Appendices Table of Contents · 2008-01-29 · Pascack Valley Hospital Hackensack, Ridgewood and...

Appendices Table of Contents

Appendix 1: . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Dartmouth Atlas-Defined Hospital ReferralRegions for New Jersey Area

Appendix 2: . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Adjustments to Dartmouth Atlas-DefinedHospital Referral Regions to Form New Jersey Hospital Market Areas

Appendix 3: . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 New Jersey Acute Care Hospitals by Hospital Market Area

Appendix 4: . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 New Jersey Population and InpatientHospital Volume Projections – AdditionalInformation

Appendix 5: . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Financial Data Sources and Considerations

Appendix 6: . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Methodology for Comparing Hospitals

Appendix 7: . . . . . . . . . . . . . . . . . . . . . . . . . . 21Issues to Address in Closing a Hospital

Appendix 8: . . . . . . . . . . . . . . . . . . . . . . . . . . 25Final Subcommittee Reports:

Appendix 8.1 . . . . . . . . . . . . . . . . . . . . . . . 25Access and Equity for the MedicallyUnderserved

Appendix 8.2 . . . . . . . . . . . . . . . . . . . . . . . 35Benchmarking for Efficiency and Quality

Appendix 8.3 . . . . . . . . . . . . . . . . . . . . . . . 43Infrastructure of Healthcare Delivery

Appendix 8.4 . . . . . . . . . . . . . . . . . . . . . . . 55Reimbursement and Payment

Appendix 8.5 . . . . . . . . . . . . . . . . . . . . . . . 61Regulatory and Legal Reform

Appendix 8.6 . . . . . . . . . . . . . . . . . . . . . . . 73Hospital/Physician Relations and PracticeEfficiency

Appendices for Final Report:Table of Contents

New Jersey Commission on Rationalizing Health Care Resourcesii

Dartmouth Atlas-Defined Hospital Referral Regions for New Jersey Area

Appendices for Final Report, 2008 1

Appendix 1: DARTMOUTH ATLAS-DEFINED HOSPITAL REFERRAL REGIONS FOR NEW JERSEY AREA

Section I

New Jersey Commission on Rationalizing Health Care Resources2

Adjustments Dartmouth Atlas-Defined Hospital Referral Regions


Dartmouth Atlas-defined Dartmouth Atlas-defined AdjustmentsHospital Service Area Hospital Referral Region

Phillipsburg Allentown, Pennsylvania Reassigned from Allentown to Morristown Hospital Referral Region

Flemington Philadelphia, Pennsylvania Reassigned from Philadelphia to New Brunswick Hospital Referral Region

Trenton Philadelphia, Pennsylvania Treated as its own hospital market area

Twenty Hospital Service Camden, New Jersey Divided into three market areas:Areas in central and • Toms Riversouthern New Jersey • Atlantic City

• Camden

Woodbury Philadelphia, Pennsylvania Reassigned from Philadelphia to Camden market area

Salem Wilmington, Delaware Reassigned from Wilmington to the Atlantic City market area

Ridgewood Ridgewood, New Jersey Combined with Hackensack and Paterson Hospital Referral Regions

Paterson Paterson, New Jersey Combined with Hackensack and Ridgewood Hospital Referral Regions

