The report, requested by Gov. Jon Corzine as a possible tool for dealing with ailing hospitals throughout the state, was undertaken by the New Jersey Commission on Rationalizing Health Care Resources and released this past June 29.
It will give Corzine an objective barometer for examining the state's hospitals and how to allocate the state's health funding - which ballooned to over $3.7 billion last year.
While the report declined to say which of the 79 hospitals providing acute care in the state should be kept open and which should be closed, it does give details about some of the problems facing each institution in a state rated worst in the nation for hospital finances.
Issues beyond their control
The report noted that hospitals are facing issues that are largely beyond their ability to control, such as the need for new costly health care technology, growing labor shortages, competition from non-hospital medical facilities, the declining number of low-wage workers without employer-based insurance, and the increasing number of poor residents with no insurance and no ability to pay. Hospitals must serve this latter group without the promise of reimbursement from state and federal governments.
Corzine created the commission in October 2006 to obtain expert advice on how the state can regulate and support New Jersey's health care delivery system in an effort to avoid regulation through crisis management.
In New Jersey, hospitals are licensed by the state. Taxpayers also pay about one quarter of hospital revenues through programs such as Medicaid, Family Care, state and local employees, retirees insurance, and through Charity Care and other grants.
Corzine established the commission with the aim of ensuring "taxpayer dollars are spent wisely," the report said, "to help meet New Jersey's health care needs in a substantial way, and to enhance oversight and accountability."
Financial condition of N.J. hospitals is poor
A viable hospital should have access to credit for a long-term capital project, adequate cash flow to deal with crisis situations, and money to handle possible changes in the economy, the report said.
"Developments in health care delivery during the past two decades have forced changes on hospitals nationwide," the report said. "Much of the care has moved from inpatient to outpatient settings."
Even inpatient care has grown shorter, a less-profitable situation for hospitals that has forced many to reduce the number of beds and services, or to close altogether.
"Approximately 7 percent of the nation's hospitals have closed since 1995," the report said.
In New Jersey, hospital closures were 17 percent during that period.
Most New Jersey hospitals have very little cash on hand to handle day-to-day expenses. They have more debt than the national average. Some hospitals also need to make improvements to aging buildings, while at the same time facing the costs of investing in new technology.
Some of the problems can be blamed on the federal government, the report said.
The federal government reimburses states between 70 and 89 cents on every dollar spent. State Assemblywoman Joan Quigley (D-32nd Dist.), a member of the Assembly Health and Human Services Committee who full-time serves as the spokesperson for the Hoboken University Medical Center (formerly St. Mary's Hospital) and helped oversee the closing of St. Francis Hospital in Jersey City, is well aware of the problems faced by urban hospitals.
Quigley said the federal government also changes what procedures are covered and how much of a procedure might be covered, leaving hospitals in the lurch.
Even the state shortchanges hospitals when it cuts back on Charity Care funding, money that reimburses hospitals for treating uninsured patients.
The upcoming 2008 fiscal-year budget, for instance, under-funds Charity Care by nearly $900 million. This is more than what was first proposed by Corzine, since the state legislature increased the original amount by $133 million.
Hudson County hospitals will receive a modest increase in Charity Care reimbursements in the new budget.
While Bayonne Medical Center is in Chapter 11 bankruptcy, officials at the hospital believe the state would be reluctant to close a facility in the largely insolated peninsula.
Greenville Hospital, meanwhile, has already filed to close, although it will likely reopen offering other services. Jersey City Medical Center - which serves as Hudson County's trauma center - is also unlikely to be closed, despite its economic problems.
Urban hospitals often feel most economic pressure
Urban hospitals, such as those in Hudson County, face some of the most significant challenges.
Some of these problems, Quigley said, have to do with the growing numbers of uninsured people, including undocumented aliens.
Hospitals are also confronted with unfair rates of payment by insurers, she said.
Rates are set by HMOs, insurance companies, and the federal government through Medicaid and Medicare. Insurance companies often set extremely low rates so that hospitals end up providing services at significantly lower rates than the services cost to perform. These same insurers create obstacles to keep hospitals from receiving prompt payment, routinely denying even valid claims so that hospitals do not get cash back to maintain operations.
What's worse, administrators have to hire people to pursue the claims, increasing costs to the hospital. Then, desperate for cash, hospitals often settle with insurance companies for even less when insurance companies offer a package deal.
While the federal government offers the best reimbursement rate, sometimes more than 90 percent of the actual cost, legislators often change the rules by refusing to cover procedures that were covered in the past, or reducing how much will be covered.
Hospitals even have conflicts with doctors
Doctors get paid for the number of days a patient stays in the hospital, but hospitals often are limited to a certain number of days by insurers, HMOs, and the government. So while the hospitals seek to get patients out as quickly as possible, doctors - some fearing malpractice lawsuits - often seek to extend a patient's stay.
Testing often leads to conflicts between hospital administration and doctors.
With malpractice as a huge issue, doctors will often order tests that may not be necessary, driving up costs for the hospital, Quigley said.
Smaller for-profit health care providers with lower overhead often cherry-pick paying customers, she said.
Doctors, even those working at hospitals, often have private facilities luring paying customers away from the hospitals while encouraging non-paying customers to seek hospital services.
So what's the answer?
There is no apparent quick fix, but Quigley said universal health care could be one solution to some of these problems.
The government must also seek to take some of the decision-making out of the hands of insurance companies, allowing hospitals to be paid promptly and fairly for services provided, she said.