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Hospitals Get Good News, Bad News in NJ’s Last-Minute Budget Resolution

Tens of millions of dollars that had been ‘frozen’ will be quickly distributed to acute-care facilities but hospital leaders alarmed by emergency-room payment reforms

Hospital emergency room
Credit: Creative Commons

The revenue agreement accompanying New Jersey’s eleventh-hour budget deal has opened the floodgates for the distribution of tens of millions of dollars in delayed hospital funding, but a new law signed during the last-minute push has also raised concerns for healthcare providers and policy experts.

Department of Health Commissioner Dr. Shereef Elnahal announced Monday that the state this week will distribute some $21 million in Charity Care payments to 70 acute-care facilities to help them treat uninsured patients, and allocate $18.2 million in Graduate Medical Education (GME) dollars to benefit 43 teaching hospitals.

The money, a mix of state and federal dollars, is the last monthly payment due these facilities from the past budget year, which ended June 30. These funds were frozen in mid-June when a revenue crunch caused state officials to cut back on certain spending, sparking widespread concerns from hospital providers, some of whom depend heavily on this money to sustain operations.

“New Jersey’s hospitals provide essential care to our state’s uninsured or underinsured residents regardless of their ability to pay and the Murphy Administration values their role is caring for this vulnerable population,” Elnahal said, promising the funds would be in their hands shortly. “We also recognize that our hospitals depend on GME to pay the physicians they are training for the future to strengthen our healthcare workforce.”

The new state budget, which took effect Sunday morning following down-to-the wire negotiations between Gov. Phil Murphy and legislative leaders, includes $262 million for Charity Care — $10 million more than Murphy originally proposed in March, according to the DOH. It also features $218 million for GME and $167 million in reform-incentive payments. The first installments are slated for distribution around July 20, officials said.

Little warning or discussion

But an emergency-room payment reform Murphy signed into law late Sunday, as officials sprinted to get their budget deal codified, has sparked worries among a variety of hospital leaders, physicians and policy experts. The measure — sponsored by Senate budget chairman Paul Sarlo (D-Bergen) and Assembly Democratic leader Louis Greenwald (D-Camden) — was one of three last-minute hospital funding mechanisms introduced with little warning or discussion. Other plans, to tax hospital admissions and certain procedures in order to expand GME and Medicaid resources, have passed the Legislature and await action by the governor.

The ER reform seeks to save taxpayers as much as $75 million annually, according to the bill’s text, by reducing to $140 — from close to $600 — the reimbursement for nonurgent outpatient emergency-room care for a small segment of the Medicaid population, the 5.3 percent still covered by fee-for-service plans with rates set by the state. The Department of Human Services, which oversees Medicaid, has suggested savings will be closer to $29 million, and that the change could actually cost hospitals nearly $60 million, with the loss of federal matching funds.

The great majority of the state’s 1.7 million Medicaid members are covered by managed-care plans run by commercial insurance companies that pay an average of $291 for ER visits related to colds, digestive issues, bumps, bruises and other concerns not requiring intensive screening and care, according to a nonpartisan legislative review. The review notes 7 percent of outpatient emergency visits are classified as “non-urgent;” the DHS is tasked with specifying which diagnostic codes will be reimbursed at this lower rate.

Experts agree too many patients resort to the emergency room for routine care or noncritical conditions that could be better treated, at a lower cost, by a primary-care doctor, community clinic or urgent-care facility. But critics of the measure said that it could set a dangerous precedent in which reimbursements are determined after the fact by those paying the bills, physicians avoid costlier diagnostic procedures, and patients are discouraged from visiting the ER in times of need. In addition, it could cut revenue from safety-net providers already struggling to survive.

Disappointed that governor signed ER bill

cathy bennett
Cathy Bennett, president and CEO of the New Jersey Hospital Association

“No one wants to create a scenario in which diagnosis and care is jeopardized in the search for budget savings. Nor should we give payers another opportunity to routinely shortchange payments to providers,” said Cathy Bennett, the president and CEO of the New Jersey Hospital Association, and a former state health commissioner.

Bennett said she was disappointed that Murphy signed the bill and hopes the administration works closely with providers to ensure that the quality of care isn’t compromised. “The risk to patients — and the financial impact on the emergency services that we all count on — is far too high,” she added.

Ray Castro, director of health policy for New Jersey Policy Perspective, a progressive think tank, called the Legislature’s intent to reduce inappropriate ER care “laudable” but said the reform measure “will not solve that complex problem which requires a much more comprehensive approach.”

Emergency-care doctors have long supported efforts to expand access to community clinics and primary-care physicians, noted Dr. Marjory Langer, who heads the ER department at St. Joseph’s Wayne Hospital and leads the American College of Emergency Physicians’ state chapter. But even with a more robust Medicaid network, she stressed that patients are not trained to discern a true medical emergency, and still need easy access to emergency-room services.

Shouldering burden of health system’s shortcomings

Dr. John Poole, board president for the Medical Society of New Jersey and a surgeon based in Hackensack said the state should work with providers to improve patient access to the “right care, in the right setting at the right time.” Under the new law, “physicians and hospital emergency rooms are once again being asked to shoulder the burden for a shortcoming of the broader health system,” he added.

Emergency department diagnoses are made more complicated by the fact that a growing number of ER patients are struggling with drug addiction or mental illness, which can require a complex process to identify and properly treat. And the law could lead physicians to cut back on care for Medicaid’s fee-for-service patients, critics warned, a group that includes the state’s elderly, blind, and otherwise disabled residents.

“Asking a hospital to treat a patient differently based on a patient’s insurance status is contrary to our mission and further disadvantages an already vulnerable population,” said Jennifer Mancuso, executive director of the Fair Share Hospitals Collaborative, which represents suburban facilities. “Hospitals should not be penalized for providing patients with a thorough and comprehensive evaluation to be sure the best possible health outcomes are achieved.”

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