Newark Newark, New Jersey None

Appendix 2: ADJUSTMENTS TO DARTMOUTH ATLAS-DEFINED HOSPITAL REFERRAL REGIONS TO FORM NEW JERSEY HOSPITAL MARKET AREAS

Section II



New Jersey Acute Care Hospitals by Hospital Market Area

Appendix 3: NEW JERSEY ACUTE CARE HOSPITALS BY HOSPITAL MARKET AREA

Hospital Hospital Market Area

Bayonne Medical Center Newark/Jersey City

Christ Hospital Newark/Jersey City

Clara Maass Medical Center Newark/Jersey City

Columbus Hospital Newark/Jersey City

East Orange General Hospital Newark/Jersey City

Greenville Hospital Newark/Jersey City

Jersey City Medical Center Newark/Jersey City

Mountainside Hospital Newark/Jersey City

Newark Beth Israel Medical Center Newark/Jersey City

RWJU at Rahway Newark/Jersey City

Saint Barnabas Medical Center Newark/Jersey City

Saint James Hospital Newark/Jersey City

Saint Michael's Medical Center Newark/Jersey City

Trinitas Hospital - Williamson Street Campus Newark/Jersey City

UMDNJ-University Hospital Newark/Jersey City

Union Hospital Newark/Jersey City

Barnert Hospital Hackensack, Ridgewood and Paterson

Bergen Regional Medical Center Hackensack, Ridgewood and Paterson

Chilton Memorial Hospital Hackensack, Ridgewood and Paterson

Englewood Hospital and Medical Center Hackensack, Ridgewood and Paterson

Hackensack University Medical Center Hackensack, Ridgewood and Paterson

Holy Name Hospital Hackensack, Ridgewood and Paterson

Meadowlands Hospital Medical Center Hackensack, Ridgewood and Paterson

Palisades Medical Center of New York Hackensack, Ridgewood and Paterson

Pascack Valley Hospital Hackensack, Ridgewood and Paterson

PBI Regional Medical Center Hackensack, Ridgewood and Paterson

St. Joseph's Hospital and Medical Center Hackensack, Ridgewood and Paterson

St. Joseph's Wayne Hospital Hackensack, Ridgewood and Paterson

Hoboken University Medical Center Hackensack, Ridgewood and Paterson

Section II


Appendix 3


St. Mary's Hospital Hackensack, Ridgewood and Paterson

The Valley Hospital Hackensack, Ridgewood and Paterson

Hackettstown Regional Medical Center Morristown

Morristown Memorial Hospital Morristown

Muhlenberg Regional Medical Center, Inc. Morristown

Newton Memorial Hospital Morristown

Overlook Hospital Morristown

Saint Clare's Hospital/Denville Campus Morristown

Saint Clare's Hospital/Dover General Morristown

Saint Clare's Hospital/Sussex Morristown

Warren Hospital Morristown

Hunterdon Medical Center New Brunswick

JFK Medical Center New Brunswick

Raritan Bay Medical Center - Old Bridge Division New Brunswick

Raritan Bay Medical Center - Perth Amboy Division New Brunswick

Robert Wood Johnson University Hospital New Brunswick

Saint Peter's University Hospital New Brunswick

Somerset Medical Center New Brunswick

University Medical Center at Princeton New Brunswick

Bayshore Community Hospital Toms River

CentraState Medical Center Toms River

Community Medical Center Toms River

Jersey Shore University Medical Center Toms River

Kimball Medical Center Toms River

Monmouth Medical Center Toms River

Ocean Medical Center Toms River

Riverview Medical Center Toms River

Capital Health System at Fuld Trenton

Capital Health System at Mercer Trenton

Robert Wood Johnson University Hospital at Hamilton Trenton

St. Francis Medical Center Trenton

Cooper Hospital/University Medical Center Camden

New Jersey Acute Care Hospitals by Hospital Market Area



Kennedy Memorial Hospitals-University Medical Center, Cherry Hill Camden

Kennedy Memorial Hospitals-University Medical Center, Stratford Camden

Kennedy Memorial Hospitals-University Medical Center, Turnersville Camden

Lourdes Medical Center of Burlington County Camden

Our Lady of Lourdes Medical Center Camden

Underwood-Memorial Hospital Camden

Virtua-Memorial Hospital of Burlington County, Inc. Camden

Virtua-West Jersey Hospital Berlin Camden

Virtua-West Jersey Hospital Marlton Camden

Virtua-West Jersey Hospital Voorhees Camden

AtlantiCare Regional Medical Center, Inc. Atlantic City

AtlantiCare Regional Medical Center, Inc. Atlantic City

Burdette Tomlin Memorial Hospital, Inc. Atlantic City

Shore Memorial Hospital Atlantic City

South Jersey Healthcare Regional Medical Center Atlantic City

South Jersey Hospital - Elmer Atlantic City

Southern Ocean County Hospital Atlantic City

The Memorial Hospital of Salem County Atlantic City

William B. Kessler Memorial Hospital, Inc. Atlantic City

New Jersey Population and Inpatient Hospital Volume Projections – Additional Information


In this Appendix, population projections are providedfor New Jersey at the State level and at the individualmarket area level. Inpatient volume projections are alsoprovided at the individual market level.

