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Early in 1999, the system-wide deterioration in the fiscal condition of New Jersey's acute care hospitals was becoming apparent. The state had already seen an overall decline in the profitability of its hospitals in 1997 and 1998 mid-year financial statements suggested a rapid worsening of the situation. Hospital executives cited the numerous pressures on their hospitals, including revenue cuts by Medicare, the growing burden of charity care, and the effects of managed care.
In response, at the direction of Governor Whitman, the Department of Health (DOH) reconvened an existing health care commission to determine the seriousness and breadth of the financial problems and how they could be addressed. The 33-member panel, which had previously studied the problem of financing and organizing New Jersey's charity care program, included cabinet members, representatives from hospitals, employers, consumers, government, unions, physicians, nurses, and others involved in health care (a complete list of members and affiliations is provided in Appendix A). Because of its expertise and established working relationships, this Advisory Commission on Hospitals was able to adhere to a quick-turnaround schedule and to work effectively to evaluate hospitals' financial issues. Governor Whitman charged the Advisory Commission on Hospitals to:
- Assess the overall health of New Jersey hospitals;
- Identify the warning signs that might indicate a facility is in jeopardy; and
- Recommend options for hospitals that want to merge or convert to other uses
In carrying out this charge, the commission examined the effects on New Jersey hospitals of significant developments over the past several years. Based on its assessment of the causes for the financial deterioration, the commission is recommending corrective actions and identifying the parties responsible for each action. This report highlights recommendations for actions to be taken by state regulators, hospital management and boards, physicians, and third-party payers.
Chapter II describes the activities of the commission. Chapter III details the deterioration of the financial condition of New Jersey hospitals and the factors driving the decline. Proposals developed by the commission to address the fiscal problems are outlined in Chapter IV.