Garden State Stands Apart in Hospital Closures and Bankruptcies
PRINCETON, N.J., Nov. 11 /PRNewswire-USNewswire/ -- New data released by the American Hospital Association shows that U.S. hospitals enjoyed healthy profits in 2007 - the same year that New Jersey hospitals experienced an unprecedented rash of hospital bankruptcies and closures.
According to AHA Hospital Statistics - 2009 Edition, released last week, the nation's hospitals posted an average operating margin of 4.3 percent in 2007. Operating margins measure profits or losses based purely on operations, not investment income.
That margin reflected the largest single-year jump in at least 15 years, according to the healthcare trade journal Modern Healthcare.
The contrast for New Jersey's hospitals is dramatic. In New Jersey, the average operating margin was 1.3 percent, according to NJHA's analysis of audited financial data. Nearly 50 percent of the state's hospitals lost money in 2007. Five filed for bankruptcy protection. And three acute care hospitals ceased operations.
That troubling trend has continued in 2008, with an additional five acute care hospitals closing their doors.
"The contrast is striking between the financial health of the nation's hospitals overall and the grim picture here in New Jersey," said NJHA President and CEO Betsy Ryan. "Garden State hospitals are struggling to survive in a very unfriendly landscape compared with their counterparts across the country. It's a problem that needs to be carefully examined before our patients face an all-out access-to-care crisis."
Hospitals officials cautioned that 2008 promises to be an exceptionally difficult year for hospitals, both in New Jersey and nationwide. The nation's ongoing economic woes not only threaten hospitals' investment income and credit costs, but also increase the demands of the uninsured as more Americans face layoffs and the loss of their health insurance coverage.
AHA reports that the total amount of uncompensated care delivered by the nation's hospitals reached $34 billion in 2007, a 5.8 percent increase.
Two recent reports have identified government underfunding of New Jersey's hospitals as a key factor in their fragile finances. In New Jersey, Medicaid - the state program that provides healthcare to the poor - pays hospitals an average of just 69 cents for every dollar of care provided. Medicare, the federal program that provides healthcare to seniors, also reimburses New Jersey at less than cost - 89 cents on the dollar.
New Jersey's charity care program is another burden that sets the Garden State apart. While most other states have designated hospitals that provide care to the poor and uninsured, New Jersey law requires all the state's hospitals to care for charity care patients. While the cost of that hospital care reaches $1.3 billion annually, the state will reimburse hospitals less than half that total, or $605 million.
The January 2008 report from the state's Commission on Rationalizing Health Care Resources identified government underfunding as a key source of hospitals' shaky finances. And a 2006 report from the financial consulting firm Accenture, which was commissioned by NJHA, showed that poor payments for charity care, Medicaid and Medicare all are key reasons behind hospitals' deteriorating bottom lines.
"There's no surprise revelation behind this new data," said NJHA's Sean Hopkins, senior vice president of health economics. "New Jersey hospitals, quite simply, are crumbling under the burden of inadequate reimbursement. The new data merely re-enforces what we've witnessed here for quite some time."
SOURCE New Jersey Hospital Association