Figure 1 below compares New Jersey’s 2005 populationand population projections for 2010 and 2015 by age

composition to the U.S. as a whole. The Figureillustrates that New Jersey’s proportion of populationage 18 to 44 is projected to be slightly smaller and itspopulation age 45 to 64 slightly larger than the nation asa whole in 2015.

Appendix 4: NEW JERSEY POPULATION AND INPATIENT HOSPITAL VOLUME PROJECTIONS – ADDITIONAL INFORMATION

Figure 1New Jersey and U.S. Population Age Composition

(2005 and Projected 2010 and 2015)

Figure 2 on the following page shows that there isvariation in the 2005 and projected 2015 population agecomposition across the eight New Jersey market areas. In2005, the Toms River and Atlantic City areas had thehighest proportions of population in the 65 and over agegroup. By 2015, the 65 and over age group is projected tocomprise 19 percent of the Toms River area’s and 16percent of the Atlantic City area’s and Hackensack,Ridgewood and Paterson areas’ total population.

As described in Chapter 4, to remove the effect of agecomposition and mix of services variations across marketareas, we compared use rates and ALOS across marketareas for 10 high volume DRGs for the 45 to 64 age group.Exhibits 1 and 2 illustrate the variation in use rates andALOS for the 10 high volume DRGs across the eightmarket areas.


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Figure 3Use Rates for New Jersey Residents by Market Area

(2005 and projected 2010 and 2015)

Figure 3 illustrates 2005 use rates compared to projected 2010 and 2015 use rates under the two projection scenarios.

Financial Data Sources and Considerations


The Commission used two primary data sources toprovide current and historical financial data: theMedicare Cost Report (Worksheet G), and auditedfinancial statements.

The Medicare Cost Report is an annual report submittedto the Centers for Medicare and Medicaid Services(CMS) by all Medicare providers (any hospital thatreceives federal Medicare/Medicaid funds). The reportis comprehensive – hospitals report total costs, not justMedicare costs – and requires information onadministrative structure, staffing and utilization ofservices, as well as financial data. Medicare CostReports are maintained in the Healthcare Cost ReportInformation System (HCRIS), a national data reportingsystem. Currently, the most recent data available for allhospitals is for FY 2005.

The New Jersey Health Care Facilities FinancingAuthority (NJHCFFA), the State’s primary issuer ofmunicipal bonds for New Jersey’s health careorganizations, provided hospitals and hospital systems’audited financial statements. During its 35-year history,the NJHCFFA has issued more than $13 billion in bondson behalf of over 140 health care organizationsthroughout the State. New Jersey hospitals submitaudited financial statements to NJHCFFA for review andinclusion in a database used for on-going monitoringand analysis. Although FY 2005 is the most current yearfor which NJHCFFA has a complete set of auditedreports, as of November 2007, all but 11 hospitals havesubmitted their FY 2006 audited financial data toNJHCFFA.

The Medicare Cost Reports have the advantage ofproviding a national database, collected through astandardized form, which allows for state-by-statecomparisons. However, an independent party does not

review the reports. Further, inconsistent or incompletereporting of certain financial elements limits the abilityto calculate key financial ratios. For example,reporting non-operating gains and losses is notconsistent across hospitals, which limits the ability tocompare operating and total margins from facility tofacility. In addition, this will cause the operatingmargin to be equal to or greater than the total margin.As another example, the Medicare Cost Report doesnot include a line item for board-designated funds;without this element, days cash-on-hand asconventionally defined cannot be calculated.

Audited financial statements are reviewed by anindependent third party. Further, the requirement thatthe statements be prepared in accordance with GenerallyAccepted Accounting Principles (GAAP) reduces theinconsistency in reporting of financial elements fromhospital to hospital. However, with few exceptions, it isdifficult to get state-by-state data based on auditedfinancial statements.

