Health Reform May Lessen Sting of Charity Care for NJ Hospitals

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New Jersey hospitals, feeling the strain of nearly $2 billion in uncompensated care, are hoping the Affordable Care Act will be more than a band-aid to help alleviate huge debts hospitals carry for treating uninsured patients.

Studies by the Rutgers Center for State Health Policy have estimated that an additional 444,000 New Jerseyans will be covered in 2014, whether through an expansion of Medicaid or through the new health care exchanges, where low and moderate income individuals will be able to buy subsidized health coverage.

“It is always positive to have more people insured, but we don’t know what will be the impact,” said Suzanne Ianni, president of the Hospital Alliance of New Jersey. “The burden on hospitals is not going to immediately disappear when health reform happens. You may not see a decline in charity care utilization immediately.”

What’s clear is that the present reimbursements hospitals receive from the state aren’t anywhere near enough. In 2010, New Jersey hospitals provided patients with $1.7 billion in uncompensated care, according to the New Jersey Hospital Association. That included $1.3 billion in charity care for low-income patients without health coverage. The hospitals are reimbursed for about half that amount — $675 million during this current fiscal year. In addition, the state’s 72 acute care hospitals reported about $1.05 billion in bad debt or unpaid patient bills that the hospitals wrote off.

“It is difficult, because in this environment, as the economy has been getting worse, more people don’t have jobs and there are more patients who we see who are eligible for charity care,” said Paul Goldberg, chief financial officer of Jersey City Medical Center, which has one of the highest charity care caseloads in the state.

JCMC receives about $48 million annually in charity care from the state, Goldberg said. The reimbursement is calculated based on what Medicaid pays hospitals, but Goldberg and other experts said Medicaid rates are about 70 percent of the hospitals’ costs.

“It is a struggle,” Goldberg said. “We are not a wealthy hospital, we don’t have a foundation with millions of dollars.”

Goldberg said he can’t predict how the Affordable Care Act will affect his hospital. “We don’t know what it will look like yet.” Adding to the uncertainty are undocumented immigrants, who account for a large proportion of the Hudson County population and will not be included for insurance coverage under the act.

Massachusetts may provide some indication of how New Jersey’s charity care landscape might shift under the Affordable Care Act. In 2007,  Massachusetts health reform’s individual mandate went into effect, and it’s estimated that only between 2 percent and 5 percent of the state’s population is currently uninsured.

Josh Archambault, director of health care for the Pioneer Institute, a Boston-based public policy research organization, said health reform has not reduced charity care as much as anticipated. The state was providing hospitals with about $700 million in charity care a year before health reform, and that last year that figure was about $405 million.

“We have hit a wall here and nobody quite understands why,” Archambault said. The continued need for charity care may in part reflect care provided to undocumented immigrants, as well as the decisions of some Massachusetts residents not to get health coverage and instead pay a penalty imposed by the state. “In the down economy you may have more folks using [health care] services who don’t have insurance,” he said.

In New Jersey, hospitals have adopted a “wait and see” approach to the health reforms. “It is safe to say — were an influx of insured of that magnitude to occur — it would lead to a reduction in bad debt and hopefully charity care services as well,” said Roger Sarao, vice president, economic and financial information for the New Jersey Hospital Association.

“Will it be a proportionate reduction, will the increase in the number of newly insured  translate  into the same decrease in charity care and bad debt expenses? That is the part that I don’t think anyone can safety predict,” Sarao said. “It will have a positive impact, but the extent we can’t quantify at this point.”

Also seen in NJ Spotlight.