Recovering through new financial plans
In Hudson County, hospitals relearn how to survive
by Timothy J. Carroll
Reporter staff writer
Mar 07, 2010 | 5089 views | 0 0 comments | 29 29 recommendations | email to a friend | print
NEW MANAGEMENT – Meadowlands Hospital in Secaucus is awaiting state approval of its sale to a group of investors from Newark. The new owners claim it will remain open to the community as an acute care facility.
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Each of Hudson County’s six hospitals has made improvements in services and facilities in the last year, but they are still struggling to find ways to keep up with the tough economy and proposed aid cuts from new Gov. Christopher Christie. In some cases, local hospitals have cut their contracts with certain insurance companies; in others, staffs have taken salary cuts.

Hudson’s six hospitals are: Jersey City Medical Center in Jersey City; Christ Hospital in Jersey City; Hoboken University Medical Center (formerly St. Mary Hospital) in Hoboken; Meadowlands Hospital Medical Center in Secaucus; Palisades Medical Center in North Bergen, and Bayonne Medical Center in Bayonne.

There was much news on the hospital front over the past 12 months. The company that owns Jersey City Medical Center and Meadowlands Hospital – LibertyHealth – is selling Meadowlands to new investors who say they plan to keep it as an acute care hospital, but the staff is awaiting further details.
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“Sixty percent of the hospitals in New Jersey are losing money.” – Daniel Kane
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In Bayonne, Bayonne Medical Center broke its contract with several insurance providers, an attempt to force them to negotiate better rates for patient care. And other hospitals that are struggling through choppy financial waters are considering doing the same.

Not quite stable

Although Hudson County is only one of 21 counties in the state, its hospitals received more than half of the state’s $84 million hospital stabilization funding over the last two years. The funding was only for hospitals facing closure or the loss of major services.

Jersey City Medical Center (JCMC), the 273-bed hospital on Grand Street in downtown Jersey City, was awarded $29 million over that time, more than any hospital in New Jersey. JCMC is the state-designated trauma center in Hudson County. They say they have had to cut programs for uninsured patients, “Charity Care.” However, all local hospitals are required by state law to take care of anyone coming into the Emergency Room, regardless of their ability to pay – something that has dogged urban hospitals.

Two years ago, LibertyHealth owned three hospitals in Hudson County: JCMC, Greenville, and Meadowlands. LibertyHealth closed Greenville in 2008 due to unsustainable finances.

This past January, LibertyHealth came to an agreement to sell Meadowlands to MHA LLC, a group of doctors and investors based in Newark. The sale is pending approval from the state Department of Health and Senior Services and the N.J. Attorney General’s office.

Bill Mear, a spokesman for MHA, said Meadowlands, with its 230 beds and 550 employees, will remain an acute care hospital.

“We want to build on the great work that Liberty did with this facility,” Mear said. “We want to keep it successful for many generations of New Jersey residents to receive their medical care here.”

Even in tough times, LibertyHealth was able to open a new medical office building in Hoboken last year, just across the street from the PATH station.

Taking on the insurance companies

One of the three hospitals in Hudson County that didn’t need stabilization money in 2008 or 2009 is Bayonne Medical Center, the 278-bed acute care center on Avenue E. But making it profitable after it underwent new ownership required bold action.

In 2007, Bayonne was losing $1.5 million to $2 million per month and edging toward bankruptcy. Keeping a community hospital in Bayonne was a high priority for residents. Bayonne is a peninsula, and if the hospital closed, residents would have a tough time getting assistance.

Daniel Kane took over as acting CEO late in 2006 and found an institution mired in debt.

In 2007, the hospital filed for Chapter 11 bankruptcy, but was then was sold to Urban Suburban Associates, LLC, backed by the real estate development company Fortis Property Group.

“Sixty percent of the hospitals in New Jersey are losing money,” Kane said last week. “The reason is because of inadequate reimbursement.”

In general, hospitals lose money for two reasons, several executives explained: they aren’t paid enough by the state for uninsured patients, and they aren’t paid enough for patients with insurance by health insurance companies.

The health insurance companies have accused the hospitals of overcharging insured patients to make up for losses in uninsured patient reimbursement.

Hospitals and hospital networks contract with health insurance companies who agree to cover their subscribers by placing the hospital “in network.” In that case, the hospitals are guaranteed to be reimbursed by the insurer, or to get a certain amount under the terms of the contract.

This helps the hospital because subscribers to that insurance are likely to choose that hospital. For the insurer, those contracts lessen costs and alleviate billing uncertainty and inconvenience for their subscribers.

However, the problem for community hospitals and those without the clout of major hospital networks, like Bayonne Medical, is that when negotiating with insurers, they get much smaller reimbursement for their services, hospital officials said.

Bayonne Medical said they were being grossly underpaid by insurance companies, like New Jersey’s largest health care provider, Horizon Blue Cross Blue Shield. So Kane made a bold move: he took Bayonne Medical out-of-network in 2008 and eliminated contracts with insurers that he believed were underpaying the hospital, willing to risk the loss of Horizon Blue Cross and Blue Shield’s subscribers in exchange for being paid in full in some instances.

