NJ Hospitals Struggle With Dwindling State Funds

The governor's proposed state budget includes more hospital funding cuts, putting additional financial concerns on safety-net providers. 

Gov. Phil Murphy's proposed state budget for fiscal year 2019 will dispense $636 million among New Jersey’s 71 hospitals, continuing the four-year trend of funding cuts in the Garden State due to budget constraints. 

If approved, the New Jersey Department of Health (NJDOH) will allocate $470 million in permanent funds: $252 million for charity care and $218 million for general medical education (GME), with another $166 million set aside as rewards for quality and efficiency efforts.  

Charity care funds are distributed across all 70 acute care hospitals and one specialty hospital, while GME funding is spread among 43 hospitals to support physician-based teaching programs. GME funding for fiscal year 2019 remains flat while the federal government provides $2 for every dollar spent by the state, totaling $436 million.   

"The Department is committed to supporting New Jersey’s hospitals' efforts to provide uncompensated care to our uninsured residents,” State Health Commissioner Dr. Shereef Elnahal said in a statement. "This funding also provides for essential training of physicians to boost the healthcare workforce."  

Fiscal year 2019 begins on July 1.  

In eight years under Gov. Chris Christie, state hospital funding increased from $856.6 million in fiscal year 2010 to $907.6 million in fiscal year 2011. From fiscal year 2012 through fiscal year 2015 that number rose to $986 million. However, funding decreased to $864.4 million in fiscal year 2016, $725.1 million in fiscal year 2017, and $705.1 million for fiscal year 2018.  

Murphy's proposed budget preserves the same level of quality incentive funding introduced by the Christie administration for the 46 hospitals participating in the Delivery System Reform Incentive Payment Program (DSRIP), program which benefits hospitals for improved quality of care and has been extended through 2020.

The most notable concern surrounds charity care, since acute care hospitals are required by state law to provide all necessary care to patients regardless of ability to pay.  

However, 12 hospitals receive 86% of state charity care funding, totaling $215 million, while the remaining 59 hospitals share 14% of funding, or $37 million, according to statistics from NJDOH. This has led some lawmakers and stakeholders to press the Murphy administration to alter the funding formula.  

Hak Kim, chief financial officer of AtlantiCare Health System, told HealthLeaders Media the system is "disappointed" by the proposed budget cuts, calling it one of AtlantiCare's "major concerns."  

"We do not believe the funding is sufficient," Kim said. "While AtlantiCare is fully committed to servicing our entire community, the lack of charity care funding and the shortfall from Medicaid reimbursement do not cover our costs of providing that care. We want to see increased funding in both programs to cover these costs." 

Hospitals see millions ebb and flow 

Next year, 21 facilities will see a dip in overall state funding, according to NJDOH statistics, a third of which will lose at least $1 million due to changes in care provided to consumers and how that impacts the funding formula.  

Among the hospitals losing funding are St. Joseph’s Medical Center, which will see the biggest drop at $6.3 million; AtlantiCare, down $3.4 million; and New Bridge Medical Center, which will collect $3.3 million less. 

Despite these projected funding shortcomings, St. Joseph’s would still collect $52.4 million, the second-highest total in the state. AtlantiCare would receive $11.1 million overall, and New Bridge would get $14.3 million. 

"St. Joseph's is the largest provider of charity care in New Jersey, and budget allocations recognize the essential role that St. Joseph’s plays in caring for our most vulnerable patients and communities," the hospital said in a statement to HealthLeaders Media.  

Several hospitals will see funding improvements, including eight that will collect at least an extra $1 million. Jersey City Medical Center, part of the RWJBarnabas system, will get the biggest funding improvement at $2.8 million more this year, for a total of $28.5 million. Jersey City declined to comment for this story. 

Additionally, Capital Health Regional Medical Center will see funding increase by $2.3 million while Hoboken University Medical Center, part of CarePoint Health, will receive a boost of $2.2 million.  

The overall funding leaders are University Hospital, which is slated to receive $77.7 million, Cooper University Medical Center at $41.7 million, and Trinitas Regional Medical Center with $33.5 million. 

Health commissioner discusses charity care funding 

Elnahal, who was sworn into office on April 2, testified before the state Assembly budget committee last week to discuss the governor's proposal, acknowledging that Murphy made "tough decisions" while allocating state funds. 

Elnahal attributed the flat rates to a decline in charity care claims in 2016 and the continued uncertainty from the federal government regarding the status of the Affordable Care Act. Elnahal added that NJDOH will survey hospitals throughout fiscal year 2019 to see how they apply charity care funding to achieve value-based care measures. 

The department is also willing to revisit the charity care funding formula in the future, according to Elnahal, as long as it improves outcomes and promotes value-based care among hospitals. After being asked about the distribution differences between safety-net and non-safety-net hospitals, Elnahal said he is open to seeing the legislature increase charity care funding.  

Republican Assemblyman John DiMaio suggested the state provide an additional $50 million, which would be matched by the federal government, to fully fund the charity care program.  

DiMaio also raised concerns about safety-net hospitals that receive additional funding from patient populations and exceed the 100% reimbursement threshold. He suggested the legislature introduce a cap at 100% along with a plan to redistribute the remaining funds to other hospitals.  

For systems dealing with charity care funding cuts, such as AtlantiCare, the focus remains on population health and working to lower the cost of care without diminishing quality.  

Kim said the continuing decline of commercial reimbursements, and the lack of adequate funding for both the Medicaid and charity care populations does not protect or support the long-term viability of safety-net providers across New Jersey. 

"There is a clear correlation between funding and access," Kim said. "As more providers are unable or unwilling to provide services for this vulnerable population due to the lack of funding, more patients will delay seeking timely treatment. They’ll likely get sicker or develop other preventable illnesses. They will eventually seek care in a higher-cost setting, for example through an emergency department. Quite often they’ll need continued care for conditions that could have been prevented. Beyond the financial cost, there is the personal well-being cost to these individuals and their families."