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State of New Jersey
Executive Order #39

Governor Jon S. Corzine

WHEREAS, the 1999-2000 Advisory Commission on Hospitals identified excess hospital capacity as a major cause of the general financial distress that characterized New Jersey's general acute care hospitals at that time; and

WHEREAS, there has been no comprehensive evaluation of the financial condition of New Jersey's general acute care hospitals since the report of the 1999-2000 Advisory Commission on Hospitals; and

WHEREAS, since 1999, 10 general acute care hospitals have permanently closed in New Jersey, reducing the number of such hospitals to 80; and

WHEREAS, despite this reduction in excess hospital capacity, in 2004 New Jersey's general acute care hospitals had a median operating margin slightly above one percent, and an average operating margin of 0.4 percent, well below the national average of 4.04 percent and the Northeast region average of 2.86 percent; and

WHEREAS, in 2004, 45 percent of New Jersey's general acute care hospitals operated with a negative margin; and

WHEREAS, in 2006, one general hospital closed, two general hospitals filed for bankruptcy, and one general hospital was authorized to convert to a municipal hospital authority; and

WHEREAS, general acute care hospitals remain, despite technical advances that have shortened the length of in-patient stays and moved many services to an outpatient setting, crucial links in New Jersey's overall continuum of health care services; and

WHEREAS, all general acute care hospitals provide a wide range of health care services to New Jersey's residents that are not available from any other source; and

WHEREAS, there has been no comprehensive State planning in more than a decade to assure an ongoing appropriate correlation between hospital capacity and demand for hospital services statewide; and

WHEREAS, government and industry have a compelling interest in supporting a structured, rational assessment of in-patient capacity and primary care outcomes in order to support continued access to care and to promote better health outcomes; and

WHEREAS, the hospital industry is the fifth largest industry in the State, providing nearly 150,000 jobs; and

WHEREAS, health care workers play a crucial role in ensuring access to quality health care, and government and industry have a mutual interest in promoting and supporting an adequate and stable health care workforce; and

WHEREAS, there is a need to develop, for the benefit of the residents of New Jersey, a comprehensive Health Care Resource Allocation Plan to promote the rational use of public and private health care resources and services; and

WHEREAS, given the State's significant financial investment in existing general acute care hospitals, there is a need for greater accountability regarding resource allocation; and

WHEREAS, given the financial distress many New Jersey hospitals face and the limited State funds available to assist hospitals, there is a need to examine whether closure is appropriate for any struggling, non-essential hospital, and whether those underutilized hospital assets can be redeployed for other health care or otherwise appropriate purposes as well; and

WHEREAS, there is no formal State policy to ensure that general acute care hospitals that are essential for access to health care, especially for low-income and medically underserved communities, will continue to operate in a fiscally sound and effective manner;

NOW, THEREFORE, I, JON S. CORZINE, Governor of the State of New Jersey, by virtue of the authority vested in me by the Constitution and by the Statutes of this State, do hereby ORDER and DIRECT:

  1. There is hereby established the Commission on Rationalizing New Jersey's Health Care Resources ("Commission").

  2. All members of the Commission shall be appointed by the Governor and shall serve at his pleasure. The Governor shall also select the chair of the Commission. All members of the Commission shall serve without compensation.

  3. There shall be 11 members appointed to the Commission. The members shall be broadly representative of the health care industry with a specific emphasis on general acute care hospitals in New Jersey.

  4. The Commission shall organize as soon as practicable after the appointment of a majority of its members.

  5. The Commission is authorized to call upon any department, office, division or agency of this State to supply it with data and any other information, personnel or other assistance available to such agency as the Commission deems necessary to discharge its duties under this Order. Each department, office, division or agency of this State is hereby required, to the extent not inconsistent with law, to cooperate fully with the Commission within the limits of its statutory authority and to furnish it with such assistance on as timely a basis as is necessary to accomplish the purposes of this Order. The Commission may consult with experts or other knowledgeable individuals in the public or private sector on any aspect of its mission. In particular, the Health Care Facilities Financing Authority shall assist the Commission in accomplishing the purposes of this Order.

  6. The Commission shall perform the following tasks:

    1. Assess the financial and operating condition of New Jersey's general acute care hospitals by benchmarking them against national performance levels; compare the performance of New Jersey's general acute care hospitals to the performance of general acute care hospitals in a group of similar states; compare the array of programs and services offered by a hospital with the core mission of that hospital and the existing availability of those services at other hospitals within their region; and evaluate the effectiveness of established programs in meeting their intended objectives;

    2. Analyze the characteristics of New Jersey's most financially distressed hospitals to identify common factors contributing to their distress including the availability of alternative sources of care such as federally qualified health centers and other ambulatory care providers;

    3. Determine appropriate geographical regions throughout New Jersey for provision of access to medical care for the residents of New Jersey, including those who are low-income and medically underserved, and assess the current and projected future demand for physician, hospital, federally qualified health center and other ambulatory care providers in each such region and compare that future demand with existing capacity;

    4. Develop criteria for the identification of essential general acute care hospitals in New Jersey and use the criteria developed to determine whether a financially distressed hospital at risk of closing is essential to maintaining access to health care for the residents of New Jersey;

    5. Make recommendations for the development of State policy to support essential general acute care hospitals that are financially distressed including the development of performance and operational benchmarks for such hospitals;

    6. Make recommendations on the effectiveness of current State policy concerning assistance to financially distressed hospitals that are non-essential and that seek to close but require debt relief or other assistance to enable them to do so, and make recommendations on ways to improve State policy to facilitate such closures;

    7. Evaluate appropriate alternative uses to which such facilities might be put, including but not limited to, their potential redeployment as federally qualified health centers, other ambulatory care providers, physician offices and treatment facilities;

    8. Develop and publish a State Health Care Resource Allocation Plan to promote the rational use of public and private health care resources, labor, and technology and to serve as the basis for reviewing and approving the development and/or redeployment of health care assets and services around the State;

    9. Review existing Certificate of Need statutes and regulations to ensure consistency with the State Health Care Resource Allocation Plan and recommend amendments and/or revisions to achieve that objective if necessary;

    10. Make recommendations to strengthen State oversight and ensure greater accountability of State resources; and

    11. Issue a written report of its findings and recommendations no later than June 1, 2007, to the Governor, the Senate President, the Senate Minority Leader, the Assembly Speaker, and the Assembly Minority Leader.

  7. The Governor at his discretion may reconvene the Commission every three years to reevaluate and update the State Health Care Resource Allocation Plan. The Department of Health and Senior Services shall, in the interim periods, continue to collect necessary data for the Commission to review if it is reconvened.

  8. This Order shall take effect immediately.

GIVEN, under my hand and seal this 12th day
of October, Two Thousand and Six, and of the
Independence of the United States, the Two
Hundred and Thirty-First.

/s/ Jon S. Corzine




/s/ Kenneth H. Zimmerman

Chief Counsel to the Governor

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