State Cuts on Charity Care at NJ Nonprofit Hospitals

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March 9, 2015; NJ Spotlight

In New Jersey Governor Chris Christie’s latest budget, hospitals in the state would see a 23 percent decrease in direct state subsidies for what is called charity care. According to an article in the online publication NJ Spotlight, the decline in charity care is “largely due to an expansion in Medicaid eligibility under the Affordable Care Act, which led the state to cover 390,000 more residents under the NJ FamilyCare program in 2014.”

Looking at the individual hospital figures released by the state, a number of hospitals would see significant decreases in funding while others would see a minimal increase. For example, consider these two Newark hospitals that would see significant decreases: University Hospital would see a nearly $20 million decline while St. Michael’s Medical Center would see a 44 percent reduction. University was slated for future expansion into “a state-of-the-art regional medical center” while St. Michaels is being sought for purchase by a for-profit California company.

The increased funding for some hospitals is often attributable to a greater need for graduate-level medical education, which may align to the shift in healthcare. New Jersey Health Commissioner Mary E. Dowd stated that the budget reflects the “transformation of the healthcare system…shifting from payments based on the amount of healthcare services provided toward a focus on improving patients’ health while controlling costs” with “less need for inpatient services and increased need for outpatient services and wellness initiatives.”

While there is a shift underway from charity aid to Medicaid because of the ACA, some are saying it’s too soon to make drastic cuts in state aid. The CEO of the Hospital Alliance of New Jersey, Suzanne Ianni, believes it “unwise to cut charity care aid when the federal government hasn’t cut its dollar-for-dollar match to states, and while it’s still not clear how the Medicaid expansion will affect hospitals’ bottom lines.” Others, like Richard Pitman, who heads the Fair Share Hospitals Collaborative, were simply happy that the cuts were not as deep as feared, giving thanks to Governor Christie for the cuts not being more drastic.

As the budget goes through further analysis, and as the numbers become more real to healthcare providers, more reactions are sure to come. One of those looking to do more analysis is Kerry McKean Kelly of the New Jersey Hospital Association, stating, “We need time to look at all of those numbers, in the entirety of this budget, to see how it balances out and to determine the full impact on hospitals and their patients.” Kelly believes that with the cuts in charity aid, the state must ensure that other funding supports, including Medicaid expansion, will cover the bill, fulfilling the “important missions of our hospitals to provide care to all, regardless of their ability to pay.”—John Brothers