Opinion: The OMNIA Alliance and the Future of New Jersey Safety-Net Hospitals

Joel C. Cantor | October 21, 2015 | Opinion
OMNIA is bold and innovative, but how will it affect the state’s most vulnerable patients and their access to high-quality healthcare?

Joel C. Cantor
The daylong New Jersey Senate committee hearing on October 5 exposed controversies about the new OMNIA Health Alliance plan introduced this month by Horizon Blue Cross Blue Shield.

As I noted in my testimony at the hearing, OMNIA represents an important shift in New Jersey healthcare financing that has the potential to address long-standing problems in care delivery. New Jersey, for example, ranks near the bottom of states in expensive but potentially avoidable inpatient and emergency department use, while we rank near the top in health spending per capita. In its new OMNIA products, Horizon will reward better care and lower cost delivered by partnering hospitals.

OMNIA relies on a “tiered” provider network that will deeply discount patient cost-sharing for those who use tier 1, while charging comparatively high deductibles and co-insurance tier 2 users. This will give patients very strong financial incentives to use tier 1 providers, at the expense of reduced service volume and lower revenue in tier 2 facilities. Driving volume to tier 1 partners is a key to making OMNIA work; Horizon will be able to negotiate discounts with those providers and work closely with them to improve care.

But at the hearing, Horizon was criticized for lack of transparency in how it selected tier 1 providers and for doing so in ways that may harm providers serving vulnerable populations. As the state’s largest health insurer, covering roughly half of privately insured individuals, and as a state-chartered nonprofit organization, Horizon, the critics argued, that should revise its plans.

A look at the numbers suggests that the critics’ arguments have merit. The chart below shows that the OMNIA tier 1 network skews toward hospitals providing less state-subsidized charity care than other hospitals. State charity-care payments to hospitals are an important indicator of the degree to which they serve low-income, uninsured patients. High charity-care hospitals are also very likely to be relied upon by Medicaid patients and to offer services, such as mental healthcare, that are needed in low-income areas.

The left hand chart shows that 57 percent of all New Jersey nonfederal acute care beds are in OMNIA tier 1 hospitals. While the chart on the right shows that these hospitals receive only 47 percent, of charity care payments.

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Two hospitals figure especially prominently in the state’s safety net (shown separately in the chart). University Hospital in Newark and St. Joseph’s Regional Medical Center in Paterson receive the biggest state charity care subsidies. While these hospitals represent only few percent of beds statewide, together they receive nearly a quarter of all charity-care distributions. University is a tier 2 facility, while St. Joseph’s is in tier 1.

The table below adds more detail, showing that the extent to which charity-care hospitals are represented in tier 1 varies greatly across eight New Jersey hospital-market areas.

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At one extreme, tier 1 hospitals in the Atlantic City and Toms River markets (which together run the length of the Jersey Shore through the Delaware Bay area) have almost all beds and receive almost all charity care payments. At the other end of the spectrum, tier 1 hospitals in the Trenton and Camden markets include just over a quarter of beds. Notably, the Trenton market’s only tier 1 hospital (RWJ-Hamilton) has 29 period of area beds and receives only 6 percent of state charity payments to the region.

Charity-care and Medicaid patients in these regions will not be directly affected by the under-representation of safety-net hospitals in tier 1, because they will not be in the tiered plan. But over time, if nearby tier 2 hospitals lose significant revenue as well-insured patients shift to other facilities, it will become increasingly difficult for them to sustain high-quality care and meet the needs of the most-vulnerable local patients. This is especially troubling for the large population of low-income patients in the Trenton area.

OMNIA is being offered in the State Health Benefit Program, making it especially problematic for state workers in our capital-city area to take advantage of this innovative plan.

New Jersey’s status as the state with among the most troubling statistics on avoidable hospital use and cost makes innovation in health care financing and delivery imperative. In that context, Horizon should be applauded for developing OMNIA. It is a bold and cutting-edge model. In my view, it could be one of the most important health care developments in New Jersey in many years.

Data on the distribution of hospital beds and charity-care payments represent only a high-level view of the potential impacts of the OMNIA tiered networks. Other, more-detailed data, such as levels of Medicaid services provided, might shed additional light on the potential impact of this important healthcare change.

Nevertheless, the data presented here strongly suggest that as currently structured, access to OMNIA tier 1 facilities will be uneven across the state. This disparity is especially troubling in the Trenton market area, where local safety-net facilities are mostly relegated to tier 2. At stake are access to affordable, high-quality care for vulnerable patients and the financial health of the New Jersey healthcare safety net.