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State Wants Hospitals to Follow Stricter Financial Transparency Standards

New regulations would go beyond voluntary measures outlined in 2014 DOH report

Cathleen D. Bennett, DOH
Cathleen D. Bennett, Commissioner of the state Department of Health

The state has proposed stricter standards for hospital financial disclosure that would make mandatory many recommendations outlined in a pivotal 2014 report. The goal: Expand public oversight and community engagement in New Jersey’s healthcare system.

The state Department of Health has introduced draft regulations that would require hospitals to post audited and unaudited financial reports on their websites at regular intervals, submit these materials to state regulators, and hold annual public meetings to discuss economic and operational issues. The changes would also force hospitals to post online and distribute current information about their insurance participation.

The proposal — which is open for public comment through Friday, August 4 — has prompted concerns for the New Jersey Hospital Association, which represents the state’s 71 acute-care facilities. The organization urged the state to scale back the draft regulations in a letter sent to DOH officials on Wednesday.

Voluntary compliance

Most hospitals have complied willingly with the current voluntary-disclosure recommendations, the NJHA said, and some 70 percent have also shared this information on the department’s healthcare-transparency webpage. Unaudited financial details and scripted meetings won’t provide real public benefit, according to the association, and could do more harm than good.

The regulatory changes under discussion are rooted in a report issued by former DOH Commissioner Mary O’Dowd in July 2014, which created new standards in what financial information acute-care facilities must submit to state regulators, and encouraged operators to also post these to their website. O’Dowd lobbied hospitals to adopt the voluntary guidelines, an effort the DOH said has continued under the leadership of current Commissioner Cathleen D. Bennett, who took the helm two years ago.

O’Dowd’s report was the result of legislative effort to force greater disclosure. But Gov. Chris Christie conditionally vetoed the bill, insisting lawmakers went too far in trying to regulate healthcare businesses, and instead ordered the DOH to study the issue. Lawmakers had responded to concerns raised by labor leaders, patient advocates, and other stakeholders about an influx of for-profit companies purchasing Garden State hospitals with what critics said was limited regard for community concerns, stewardship of public funds, or quality of care.

Continuing concerns about MHMC

One facility that became a magnet for concern, Meadowlands Hospital Medical Center, in Secaucus, has continued to flout state requirements. In 2010, the near-bankrupt facility was purchased for $17.6 million by a network of investors, and it has had a troubled record since. (The state is now reviewing a request to sell the hospital to a New York man who runs a plastic surgery practice in Hackensack, a process that has dragged on for more than a year.)

In recent years, MHMC has seen patient levels drop and employed various creative techniques to generate revenue, including a program designed to entice wealthy Russians to travel to Secaucus to give birth to babies that would automatically qualify for U.S. citizenship. But the hospital has not filed the required annual financial disclosures since 2013 and has been fined hundreds of thousands of dollars by state regulators for what are now three years worth of missing reports.

Under the proposed regulations, hospitals could be fined up to $100 a day for not submitting financial reports to state regulators and for not posting them online. The state could assess a $50 daily penalty for failing to provide updated insurance information and could charge hospitals $1,000 for failing to hold their annual meeting within two months of releasing yearly economic data.

Audited and unaudited

The changes would require facilities to reveal audited annual financial statements and unaudited quarterly reports, both to the state and on their website, within specific timeframes. It would allow hospitals to post a disclosure notice, warning that the unaudited information may change, and would permit them to apply months in advance to skip a filing if they could demonstrate it would disrupt other business dealings.

“The proposed new rules requiring disclosure of hospitals’ financial statements could enhance the ability of the people of New Jersey to remain informed about the financial viability of the hospitals in their communities upon which they rely for their health care and/or livelihoods, and to meaningfully participate in early community responses to indications of hospital financial instability. Early informed public participation may help communities to avoid sudden, unplanned hospital closures and the negative economic impacts that stem therefrom,” the DOH stated in the proposal.

But NJHA senior vice president Sean Hopkins wrote to state officials that member hospitals have already demonstrated their commitment to transparency. State officials already have tools to track a hospital’s financial viability on a quarterly basis and releasing unaudited data could be “more misleading than informative” given the likely fluctuations, he said, and could have unintended consequences.

“It would be very detrimental, for example, if consumers made treatment decisions or career choices based on preliminary, unaudited information,” Hopkins said, urging the state to eliminate the request for these particular documents.

In addition, Hopkins said the state should accept annual audited statements that cover entire healthcare systems or multiple hospitals, if that is how the organizations craft the documents for other regulators. The state’s proposal would require healthcare systems to file separate paperwork for each hospital in its network.

But this approach is outdated, Hopkins said, since 80 percent of the state’s acute-care providers are part of multi-facility networks. “It is our belief that the proposed regulations should reflect the changing environment as a result of system formations over the last decade,” he wrote.

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