The primary value of unaudited statements is that theyare usually available within 45 to 60 days from the endof a period. In contrast, audited financial statements arenot usually available until 120 to 150 days after thefiscal year ends; cost reports are usually not availableuntil six or more months after the year ends. Thus,unaudited statements will typically provide the mostcurrent picture of a hospital’s financial condition. Theprimary disadvantage of unaudited statements is thatthey have not been reviewed by an independent outsideparty. In some cases, there may be material differencesbetween the unaudited and audited statements based onthe findings of that outside review. Therefore, unauditedstatements should be analyzed with caution.

Appendix 5: FINANCIAL DATA SOURCES AND CONSIDERATIONS

Methodology for Comparing Hospitals


The methodology for comparing hospitals is based onthe average for each metric for all hospitals in thehospital’s market area.

A score is established equal to the number of standarddeviations away from the average for each hospital. Apositive score indicates a hospital is more essential thanthe average for all hospitals in the area and a negativescore indicates a hospital is less essential than theaverage.

The formula used for converting a hospital’s metric on acertain variable (e.g., number of Medicaid anduninsured discharges and ER visits, occupancy rate, etc.)into its equivalent standardized value is as follows:

Standardized Score =

(Individual Hospital Metric Value – Average for All Hospitals in the Market Area)

Standard Deviation of the Metric for the Area

By subtracting the average of the metric for the relevanthospital market area from the observed value of themetric for a given hospital and then by dividing it by thatmetric’s dispersion (standard deviation) across hospitalsin that area, one arrives at a new variable whose averageacross the area must, by construction, be 0 and whosemeasure of dispersion (standard deviation) is 1.

If this is done for every metric, then, regardless of thesize and dimension of each metric, all standardizedmetrics will have an across-market-area average of 0and a dispersion (standard deviation) of 1. Because thesestandardized variables are now similar, one can addthem up, by weighting each, to arrive at an overallweighted average score that may reflect many distinctmetrics.

On the following pages in Tables 1 and 2, examples areprovided of this method for standardizing two of theessentiality metrics, one that is numbers (number ofMedicaid and uninsured ER visits) and one that ispercentages (occupancy rate).

Appendix 6: METHODOLOGY FOR COMPARING HOSPITALS


Appendix 6

Table 1Method for Standardizing Metrics Example:

Medicaid and Uninsured ED Visits

Observed Value Average Number Hospital for Number of of Medicaid and Observed Standard Standardized

Medicaid and Uninsured ER Value less Deviation ScoreUninsured ER Visits for Market Average

Visits Area

A B C = A - B D E = C/D

A 5,562 13,827 -8,265 9,935 -0.83

B 5,732 13,827 -8,095 9,935 -0.81

C 6,231 13,827 -7,596 9,935 -0.76

D 6,281 13,827 -7,546 9,935 -0.76

E 7,951 13,827 -5,876 9,935 -0.59

D 9,159 13,827 -4,668 9,935 -0.47

F 11,484 13,827 -2,343 9,935 -0.24

G 12,028 13,827 -1,799 9,935 -0.18

H 15,333 13,827 1,507 9,935 0.15

I 20,500 13,827 6,674 9,935 0.67

J 31,550 13,827 17,724 9,935 1.78

K 34,107 13,827 20,281 9,935 2.04

Average 13,827 0.00

Standard Dev. 9,935 1.00

Methodology for Comparing Hospitals


Table 2Method for Standardizing Metrics Example:

Inpatient Occupancy Rates

Observed Value Average Observed Standard Standardized Hospital for Occupancy Occupancy Rate Value less Deviation Score

