.

Just take a look at these numbers released by the New Jersey Hospital Association in October. More than 40 percent of the state's hospitals are in the red, more than double the national average. Those that operate in the black average less than 1 percent profit. While national operating margins for hospitals increased from 2000 to 2005, in New Jersey they declined. Since 1985, 20 New Jersey hospitals have been forced to close.

Many of the problems are structural: New Jersey gets back only 55 cents of every federal tax dollar it sends to Washington; Medicaid reimburses at less than actual cost; and President Bush's new budget contains freezes and cutbacks in both the Medicare and Medicaid programs. But these problems are heightened because 15 percent of the state's population is uninsured, 40 percent of expensive emergency room visits statewide are for primary care, and there is a large and growing number of undocumented immigrants here.

That's not all. Fifty-eight percent of the people treated at New Jersey hospitals are covered by three government programs: charity care subsidies, Medicare and Medicaid. Medicare, the single largest payer, no longer reimburses the full cost of treatment, producing a gap in inpatient treatment alone of $500 million a year.

Private insurers, which used to cover some of the financial gap, now collect some of the highest premiums in the country, concentrating market share among a small number of providers that then enjoy the power to negotiate ever more favorable rates with providers. State mandates, including the so-called slacker mandate requiring coverage for unmarried children under the age of 30, add as much as 20 percent to premium costs. Insurance profits are healthy and premiums are high, especially with the built-in need to cover aid program shortfalls with the hidden tax built into insurance cost.

And the health of hospitals has a big effect on the health of the state as a whole. According to the American Hospital Association, the hospital industry is the fifth-largest in New Jersey, providing 150,000 jobs and $7.7 billion annually in salaries and benefits and contributing $34.4 billion to the state's economy.

Gov. Jon Corzine's Commission on Rationalizing New Jersey's Health Care Resources, formed late last year, looks promising. Its mandate to ensure that the right services are in the right places is the best approach to distributing health care efficiently throughout the state.

Perhaps new federal priorities will produce better reimbursement rates and thus healthier hospitals. Perhaps Washington will take into account the factors that especially disadvantage New Jersey in the current formulas and correct them. But there are many things that the state can do.

As the commission members begin to decide which hospitals are to survive and how to distribute scarce state money, they must take into account factors that vary widely among hospitals. For example, here at Jersey City Medical Center, 77 percent of the people we treat in the emergency room are either Medicaid or charity patients. Our colleagues in more affluent areas have a mix of patients, more of whom can pay for their care.

Sure, some hospitals have too many beds and some are in such antiquated buildings that keeping them open would merely be throwing money away. But in some parts of the state, hospitals are major economic engines and closing them could be disastrous for communities. Many hospitals also provide important services like ambulances and home health programs that are in short supply.

Because I am in the business of running hospitals, I have some specific suggestions for the commission to consider. First, the commission must ensure that every hospital in the state is doing the best it can with what it has. That means strict and continuous audits of everything from fiscal practices to a patient's length of stay and the kind of services offered. Tax money must be spent wisely, and the state needs to have medical and accounting professionals making sure that it is.

Second, reimbursement must be distributed fairly -- without regard to politics -- to well-run institutions with a patient population that includes large numbers of the old, poor, chronically ill and underserved. Those hospitals cannot be profitable if they lose money on most of the patients they treat. Too many hospitals are getting aid not because they need it but because they have elected representatives who want a share of the pot. That needs to stop.

Sick people deserve care, no matter where they live or how much money they have. Medical care is a public responsibility. Unless and until there is universal health care in the United States, hospital survival will depend on compassion for those who cannot pay, combined with flinty-eyed attention to where we send the money to take care of them.

Brett Harwood is the chairman of Jersey City Medical Center.

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