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University Hospital Makes Strides Since Restructuring, But Faces New Challenges

CEO aims to eliminate deficit in three years, make case for preserving hospital’s major role in northern New Jersey healthcare

University Hospital President and CEO James R. Gonzalez
James R. Gonzalez, president and CEO, University Hospital, Newark

University Hospital in Newark has completed its first year as a standalone, state-owned facility – a momentous change that has seen the hospital remake its administrative structure, open a new federally qualified health center, and reduce an unsustainable deficit.

But the hospital faces a new set of challenges, including a regional study that could lead to the consolidation of inpatient Newark-area hospitals; an ambitious goal of eliminating a remaining $27 million deficit in three years; and a large number of needed upgrades to its building, including new intensive-care units, operating rooms and emergency power generators.

Hospital President and CEO James R. Gonzalez describes it as an “exciting” time for the hospital, which was separated from the former University of Medicine and Dentistry of New Jersey on July 1, 2013, as part of the legislation that merged UMDNJ with Rutgers University.

It hasn’t been a clean break for the hospital, which still is nearly entirely dependent on the clinical faculty of neighboring New Jersey Medical School – which is now a part of Rutgers -- to serve as the hospital’s medical staff.

“We were one happy family and then we had a legal divorce, so now we’re sorting through those issues,” Gonzalez said, adding that the “divorce” was “amicable.” The hospital has absorbed many of the administrative staff and functions that were previously part of UMDNJ, but it’s still linked to the school’s physical infrastructure.

University Hospital’s future will hinge on the state’s plans for healthcare in the Newark area – seven of the 11 positions on the hospital board were appointed by Gov. Chris Christie, while the other four are Rutgers University leaders who serve on the board in an ex-officio capacity. The hospital board chairman is former Gov. Donald T. DiFrancesco.

A key factor in determining the hospital’s near-term future will be the study that the New Jersey Health Care Facilities Financing Authority has hired consulting firm Navigant to complete.

The report could recommend consolidating or regionalizing medical services in the Newark area, if it determines there is duplication or overcapacity in the city.

But regardless of what steps Navigant recommends, Gonzalez is confident about the hospital’s prospects.

“We will be part of that future,” said Gonzalez, noting the hospital’s role as an academic medical center and regional trauma center.

“I’m hoping that study will bring out the fact that there are too many in-patient beds and the capacity is beyond what is truly needed,” he said. “And that someone will come with a plan or strategy to restructure healthcare in the city of Newark, determining where the centers of excellence are, where they should remain, and what services could be integrated or shared with the other facilities within the region.”

He’s also hoping that the study takes into account the best use of the hospital’s facilities. Gonzalez said the hospital needs a variety of expensive upgrades – the facility, opened in 1979, is becoming dated.

“Do you retrofit what you have now or consider building brand-new?” Gonzalez said.

If the state decides a new building is needed, the existing facility could be transformed into an ambulatory surgical center or put to some other outpatient use, he added.

Gonzalez touted major successes in the past year, foremost among them reducing a projected $37 million deficit by roughly $11 million by cutting costs and making the hospital more efficient.

The effort has been aided by Barnabas Health, which has been consulting with the hospital on management issues since October. Gonzalez said the involvement of Barnabas has helped reduce costs and improve the quality of care at the hospital.

“A deep dive was done to understand the expenses for each department, for each service,” with an eye toward shifting staff and funds toward the departments that are attracting more patients, Gonzalez said.

There are some expenses the hospital can’t cut, such as those related to its status as the only Level I trauma center in northern New Jersey. Of the 95,000 emergency department visits the hospital has each year, more than 6,000 are for trauma, Gonzalez said.

In addition, University serves the largest number of uninsured, underinsured and Medicaid patients of any hospital in the state. The hospital’s ambulance squad provides emergency medical services for the city and Newark Liberty International Airport.

The hospital has strengths that contribute toward its financial stability, including strong neurosurgery and orthopedic departments. It also is one of two liver transplant centers in the state.

The hospital has taken steps to relieve some of the pressure on its emergency department, including signing up patients for health insurance offered through the federal Affordable Care Act. The goal is to have more newly insured patients seek care in primary-care settings, avoiding unnecessary medical emergencies. One place where they could receive this outpatient care is across the driveway from the hospital’s main building, where a new clinic operated by the city’s federally qualified health center recently opened. The center has a “patient navigator” based in the emergency department who signs up patients for appointments at the clinic.

“It was a challenge because many of them were coming to the emergency room and it was becoming an overcrowding situation,” Gonzalez said, adding that reducing wait times will improve patient satisfaction.

In addition, the hospital opened an “observation” unit in the middle of June. This second-floor unit allows hospital staff to monitor patients that the hospital doesn’t expect to stay for more than 24 hours – this should help the hospital avoid unnecessary inpatient admissions, Gonzalez said.

University Hospital also is aiming to finalize contract talks with more commercial insurers. It also has been working to attract more doctors from outside of the medical school faculty – which could also attract more patients and revenue to the hospital.

For all of these changes, the ongoing cooperation of Rutgers New Jersey Medical School will be essential. The separation of the school and hospital added a layer of bureaucratic complexity, as the federal government required a series of steps to adhere to the Stark Law, which limits physician referrals to prevent doctors from profiting from those referrals.

“There’s a lot more documentation about the time and effort that physicians are spending providing services for the hospital,” said Dr. Kendall R. Sprott, senior associate dean for clinical affairs for the medical school, who oversees the clinical relationship between the school and the hospital.

Sprott said the school is keeping an eye on whether a new hospital building is needed in Newark, noting that hospitals in Newark and across the country have had to adjust to an increase in the number of empty inpatient beds as the healthcare system increasingly focuses on outpatient care.

“One of the challenges we have is that we have a relationship that’s defined by a series of contracts,” which are designed to be permanent, Sprott said. “This relationship is really a relationship of codependency.”

The medical school faculty members “need a place” to practice, Sprott said, while University Hospital officials “need a staff. We are that staff.”

Sprott added that the school and hospital have been able to work cooperatively to overcome challenges during the past year.

Another partnership that’s important to the hospital’s future is with the Greater Newark Healthcare Coalition, a regional organization that includes officials from each of the major hospitals and health centers near the city. University Hospital is participating in an application to be a Medicaid Accountable Care Organization, which is expected to encourage unprecedented cooperation between longtime rival institutions in an effort to better coordinate patient care, particularly for frequent hospital patients.

“Competing with each other isn’t going to work any longer,” Gonzalez said.

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