Interactive Map: Subsidizing Charity Care for NJ’s Poorest Residents

Still reeling from last year’s cuts to indigent care, hospitals worry that further reductions could be in store with coming budget address

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Less than a month before Gov. Chris Christie presents his state budget proposal, New Jersey hospital officials are urging the governor not to cut charity-care subsidies again because last year’s $148 million reduction was hard to bear.

In the current fiscal year, the state’s $503 million subsidy to hospitals for those who are uninsured and unable to pay their bills covers a little less than half the total charity-care bill for 2013 (on which the subsidy was based) of more than $1 billion, an analysis of Department of Health data shows. By law, hospitals must treat all those in need regardless of their ability to pay.

The state apportions charity-care subsidies to hospitals based on a formula that takes into account the amount the facility spent caring for the indigent in the base year and the total amount allotted for subsidies in the fiscal-year budget.

“It is not intended to be a claims-processing system,” said Donna Leusner, a DOH spokeswoman. “It is not supposed to be a dollar-for-dollar reimbursement.”

The ratio of subsidy received this fiscal year to the cost of care provided in 2013 varied widely, from just 2 percent at 17 mostly suburban hospitals to as high as 76 percent at nine urban hospitals.

She said the reason for the reduction in the subsidy was because the state’s Medicaid expansion and the Affordable Care Act have led to an increase in the number of people with insurance, meaning fewer people can’t pay. According to the “Calendar Year 2014 Report of Documented Charity Care” from the DOH’s Office of Health Care Financing, the amount of documented charity care provided declined by $453 million, or 44 percent, from 2013 to 2014.

While that is true, hospital officials argue that Medicaid’s reimbursement rate is significantly less than actual cost and the charity-care subsidies are even smaller.

“We still have almost 1 million uninsured in the state,” said Kerry McKean Kelly, vice president of communications with the New Jersey Hospital Association. “New Jersey hospitals annually absorb hundreds of millions of dollars in unreimbursed charity care.”

“Last year’s cuts to the Charity Care program were very painful to safety-net hospitals and we cannot sustain another round of large cuts,” said Suzanne Ianni, president of the Hospital Alliance of New Jersey, which represents 17 urban and teaching hospitals in the state.

She said the cost of charity care is undervalued because it is reported at Medicaid rates. The state’s Medicaid program pays about $7 for every $10 of a hospital’s costs. The subsidies are crucial for the financial viability of the state’s urban hospitals because as many as three of every five patients are either uninsured or covered by Medicaid, Ianni added.

“The federal policy for the Charity Care program is to recognize not only care to the uninsured but also care provided to Medicaid patients,” she said. “This is why the federal government did not cut matching funding to these programs as it is understood that Charity Care dollars are critical to pay for both care to the uninsured and to make up for insufficient Medicaid payments.”

Urban facilities endured the largest dollar cuts in charity care subsidies last year, with University Hospital and St. Michael’s Medical Center, both in Newark, suffering reductions of more than $10 million.

Kelly said it’s too soon to tell whether Christie plans to propose any further reduction in subsidies for the fiscal year beginning July 1 when he presents his budget to the Legislature in mid-February.