Hospitals Pleased with Christie’s Budget Proposal, Despite 2 Percent Cut

Andrew Kitchenman | March 1, 2013 | Health Care
Graduate medical education to get $10 million boost, while some distressed hospitals will see $30 million cut

Sean Hopkins, senior vice president of health economics for the New Jersey Hospital Association.
Advocates for New Jersey’s hospitals were pleased with Gov. Chris Christie’s budget proposal for the upcoming fiscal year, despite elimination of a $30 million fund to aid hospitals facing financial distress.

Hospital advocates said the $966.3 million in state and federal money for hospitals showed Christie’s commitment to healthcare at a time when some of the funding was under threat.

The total budgeted for hospitals represents a $20 million, or 2 percent, reduction from the current level.

The cut was due to elimination of the Health Care Stabilization Fund, which state officials said was dropped after the federal government ended its half of the funding for the program. The fund was designed to help hospitals facing financial distress or closure to continue to offer services.

Christie proposed a $10 million increase for graduate medical education, which hospitals hope to use to retain medical residents in the state. This and other areas of hospital funding are being supported through matching funds from the federal government, which is expanding healthcare spending through the 2010 Affordable Care Act.

The budget also included a shift in how $166.6 million in state and federal funds will be distributed. Instead of being used to pay hospitals for services provided to Medicaid and uninsured patients, the money will be paid to hospitals for innovative projects they develop to improve how they deliver care, known as delivery system reform incentive payments or DSRIP.

The state and federal governments are each contributing $83.3 million of the funding for the initiative

Suzanne Ianni, president and CEO of the Hospital Alliance of New Jersey, said this funding would have been eliminated due to technicalities arising from the state’s successful application for a waiver from federal Medicaid rules. However, through negotiations with federal officials, the state was able to maintain the funds to be used to improve how care is delivered, she said.

Sean Hopkins, senior vice president of health economics for the New Jersey Hospital Association, said the shift to DSRIP reflects the federal government’s focus, since the ACA’s enactment, on encouraging better care at lower cost. He expects the details of how the payments will be awarded to hospitals to be released in the coming months.

Ianni said she expects the state to work with hospitals that will no longer receive money from the eliminated Health Care Stabilization Fund. Eight hospitals received $30 million last year, with St. Mary’s Hospital of Passaic receiving the largest amount, $9.5 million.

“While we’re disappointed that program is no longer is in existence, we look forward to working with the Christie administration” to make sure these hospitals can continue to provide access, Ianni said.

The largest category of direct government funding for hospitals is the charity care program, which would receive the same $675 million under Christie’s proposal as in the current budget.

This constant level of funding could actually improve hospitals’ financial position, according to Hopkins.

That is due to a combination of factors. The demand for charity care may fall in the next year as thousands of currently uninsured residents receive insurance due to a Medicaid expansion announced by Christie. Combined with constant state funding, this would reduce the amount of care that hospitals must provide without being reimbursed, the cost of which far exceeds the charity care subsidy.

A more direct gain from the budget proposal would be experienced by the hospitals that train young doctors. Graduate medical education funding would rise from $90 million to $100 million, with the funds split between state and federal sources. Federal funding for medical education is increasing as the federal government seeks to meet the increased demand for healthcare promoted by the ACA.

Deborah S. Briggs, president and CEO of the New Jersey Council of Teaching Hospitals, said she expects the hospitals to use the additional $10 million to increase the number of medical residents they have, or to provide incentives for New Jersey medical graduates to commit to starting their careers in the state.

Briggs said this could help address the state’s shortage of primary care providers. She cited a council study of a $30 million increase in government funding two years ago, which led to hospitals hiring 100 residents, primarily in family medicine and other primary-care areas.

In addition, hospitals could use funding to reduce the medical school debt of graduates, in return for the doctors agreeing to work for the hospitals once their training is complete.

“They tell us in their own words (in surveys) they just can’t afford” to stay in the state due to the combination of low primary-care pay and New Jersey’s high cost of living and the cost of practicing medicine here, Briggs said.