Stable State Funding, But New Requirements for NJ Hospitals

Lilo H. Stainton | March 11, 2019 | Health Care
While their stream of state money will remain steady, hospitals will have to instigate policy reforms focused on improving patient care

Credit: NJTV News
New Jersey’s proposed spending plan for the coming year includes stable levels of funding for hospitals, along with several new requirements that tie these public resources to policy reforms designed to improve patient care.

In the budget he introduced last Tuesday, Gov. Phil Murphy included nearly $740 million in direct funding — a mix of state and federal dollars — for New Jersey’s 71 acute-care hospitals; this includes $262 million for the charity-care program, which reimburses these facilities for a portion of what they spend treating patients who don’t have sufficient insurance.

The governor’s $38.6 billion proposal for fiscal year 2020, which begins in July, also includes $218 million in Graduate Medical Education, or GME, funds that support more than three dozen teaching hospitals in the Garden State. Nearly 50 hospitals also share in almost $167 million for reaching certain reform and performance goals.

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While these funding levels — and the formulas used to divvy up the dollars — are essentially unchanged from the current budget, the Murphy administration has introduced some new twists. State officials said one-twelfth of each hospital’s charity-care award will be tied to reporting certain key indicators, like the number of underinsured patients who are connected to primary-care physicians following their hospital stay.

“This is payment for reporting, not performance,” state Department of Health Commissioner Dr. Shereef Elnahal told hospital leaders on a conference call last week, according to a transcript shared by his staff. The state will be issuing guidelines on this new process after lawmakers adopt the budget, which must happen by the end of June.

Connecting and sharing

In addition, Elnahal told the hospital administrators that in order to receive any charity-care dollars, facilities must be linked to the New Jersey Health Information Network, a unified system of electronic health records. The state has struggled to improve so-called interoperability among its healthcare providers, but the work is paying off. The DOH said that, as of today, 64 acute-care hospitals have joined the NJHIN; the remaining seven have until July of 2021 to connect their systems to this larger network.

“As you have all heard from me since I began leading the Department, it is a priority that the State’s healthcare facilities connect and share information on a single system that can be accessed by all providers,” Elnahal said, noting that better data exchange and more coordinated care “will improve health outcomes for residents.”

Hospital leaders did not directly address these policy changes in comments following the governor’s budget speech, but in general they praised Murphy for maintaining stable funding for these healthcare institutions. Public dollars for charity care have declined significantly over the past five years, down from $650 million in 2015.

“In a time when the state has numerous competing priorities, we appreciate that Gov. Murphy’s budget proposal preserves charity care funding to provide a safety net for the working poor uninsured, along with other important programs like graduate medical education to ensure that New Jersey has enough clinicians to meet our future care needs,” said Cathy Bennett, president and CEO of the New Jersey Hospital Association. (Bennett, who joined the organization in 2017, has also worked to connect association members to the NJHIN.)

Funding for charity care is distributed based on how many under-insured patients a facility treats and according to a formula that favors hospitals with higher percentages of these cases overall. As more Garden State residents gained insurance coverage through the Affordable Care Act, which took full effect in 2014, the state tightened the purse strings; hospitals must cover the balance out of their own budgets.

Caring for people without health insurance

“New Jersey hospitals continue to face the age-old challenges of caring for people without health insurance,” Bennett said.

The Fair Share Hospitals Collaborative, which represents 31 hospitals in primarily suburban areas, also thanked Murphy for protecting this funding for the coming year. These facilities, which tend to receive lower amounts of charity-care funding, welcomed the continued GME dollars as well.

“All hospitals are safety nets for their communities and rely on the Charity Care program to help offset the cost of treating low income and uninsured patients,” said Fair Share’s Jennifer Mancuso. “It’s vital that all New Jersey teaching hospitals continue to train the next generation of physicians in the State, ensuring New Jersey residents have access to a highly trained healthcare workforce.”

Some teaching facilities will also benefit from a new funding pot that was created by a law Murphy signed in August; it expanded a hospital admissions fee in an effort to raise at least $24 million to help train new healthcare providers. According to the DOH, 14 teaching hospitals with high percentages of Medicaid patients will share in this “supplemental GME” money.

In addition, the FY2020 proposal includes $24.7 million for the state’s four psychiatric hospitals, which care for nearly 1,300 seriously mentally ill patients; this funding is stable from last year’s budget.

And for another year, $43.8 million is included for Newark’s University Hospital, the state’s only public hospital, which came under close state scrutiny last year when Murphy raised questions about its financial stability and its ability to fulfill its mission to care for patients, particularly those in underserved communities nearby.