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Three Newark-Area Hospitals May Switch to Offering Only Outpatient Services

Two others would still be full-fledged facilities, with one becoming state-of-the-art regional medical center, if state adopts recommendations

A state-ordered report has recommended dropping inpatient services at three of the five Newark-area hospitals, turning them into ambulatory care centers.

If the plan is adopted, many city residents would live farther from the nearest hospital -- and some healthcare workers could be out of a job.

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East Orange General Hospital, Newark Beth Israel Medical Center and Saint Michael’s Medical Center would become ambulatory care centers, providing emergency and outpatient services but not inpatient services, under Navigant Consulting’s recommendations released yesterday.

On the other hand, University Hospital would be expanded into a state-of-the-art regional medical center, while Clara Maass Medical Center in Belleville would also remain open as an inpatient hospital.

The report reflects trends that have been affecting not just the Newark area but the entire country, as demand for inpatient hospital services shrinks while demand for outpatient services steadily grows. The recommendations come only seven years after the closing of St. James and Columbus hospitals in the city.

In the five remaining Newark-area hospitals, only 69 percent of 1,495 available inpatient beds were used during an average day in 2013, according to the Navigant report.

“It’s safe to say the Newark area hospital market can’t support as many beds as it has,” said Joel Cantor, director of the Rutgers Center for State Health Policy.

The state asked Chicago-based Navigant to look into whether services at the hospitals are either duplicative or insufficient, as well whether there is unused capacity. If Navigant found that to be the case, the state asked it to recommend the plan for consolidation or regionalization of services.

State Department of Health spokeswoman Donna Leusner described the report as “a tool in making future decisions about the healthcare delivered to the Newark area.”

Navigant considered a variety of alternative scenarios, with each of the hospital buildings considered for potential conversion to outpatient services.

Turning losses into profits

The consultant reached the conclusion that only its final set of recommendations would allow Newark-area hospitals to stop losing money -- without the recommended changes, Navigant projects that the five hospitals’ combined operating loss would grow from $32 million in 2013 to $190 million in 2019.

Under the recommended changes, the five hospitals would post a combined profit of $64 million in 2019, according to projections in the report.

The recommendations also call for the largest capital investment -- $1.02 billion – of any of the scenarios considered by Navigant. Much of the capital investment would go toward expanding University Hospital.

The report ends with four consolidation recommendations to the state:

  • Combine all pediatric and cardiovascular surgery services in Newark Beth Israel by 2017;

  • Expand the role of Broadway House – a center for people with HIV – in providing post-acute care to a broader population of patients by 2016;

  • Transform East Orange and Saint Michael’s into “state-of-the-art ambulatory care facilities” by late 2017;

  • Expand University Hospital and consolidate Newark Beth Israel’s inpatient services into it by no earlier than 2019.

In the meantime, the report projects that 40 percent of East Orange and Saint Michael’s patients would go to other hospitals outside of the five considered in the report, with the remaining patients absorbed by University Hospital, Newark Beth Israel (which would need to temporarily expand its number of available beds) and Clara Maass.

Once the expansion of University Hospital is completed – the report says it will take years to plan and finance – Newark Beth Israel’s facility would then be used for outpatient services.

In addition to determining that there are too many empty hospital beds in the Newark-area hospitals, Navigant also found that there is inadequate access in some areas to outpatient-focused facilities.

The consulting firm also found that the area’s three federally qualified health centers that serve uninsured, underinsured and Medicaid patients all “play important roles in addressing access to care” but “there is strong evidence that there is a lack of sufficient coordination among the FQHCs” and they need to better coordinate their services with each other and other local healthcare providers.

Navigant also recommended that area doctors be better integrated into the Newark-area healthcare network, with a greater focus on doctors being paid based on keeping their patients healthy rather than receiving a fee for each service they provide, and that better coordination at all provider levels is needed throughout the Newark area.

It noted that East Orange General and Saint Michael’s have the lowest percentage of beds that are typically in use, as well as the shortest distances to University Hospital.

Opposition from one hospital

The report was met with swift opposition from Saint Michael’s current management; Prime Healthcare Services, the for-profit California company that’s seeking to buy Saint Michael’s; and JNESO, the union representing nurses at the hospital .

