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Murphy Boosts Medical Education Funding, Tweaks Plan for Hospital Aid

Governor signs bill that could add $24 million to funds for graduate medical studies, CVs measure increasing Medicaid to charity-care facilities

medical students

Teaching hospitals in New Jersey should benefit from more than $24 million in additional funding, thanks to a law signed by Gov. Phil Murphy designed to enhance the state’s system of medical education.

But the governor returned to the Legislature another bill designed to boost Medicaid funding to urban hospitals in certain counties, urging members to adopt changes that would allow more input from state officials on how the new dollars would be allocated, in what he termed an effort to improve fairness and transparency in the program.

As drafted, the bill creates a pilot program to raise money through a new county fee, or tax, on certain hospital procedures, which would be used to attract a federal match. But Murphy’s recommendations appear to shift control over the structure of the program from county officials to the state, which would be required to come up with methodologies for the fee schedules and distribution of any funds. They would also ensure more of the funding generated goes back to the hospitals, with less available for county administration of the pilots.

“While I applaud the efforts of the bill’s sponsors to secure additional federal match dollars through this innovative program, I also hope to encourage the equitable distribution of funds amongst the hospitals in the State,” the governor wrote. It is not clear if lawmakers will follow the governor’s lead, however. State Sen. Joseph Vitale (D-Middlesex), a lead sponsor of both bills and the chair of the Senate Health Committee, said Tuesday he was not certain the sponsors would accept these amendments to S-2758/A-4212.

The birth of the bills

Both proposals suddenly emerged in June during the budget negotiations, along with a third measure proposed by Sen. Paul Sarlo (D-Bergen), the budget committee chairman, to establish a lower Medicaid reimbursement rate for certain emergency room assessments, which Murphy signed in July.

Hospital officials were somewhat divided on the proposals, with suburban facilities worried about the impact of new taxes and fee changes – and the lack of clarity in some of the measures. Urban safety-net hospitals, however, were encouraged by the opportunity for needed resources.

The Garden State’s acute-care hospitals receive hundreds of millions of dollars in state and federal aid, largely through Charity Care payments — money to offset the cost of caring for uninsured or underinsured patients. These totaled $262 million in the current fiscal year, which began in July. Many also share in $218 million for graduate medical education and $167 million in reform-incentive payments.

Dwindling charity care

But while facilities will collect the same amount this year as they did last fiscal year, Charity Care has declined significantly in recent years, as more patients gained insurance coverage through the Affordable Care Act, leaving some facilities feeling a financial pinch as costs continue to climb. And state payments for these programs were temporarily suspended early this summer as part of a state revenue crunch, causing alarm among hospital officials.

The new funding proposals were crafted in an effort to boost revenue for the state’s safety-net hospital system, a mix of small and large facilities that operate in low-income areas, including urban centers, to treat a population that typically has limited insurance coverage.

On August 24, Murphy signed the graduate medical education measure (S-2759/A-4249), sponsored by Vitale, Sen. Theresa Ruiz (D-Essex), Assemblyman Benjie Wimberly (D-Passaic), and Assemblywoman Eliana Pintor Marin (D-Essex), the budget committee chair. It would allow the state to expand the use of a $10 fee on hospital admissions to raise new revenue. Officials said this could generate close to $24.3 million, part from a federal match, to supplement the existing GME fund.

“This new funding will help to address problems surrounding physician retention at safety-net hospitals, which is often made additionally challenging because of the proportion of Medicaid and Charity Care patients we serve,” said Suzanne Ianni, president and CEO of the Hospital Alliance of New Jersey, which represents 16 safety-net facilities.

Ianni praised the sponsors, legislative leaders, and Murphy for supporting this “innovative approach” to create new dollars. “By embracing this innovative initiative, the governor takes another proactive and positive step to enable safety-net teaching hospitals to better serve the healthcare needs of our state's most vulnerable communities,” she said.

Murphy’s conditional veto

Three days later, the governor issued a conditional veto to the bill designed to boost Medicaid funding — one of nearly two-dozen CVs he signed that day. The measure, sponsored by Vitale, Ruiz, and Assembly Speaker Craig Coughlin (D-Middlesex), would establish a five-year pilot program in seven counties that met certain population-density and economic criteria.

Under their plan, these counties could adopt a new tax on hospital procedures — which facilities could not pass along to their patients — to raise money that would then be transferred to the state Department of Human Services; the DHS would use these dollars to collect federal matching funds and return at least 75 cents of each dollar to the hospitals that paid into the program.

But in a message that accompanied his action, Murphy raised concerns about the proposal as drafted; he called for at least 90 percent to be returned to the hospitals and urged lawmakers to focus these dollars on acute-care facilities, not “hospital-related providers” who were also eligible under the Legislature’s version. He also called for 1 percent of the money raised to be transferred to the state to oversee the effort and wants to give the DHS 180 days to craft guidelines for the counties. Under the original version, the counties could start building the pilots immediately.

“I recommend the bill be amended to require the Department of Human Services to adopt rules further defining the contours of the program to create a consistent approach and promote greater transparency in the process. The Department’s oversight will also help ensure that the money collected through the Pilot is fairly distributed,” the governor noted.

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