Christie’s Proposed Health Budget Slashes $148M From Hospital Charity Care

Andrew Kitchenman | February 25, 2015 | Budget, Health Care
Administration argues that cuts are counterbalanced by ACA Medicaid expansion, which has thinned the ranks of the uninsured

Jersey City Medical Center would be among hospitals affected by Gov. Christie's plans to reduce so-called charity care funding.
New Jersey hospitals will be getting a lot less money from the state government to deliver charity care to uninsured people under Gov. Chris Christie’s proposed 2015-2016 budget. Administration officials say there’s a good reason for the cuts: the Affordable Care Act has dramatically reduced the ranks of the uninsured. But hospitals contend that it’s too soon to know how much they’ll be getting from the ACA or if that money will offset the proposed reductions.

Christie cut charity-care funding by $148 million — or 22.8 percent — from $650 million to $502 million.

“While we recognize the immense financial challenges that are facing New Jersey, access to healthcare for the poor and vulnerable should be an important priority,” said Sister Patricia Codey, president of the Catholic HealthCare Partnership of New Jersey. Her organization includes the state’s Catholic hospitals.

“Those most in need should not be sacrificed for balancing the budget,” she said, adding that the proposed cuts will be “devastating to our hospitals and ultimately to our patients.”

The administration argues that the shortfall will be partially offset by a $45 million proposed increase in the amount that doctors are reimbursed through New Jersey FamilyCare, the state’s main Medicaid program. State officials said that many formerly uninsured patients are now covered by FamilyCare, under the ACA’s Medicaid expansion.

“We’ve noticed a dramatic reduction in documented charity-care claims,” at the same time the number of residents covered by FamilyCare rose 1.28 million to 1.67 million, state Treasurer Andrew Sidamon-Eristoff said, defending the cuts But advocates for “safety-net” hospitals said the cuts were too soon and needed further analysis. The hospitals, they argued, may not be able to provide the current level of service without substantial charity-care payments.

Still, the ACA and Medicaid expansion help the state budget in a variety of ways, such as providing 100 percent federal funding for some people whose Medicaid costs were previously shared by the state and the feds. The state is projected to save $416.9 million from this in the coming fiscal year, according to the nonpartisan Office of Legislative Services.

That helped lower the overall proposed increase in the state’s Department of Human Services budget to 0.8 percent, from $6.69 billion to $6.74 billion. When federal spending is included, DHS is the largest single line in the state’s budget.

The proposed spending plan also includes a $27 million increase in the Department of Health budget, from $369 million to $396 million.

Groups representing hospitals that serve the largest share of uninsured resident and Medicaid recipients – known informally as “safety-net” hospitals — expressed concern about how the charity-care cut will affect them. Hospital representatives argued that it’s not yet clear how the influx of Medicaid recipients — when combined with a significant number of residents who remain uninsured — will impact them financially.

Jersey City Medical Center President and CEO Joseph F. Scott said it’s important that the state concentrates the remaining charity-care aid on the safety-net hospitals.

“I think it’s going to be very difficult for us to see that kind of cut for a hospital that has 49 percent charity and Medicaid,” Scott said of his hospital. “All of a sudden, we’re depending on Medicaid (which) doesn’t fully cover our costs, and at the same time you’re going to cut charity care, and I’m still seeing charity care” patients at the hospital.

Scott is chairman of the Hospital Alliance of New Jersey, an association of urban hospitals. Alliance President and CEO Suzanne Ianni said that patients who are newly covered by Medicaid will use healthcare services more, but with the low Medicaid reimbursement rate, hospitals would lose money.

Ianni pointed out that Jersey City Medical Center “received additional payments, but the payments did not offset the additional cost.” She continued, “in essence, Medicaid expansion cost Jersey City Medical Center $10 million more.”

She noted an estimated that Jersey City Medical Center in 2014 – the first year of the Medicaid expansion — had a $10 million larger shortfall between the cost of providing care to low-income patients and the amount they received than it did in 2013.

Richard A. Pitman, executive director of the Fair Share Hospitals Collaborative, said hospitals had been hearing rumors that the charity-care cut would be twice as large as Christie proposed. His organization represents 26 hospitals that serve areas with fewer low-income patients than those in Ianni’s organization.

He said a cut would be worrying, adding of the administration’s position: “I think there’s no question as to whether Medicaid has increased, so their position is not illogical.”

Assemblyman Herb Conaway Jr. (D-Burlington) said, “on the one hand, I imagine the hospital systems are breathing a little bit of a sigh of relief,” that the proposed cut wasn’t larger. But he emphasized that the Legislature would be looking closely at whether the institutions could withstand the cut.

“We have been hearing that very large cuts will imperil a number of hospitals – basically, drive them out of business, endanger jobs and communities, and we have seen that when the state hasn’t been as supportive as it ought of hospitals, that we have lost hospitals,” he said.

New Jersey Hospital Association President and CEO Betsy Ryan also said the budget proposal needs more analysis, but appreciated areas where Christie increased aid..

That includes a significant boost in the amount of money that will go to graduate medical education funding, which would add $27.3 million to the $100 million in the current budget.

“We certainly are very appreciative of his additional support for graduate medical education,” said Deborah Briggs, president and CEO of the New Jersey Council of Teaching Hospitals. She also said that more information is needed to understand the total effect of the budget proposal on hospitals.

Aside from the hospital aid, the proposed budget includes $2.3 million to create a single point of entry for addiction services, with Rutgers Behavioral Health Care tabbed for a management contract to help uninsured or FamilyCare patients with addictions access services anywhere in the state.

Christie also included $8.5 million more to expand the drug-court program, in which nonviolent offenders with addictions undergo mandatory drug treatment instead of jail time, to Bergen, Burlington, and Monmouth counties. It’s already in nine other counties: Atlantic, Cape May, Hudson, Hunterdon, Mercer, Ocean, Passaic, Somerset and Warren.

The spending plan also includes $72.5 million in new state and federal money for residents with developmental disabilities to live in community group homes. This effort has been supplemented by the funds from the closing of two developmental centers, which has raised protests from family members of residents.