Ending inpatient services at multiple Newark-area hospitals would be “catastrophic,” said JNESO Executive Director Douglas Placa. “The city and the surrounding area, one, deserve choice and, two, deserve quality care. You’re not going to go to one facility and expect that.”

Placa also said the projected job losses would be an economic drain on the local economy.

“You’re talking about almost 2,000 good-paying jobs and those employees contribute to the local economy, so certainly at the very least and at the outset, there’s a domino effect,” he said.

Saint Michael’s officials urged the state to approve the hospital’s sale to Prime Healthcare and to maintain the current level of service.

“Restricting the hospital’s services to offer only ambulatory care -- as the recent Navigant study commissioned by the state recommends -- would greatly limit healthcare access and choice to the city’s most vulnerable residents who need more than emergency and primary care,” according to a hospital statement.

Prime spokesman Edward Barrera said the company stands by its commitment to maintain Saint Michael’s as a full-service hospital. He said that if the Navigant recommendations are re implemented, it “would be a devastating blow for access to critical care in the Central Ward and greater Newark community.”

The proposed sale to Prime has itself been controversial, with opponents saying that the company’s business model depends on ending contracts with health insurers and channeling patients through its emergency departments, driving up reimbursements.

Officials with the Health Professionals and Allied Employees (HPAE), the union representing University Hospital workers, as well as others in the coalition opposed to the Saint Michael’s sale, praised the Naviagant analysis but questioned how the recommendations would be implemented.

HPAE President Ann Twomey said the report makes clear that the hospitals must collaborate, not compete, to meet community needs.

“What is unclear is whether and how this report will be implemented as policy – and whether New Jersey will make the necessary investments to appropriately implement these proposals for the betterment of our residents without unnecessary disruption,” she said, adding that the union will advocate for both community members and workers to have a voice in any changes, as well as for transparency and accountability in the process.

Public-private partnership

One particular point raised in the report that drew questions from union officials was the recommendation that the combined University Hospital-Newark Beth Israel be a “public-private partnership.”

The report doesn’t detail how such a partnership would be implemented, but suggested two role models: Seton Brackenridge University Hospital in Austin, Texas, which is a city-owned facility operated by the national nonprofit Ascension Health system, and Boston Medical Center, a nonprofit hospital that was the result of the merger of two existing hospitals.

HPAE policy and political director Jeanne Otersen said such partnerships could be beneficial “if you maintain public control, make proper investments” and ensure that private interests aren’t guiding the delivery of services.

India R. Hayes Larrier, spokeswoman for the hospital-sale opposition group Campaign to Protect Community Healthcare and an organizer with New Jersey Citizen Action, said the report contains thoughtful analysis, but doesn’t address some important questions.

“We don't know how this will be experienced by the patients of Newark,” Hayes Larrier said in a statement. “The largest question of all is whether the New Jersey Department of Health will commit to this vision of Newark healthcare with both investment and force of will. Will all the necessary services offered by the City's hospitals be maintained? Will staffing levels and local jobs be maintained? Will the providers bringing this vision to life also keep healthcare affordable for working families by agreeing to stay in-network with insurers?”

Legal factors contributed to University Hospital emerging as the potential sole surviving city inpatient hospital, including the commitment that the state made to operate the hospital initially in the “Newark Agreements” of 1968 as part of the University of Medicine and Dentistry of New Jersey, and again in 2013, as part of the law that merged UMDNJ into Rutgers.

Since becoming independent from UMDNJ in 2013, University Hospital has formed a management partnership with Barnabas Health System, which operates both Newark Beth Israel and Clara Maass. The Navigant report doesn’t spell out exactly what role Barnabas would play in the combined University Hospital-Newark Beth Israel entity should the state implement all of the recommendations.

University Hospital President and CEO James R. Gonzalez said the hospital’s leaders and board “look forward to discussions with both Rutgers and Barnabas on the creation of a regional medical center on our campus to serve the Newark community.”

Cantor said his initial response to the recommendations was that they weren’t surprising, and that the city likely can no longer support multiple large hospitals providing inpatient care.

“The evidence is that facilities that are on thin financial ice don’t do as good a job investing in quality,” and that without some market consolidation, quality will suffer, said Cantor. He added that he needed to study the details of the recommendations in more detail.

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