“The insurance companies are taking advantage of the hospitals without a major network behind them,” Kane said. “There is a tremendous variation in reimbursement.”

He said Bayonne Medical receives full payment for emergency visits (required by the state), and payment for patients whose insurance covers out-of-network costs. But the hospital gets no payment for patients who are not covered out-of-network.

Usually for non-emergencies, those patients must go to a hospital that accepts their insurance, or pay out of pocket when they are billed.

However, Bayonne Medical says it absorbs extra out-of-network costs so they don’t turn away patients.

Now, the hospital has steadily climbed away from bankruptcy and is reporting profits.

The hospital isn’t collecting for non-emergency out-of-network visits, Kane said. What he won’t admit directly is that full payment by the insured for some visits and no payment for others works better in the long run than low payment for all visits.

Other approaches

In contrast with Bayonne Medical, JCMC has taken a different approach, according to spokesman Mark Rabson, so more patients feel comfortable coming to the hospital for care. Instead of going out-of-network, the hospital went in the other direction and signed contracts with three additional health insurance companies last year.

“We feel it’s the right thing to do,” Rabson said. “Our job is to increase patient and physician satisfaction.”

Palisades Medical Center, located on River Road in North Bergen, has no contract with Horizon Blue Cross Blue Shield, so like Bayonne, they operate out-of-network with the largest health insurance provider in the state. Like Bayonne, Palisades was doing well enough financially to not need any state stabilization money over the last two years. But unlike Bayonne, Palisades does not absorb the cost of the patients who visit the hospital out-of-network.

Palisades Vice President Eurice Rojas said his hospital bills out-of-network patients at a reduced level that equates roughly to the patient’s cost if they would have been in-network.

Palisades is a member of the New York-Presbyterian Healthcare System and operates the 202-bed acute care Medical Center as well as The Harborage, a 245-bed rehabilitation center and nursing home nearby.

The cost of charity care

Out-of-network operations aren’t for everyone, according to Peter Kelly, CEO of Christ Hospital, a 381-bed acute care facility on Palisade Avenue in Jersey City Heights. “It’s a question that virtually every hospital scratches their head about every time they go into negotiations,” Kelly said, because of the “woefully inadequate” offers made by the insurance companies.

Even more than the low in-network insurance payments, Kelly worries about looming cuts for state reimbursement for treatment of the uninsured.

“That’s the wild card,” he said of Charity Care funding. “We don’t know where it is right now.”

The hospital’s ChristCare program for the uninsured stresses equal treatment regardless of the patient’s ability to pay, he said. It also stresses cost efficiency, Kelly said, which means the hospital evaluates and provides treatment for patients as effectively as possible in the shortest amount of time.

Last year his hospital spent nearly $16 million on charity care, but only received $12 million from the state, he said: “70 cents on the dollar.”

The state has already cut the last half-month of Charity Care reimbursements from 2009, which means a $512,000 loss for Christ, a $614,000 loss for Hoboken University Medical Center, and a $1.9 million loss for JCMC.

Christ also received state stabilization funds last year.

Looking for regional solutions

One of the requirements for the state money was to submit to a state study of Hudson County hospitals to find out if a regional solution to health care problems can be found.

The state evaluation of Hudson County hospitals will begin in the spring and a recommendation to the state is expected by the summer, although it will not be binding.

Kelly said he is interested in the cost-saving measures the report may convey, but some officials speculate that the study is meant to set up the elimination of one acute care facility in Hudson County.

Because each received $7 million in state stabilization funds this year, three facilities will be under the microscope by the state: JCMC, Christ Hospital, and Hoboken University Medical Center.

Will one hospital be eliminated?

Hoboken University Medical Center (HUMC) may be one of the heads on the chopping block. In fact, a transition team for Gov. Christie reported earlier this year that the hospital would close in the next few months, although outraged hospital spokespeople and local politicians denied the claim.

HUMC is a 328-bed facility located on Willow Avenue and Fourth Street. The former St. Mary Hospital was saved from closure in 2007 when a state bill allowed the Hoboken City Council to fund it with $52 million in bonds and take over the hospital.

Now, the city and its Municipal Hospital Board are doing what they can to keep the hospital afloat, despite the fears of taxpayers that the city will lose money if the facility closes. After the hospital was sold, hospital officials apparently misrepresented a $22 million loss that put the hospital in risk of closing again last year, according to subsequent news reports.

CEO Spiros Hatiras took over the hospital in 2009 and promptly cut losses to $8.7 million, half of the losses from the previous year. The hospital is reporting a $3.6 million surplus for 2010, but that figure includes most of their $7 million in state stabilization funds.

HUMC Vice President and State Assemblywoman Joan Quigley said the greatest achievement the hospital made last year was to rebound financially. But the move toward fiscal health has taken concessions.

Earlier this year, the employees and labor unions agreed to a 10 percent salary giveback in order to keep the facility open.

In these tough times, Quigley said the hospital has also considered going out-of-network and severing contracts with providers, as Bayonne did.

For now, she said: “We’ve been telling [the providers] they have to do more for us. So far, they’ve been willing to talk. If not…”

Timothy J. Carroll may be reached at tcarroll@hudsonreporter.com.

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