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Will Governor Sign Hospital Financial Disclosure Rules?

NJHA opposes the law saying it would chill purchases of failing NJ hospitals by for-profits.

A coalition of community and consumer advocates, labor unions and health insurers is calling on Gov. Chris Christie to sign legislation requiring all hospitals in the state to disclose their finances as a condition for receiving charity-care payments from the state, a bill the hospital association says will prevent for-profit firms from buying failing hospitals.

Advocates say the legislation, S782/A2143, would level the playing field for non-profit and for-profit hospitals by making profit-making hospitals play by the same financial disclosure rules already in place for the non-profits. The Health and Allied Employee union, which represents hospital workers, is asking people to sign a petition showing their support for the bill.

The New Jersey Hospital Association opposes the bill. “From a consumer access-to-care perspective, this would have a chilling effect on new hospitals coming into the state,” said Kerry McKean Kelly, vice president of communications and member services.

The legislation, called the “New Jersey Hospital Disclosure and Public Resource Protection Act,” ties charity-care payments to disclosure of financial and governance information. The bill, which has passed both houses of the state Legislature and awaits action by the governor, requires all hospitals that receive charity care to report their funding sources and revenues, their expenditures, the vendors they deal with, and who sites on corporate boards to the state Department of Health and Senior Services. Non-profits already submit this information to the federal Internal Revenue Service, but not to the state. For-profit facilities have no such requirement.

Seven of the states’ 72 acute care facilities have been taken over by for-profit firms, with five of these transfers occurring within the last five years. Another three or four purchases are under consideration. All of them are taking over existing facilities. Advocates say the growing presence of for-profit hospitals, coupled with the lack of transparency, leaves public officials in the dark when making decisions about the use of public money and puts communities at risk.

“The need is pretty simple,” says Jeff Brown, the policy and communications coordinator for New Jersey Citizen Action. “You have a situation in New Jersey where a lot of for-profit companies are coming in and buying up what were non-profit hospitals in communities that need hospitals. They are using questionable business practices, questionable business models and they are not providing the same community benefit.”

Public oversight is difficult because the for-profits are not required to disclose the same kind of information publicly required of the non-profits, he said. That’s why there is a need to require transparency.

“We’re not looking to target for-profit companies,” Brown says. “We’re just asking that they be held to same standards as their non-profit brethren.”

For-profit companies, he said, are “assuming valuable community assets that have built over time with community effort and funding and the public should be able to see if they are providing that community benefit.”

The bill passed both houses of the state Legislature with bipartisan support -- 32-4 in the Senate and 49-22 in the Assembly. It awaits action by the governor, who has until Aug. 16 to act.

Sean Conner, a spokesman for the governor’s office, said the governor would not comment.

“The governor’s office does not comment on legislation currently being reviewed by our counsel’s office while it awaits the governor’s action.”

State Sen. Loretta Weinberg (D-Bergen), a prime sponsor of the bill, said she is optimistic that the governor would sign it into law, even though she has not talked with him about it.

“We are seeing a growth in for-profit hospitals, which function with a large amount of taxpayer money in charity care, Medicaid and Medicare payments,” she said. “It seemed simple to level the playing field and to require you, as a for-profit, to give the same information that your not-for-profit brothers and sisters give.”

Jeanne Otersen, policy director for the Health Professionals and Allied Employees union, also is hopeful that the governor will sign the bill.

“The governor has talked over and over again about transparency and accountability for taxpayer dollars,” she said. “He has talked about how the government should be accountable in how it spends taxpayer money and transparent in how it is spent. Given everything he talks about, the governor should sign this bill to show he believes it.”

Randy Minniear, senior vice president for government relations and policy, said the legislation would put New Jersey at a competitive disadvantage and could cost some communities access to hospital care. “This is a bill backed by the unions and we wonder what their purpose for wanting this information is,” he said. “I am not aware of any other state having this level of reporting requirements for for-profit hospitals. I am told by our members who have affiliates in other states that this is pretty unique. “

The purchase of the then-bankrupt Bayonne Medical Center by IJKG Opco in 2008 may not have been possible had bill S782 been in place creating a disincentive, Minniear said.

“If there were more obstacles for them to come into the state, you could have put quite a number of patients at risk of not having access to care,” he said.

The hospital association -- and the industry, globally -- supports transparency, Minnier said. The disclosure bill, however, does not provide the kind of information that the average patient desires -- data that describes patient care and cost.

Otersen said patients and policy makers deserve more. The growth in for-profits and the lack of information available on how they spend the public’s money leaves consumers in the lurch, she said.

“We are seeing the trend that, when you have an urban hospital facing financial difficulties, they swoop in looking like they are saving the day,” she says of the for-profit companies. “But in fact, they are setting up a very profitable business for themselves on the taxpayer dole.

“The infrastructure exists. The utilities, the customers, the docs, the providers are all in place, and the company gets all kinds of special deals to take over. Then they cancel the insurance contracts and cut services, even though they have a captive market.”

All of this happens in the dark, she said, because the for-profit hospitals are not required to disclose their financial information in the same way that non-profits must.

“This bill is a step in the right direction,” she says. “It will allow the public to know how [the hospitals] are using taxpayer and public dollars. They are getting charity-care dollars, and they get it whether they are non-profit or for-profit. They get Medicare and Medicaid. We know where the non-profits are spending the money, but don’t know where the for-profits are spending it.”

Hank Kalet is a veteran journalist and editor, who has covered economic issues, government, and entertainment in central New Jersey for more than two decades.

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