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For Release:
January 24, 2008

Heather Howard

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Thomas Slater
Marilyn Riley

Commission On Rationalizing Healthcare Resources Issues Final Report – Recommendations Provide Tools to Shape New Jersey’s Healthcare System


PRINCETON - New Jersey needs an “early warning system” to monitor acute-care hospitals, identify those in financial distress and intervene in advance to protect communities’ access to care, according to the final report of the Governor’s Commission on Rationalizing Healthcare Resources. The report also recommends the state better monitor public money spent on health care to ensure it is used efficiently.

Following a year-long study, the Commission today released its 200-page report at a press conference at Princeton University’s Woodrow Wilson School of Public and International Affairs.  The 13-member Commission was led by Uwe E. Reinhardt, Ph.D, an internationally recognized health care economist and Princeton’s James Madison Professor of Political Economy. 

The Commission also included experts in health care economics, nursing, medicine, hospital administration, public health and health policy.

“We have put forth a wide-ranging series of recommendations that we believe can enhance the proper functioning of New Jersey’s health system,” Dr. Reinhardt said.  “The fact remains that more than a million New Jersey residents are among the 47 million uninsured in this country.  We cannot truly solve many of our problems until the nation reaches political consensus on the principles that should govern meaningful reform of the health care system.” 

“This report gives us the tools we need to shape the future of our health care system, so we’re not just running from crisis to crisis,” Health and Senior Services Commissioner Heather Howard said in accepting the report for Governor Corzine.

          “Fixing the state’s health care system is a shared responsibility,” she added.  “By working together – the Department, the Legislature and the heath care community – we can make the changes we need to support essential hospitals and make sure the communities they serve will have access to quality health care for years to come,” she added.  “The Governor and I are very grateful for the Commission members’ service and the excellent report they have produced.” 

The Department of Health and Senior Services (DHSS) has already begun work on the recommendations.  DHSS is talking to the New Jersey Health Care Facilities Financing Authority about an “early warning system,” increased oversight and expanded reporting standards. Also, Commissioner Howard has charged a DHSS senior staff team with developing an overall implementation strategy for the report.

          One of the study’s key findings is that a large number of hospitals are in poor financial health at a time when hospitals nationally are doing well.

Five New Jersey hospitals have filed for bankruptcy since July 2006, and 15 hospitals have closed in the last decade. Many hospitals, especially in the northeast, have too many empty beds. More hospitals will face possible closure in the next few years, the report predicted.

The report identified six major causes of the industry’s overall poor financial health:

  • No Universal Health Care Coverage – More than 1.3 million New Jerseyans lack health insurance, including 250,000 children.
  • Low Hospital Reimbursement Rates -- Underpayment by public payers forces hospitals to charge others more to try to make up the difference.  Hospitals with fewer privately insured patients are most vulnerable.
  • Hospital/Physician Relationship – Hospitals and doctors have differing financial incentives and professional interests.  Hospitals depend on physicians for patient referrals, but have little control over how many resources (lab tests, etc.) doctors use and whether they’re used appropriately.
  • Lack of Transparency on Quality and Cost – Hospitals have been slow to measure and report on performance and care costs.  Hospitals need this data to guide them in improving both efficiency and patient care.
  • Governance by Hospital Boards – In some cases, hospital boards have not exercised proper oversight of their institution’s finances and management, thus threatening the future of valuable community assets.
  • Geographic Proximity – When there are a number of competitors nearby, hospitals find it difficult to negotiate more favorable insurer payment rates or to influence physician practice patterns.

          The Commission proposed dozens of steps that should be taken to stabilize New Jersey’s troubled hospital system.  They deal with state oversight, hospital funding, hospital efficiency, transparency in hospital operations and accountability for $3.7 billion in state money used to pay for health care in New Jersey.

         Some key recommendations:


·         Create an “early warning system” to closely monitor hospitals for early signs of distress, when a crisis might be averted.  A range of fiscal indicators, such as profitability and available cash on hand, should be used as part of this warning system.

·         When necessary, impose formal monitoring or intervention upon the hospital, based on the seriousness of the hospital’s problems.

·         Require distressed hospitals receiving state support to meet efficiency standards to ensure appropriate use of public funds.

·         Require hospitals to submit data regularly on efficiency and quality of care, and make that information public.

Hospital Board Governance and Transparency

·         Require boards to meet best practices of non-profit governance, including limiting board size and limiting the number of consecutive terms a board member may serve.

·         Require hospitals to charge uninsured New Jersey patients on a sliding scale based on income, with the maximum set at the price Medicare pays hospitals for the same service.

·         Require hospitals to post important documents on their web sites.  This would include charges for services, sliding-fee payment policy for the uninsured, and the three most recent IRS Form 990s -- annual financial statements certain federally tax-exempt organizations must file.


·         Focus state effort and resources on distressed hospitals that are essential.

·         Examine a series of measures, such as occupancy rate and number of Medicaid or uninsured patients, to determine whether a hospital is essential.  Software was created to analyze up-to-the-minute data related to essential factors and a hospital’s financial viability. 

·         Create a Distressed Hospital Program to aid financially troubled essential hospitals.

·         Consider increasing Medicaid payment rates for certain services at essential, distressed hospitals.


·         Require licensing for all ambulatory surgery centers and surgical physician practices with one operating room to ensure quality and patient safety. 

·         Regularly review the certificate-of-need process to ensure it keeps pace with changes in the healthcare marketplace.

As part of its deliberations, the Commission sought input from the public and a wide range of stakeholders.  The panel held three public hearings and considered testimony and position papers from hospital groups, payer groups, consumers and others.  The Commission also created six subcommittees that examined such issues as regulatory and legal reform, information technology in health care delivery and access and equity for the medically underserved, among others.

          The full report is available on the department’s web site at:

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