Starting in six months, hospitals in some of New Jersey’s most populated counties could have a fresh source of funds to support services for low-income patients, thanks to a pilot program that allows for an optional fee on some medical procedures. This revenue would then be leveraged in a way that attracts more federal dollars.
Gov. Phil Murphy signed a bill Thursday that would allow up to seven counties to adopt a new fee on still to be defined medical procedures at hospitals within their borders; this money would be then be used by the state to secure additional Medicaid funds and the combined revenue would be returned to hospitals in the participating counties.
The five-year pilot program — which is entirely optional — targets counties that contain large, economically challenged communities, where hospitals frequently treat a high proportion of Medicaid patients and can struggle to balance their budgets with the low reimbursement rates associated with the public insurance program.
“While Medicaid is the safety net that prevents low-income New Jerseyans from falling through the cracks, hospitals need to be well-funded and supported to properly deliver expert care to the community they serve,” said Sen. Joseph Vitale (D-Middlesex), chair of the health committee and a bill sponsor with Sen. Teresa Ruiz (D-Essex).
“This pilot program will expand the resources for Medicaid and funnel funds into those facilities that ensure the disadvantaged continue to receive the quality care they need,” Vitale added.
A number of funding initiatives
The measure is one of three proposals related to hospital funding that emerged suddenly in June, as the Democratic-led state Legislature struggled with Murphy, a first-term Democrat, to agree on what would become New Jersey’s $37.5 billion budget for the current fiscal year, which began in July. The budget included $262 million in charity care funding to help hospitals care for patients with no — or limited — insurance, $218 million for the Graduate Medical Education (GME) program, and $167 million in reform-incentive support.
In July, Murphy signed a bill by Senate budget committee chairman Paul Sarlo (D-Bergen), which lowered the state’s Medicaid reimbursement rate for certain less complicated emergency procedures, a move which is likely to reduce revenue for some facilities. While the nonpartisan Office of Legislative Services estimated, based on available data, that that measure could save between $29 million and $75 million annually, a recent regulatory notice distributed by the Department of Human Services, which oversees Medicaid, said the savings would be closer to $1 million total, through the end of June 2020.
In late August, the governor approved legislation sponsored by Vitale, Ruiz, Assemblyman Benjie Wimberly (D-Passaic), and Assemblywoman Eliana Pintor Marin (D-Essex), the budget committee chair, to boost funding for the state’s 43 teaching hospitals. The law, which took effect immediately, allowed the state to expand the collection of a $10 fee on hospital admissions for all long-term care and rehabilitation facilities, not just acute-care hospitals, to raise more than $24 million for GME efforts.
But a few days later, Murphy issued a conditional veto on the bill to increase the Medicaid match for hospitals in certain counties, sending the measure back to the Legislature for changes. The governor urged lawmakers to allow the DHS to have far more control in creating the program’s general structure and in approving each county’s plan for raising and distributing the new dollars.
Governor made more changes
Murphy also edited the legislation to require that more funding go directly to hospitals in the participating counties. While lawmakers called for facilities to get 75 percent of the money raised, with 25 percent available to county officials for administrative work, the governor said 90 percent should go to healthcare and 1 percent to offset the state’s cost in creating and overseeing the program.
Lawmakers approved these changes late last month and Murphy signed the measure into law on Thursday. “This will be an important benefit for the health of our disadvantaged communities and will help ensure that they have access to the resources and care they need,” Ruiz said.
The changes outlined by the governor and approved by lawmakers were good news to the Fair Share Hospitals Collaborative, an organization of more than two dozen hospitals, both independent facilities and large systems, that generally serve more suburban communities. The group has advocated for changes in the way the state distributes charity care, which tends to favor urban hospitals.
“The Governor’s recommendations significantly strengthen State oversight of the program and encourage the equitable distribution of funds generated through the program to all of the participating hospitals in the seven counties involved in this demonstration program,” said Fair Share executive director Jennifer Mancuso, who had raised questions about the initial proposal.
“These changes will help enhance the care provided to low income patients and strengthen the proposed program in a way that helps protect the mission of FSHC members,” she added.
Money will help with Medicaid
The law creates the five-year County Option Hospital Fee Pilot Program, which is open to up to seven counties with 250,000 or more residents and at least one municipality that meets certain population and economic-distress metrics. While the measure does not spell out which counties are eligible, it appears that at least a dozen would qualify. (At least six counties would fail to qualify on population numbers alone.)
Freeholder boards in eligible and interested counties must adopt a law that spells out what kind of fees would be charged and define what medical procedures they would apply to. Hospitals must be consulted in the process and freeholders could also allow some facilities to opt out. The DHS commissioner will need to approve these plans and could cap fees, if it was seen to benefit public health. Hospitals are prohibited from passing the additional cost on to patients or insurers, or listing it separately on a billing statement.
The funding generated through these fees will then be transferred from the participating county to the DHS, which will make it available for Medicaid matching funds; these are provided on a basis of at least 1:1, depending on the program. (The state budget currently includes nearly $15 billion for Medicaid, nearly two-thirds of which the federal government provides to cover the 1.8 million New Jerseyans enrolled.)
The DHS will then use the new revenue — both local and federal — to enhance Medicaid payments to participating hospitals in the counties involved in the program, to help them provide quality care for low-income patients. Insurance companies that provide Medicaid managed care would not be able to benefit from the additional funds, other than to cover the administrative costs involved.