Rate Average

A B C = A - B D E = C/D

A 47% 72% -25% 11% -2.33

B 59% 72% -13% 11% -1.25

C 68% 72% -4% 11% -0.39

D 70% 72% -2% 11% -0.19

E 70% 72% -2% 11% -0.15

D 74% 72% 2% 11% 0.19

F 76% 72% 4% 11% 0.36

G 78% 72% 6% 11% 0.59

H 79% 72% 7% 11% 0.67

I 82% 72% 10% 11% 0.95

J 82% 72% 10% 11% 0.96

K 83% 72% 11% 11% 1.03

Average 72% 0.00

Standard Dev. 11% 1.00


As these two example show, the variation in theobserved values is very different for the two metrics:for the number of Medicaid and uninsured ER visits, thedispersion (standard deviation) is 9,935, while thedispersion for occupancy rates is 11%. However, thestandardized scores in Column E account for thesedifferent dispersions in the observed values for themetrics. For example, Hospital I has 6,674 moreMedicaid and uninsured ER visits than the average forall the hospitals in the market area and this yields astandardized score of .67. For the occupancy ratemetric, Hospital H’s occupancy rate is 7 percent greaterthan the average occupancy rate for all hospitals in themarket area, and its standardized score is also .67. Instandardized terms, both Hospital I and Hospital K are0.67 above the average for these two different metrics.Standardizing allows for hospitals' observed values tobecome "unit free", thus enabling them to be addedacross all the essentiality metrics.

Under this method, each hospital’s overall essentialityscore is relative only to the other hospitals in its marketarea; it is not valid to compare hospitals’ essentialityscores across different market areas.

The Commission used the same methodology forscoring each hospital on the three financial viabilitymetrics, except that it compared all hospitals in the Stateagainst the statewide average for the metric rather thanagainst the average for the market area. Since highervalues of Long-term Debt to Capitalization put a hospitalat greater risk, the score was inverted for that metric sothat values above the average yield negative scores.Doing this allowed us to sum the scores to arrive at anoverall score of each hospital’s financial viabilityrelative to other hospitals in the State.

Appendix 6

Issues to Address in Closing a Hospital


Appendix 7: ISSUES TO ADDRESS IN CLOSING A HOSPITAL

Issue Description

Governance and Authority

Accreditation andRegulatoryRequirements

Communicationswith KeyConstituencies

Determine who will oversee the closure process (the hospital’s board, a special committee ortask force?) and the scope of authority that group and management will have to makedecisions related to the closing in terms of authorizing resolutions/restrictions/limitations.

Accreditation and regulatory issues associated with closing a hospital, include, but are notlimited to:• Preparation of the CN• Notification of the State Health Department, NJHCFFA, and JCAHO• Providing required notification of termination for all healthcare licenses (e.g., pharmacy,

lab, blood bank, DEA)• Notification of appropriate federal agencies (e.g., Department of Health and Human

Services, Social Security Administration, CMS, Internal Revenue Services, EnvironmentalProtection Agency)

• Notification of appropriate State agencies (State Department of Licensing and Regulation,Worker’s Compensation, Employment Security Bureau, Planning Commission)

Given that hospitals have a multitude of constituencies, communication with these variousgroups and individuals throughout the closure process is critical. It is essential that thehospital identify the necessary communications resources, assign responsibility forcommunications, develop a consistent message regarding the reasons for and process ofclosure and provide ongoing updates and information to groups including, but not limited tothose identified below

• Board and other governing bodies• Vendors and suppliers• Medical staff• Licensing authorities• Employees• Payers• Patients/families

• Donors• Community organizations/neighbors• Volunteers/auxiliary• Elected officials• Lenders/bond trustees• Other providers• Ambulance companies


Appendix 7

Issue Description

Employees

Financial

Medical Staff

Employee-related issues that must be addressed in a hospital closure are the following:• Notification requirements including provisions in union contracts and the federal

government’s Worker Adjustment and Retraining Notification (WARN) Act, which specifiesregulations regarding notification of the termination of employment. This act entailsnotifying both employers and local governments when mass layoffs occur. The specificregulations include provisions regarding the timeframe for notice depending on the size ofan organization.

• Identification and settlement of vacation, termination, sick leave, early retirement,outplacement, life insurance and tuition reimbursement benefits due to employees

• Determination of prior liabilities related to Worker’s Compensation, EEO, arbitrationawards, 401K, etc.

• Notification for Social Security withdrawal• Termination of 401K plan, including notification to employees and payment of match• COBRA eligibility information and benefits• Identification and negotiation/settlement of special employment contracts• Employee reduction plan to coincide with the ramping down/cessation of operations

While the cost of closing a hospital will vary from one hospital to another, there are typically anumber of obligations that must be met, including:• Vendor or trade debt• Commercial lease financing• Corporate debt• Tax exempt bonds or leases• Wages, pensions and benefits• Malpractice and other insurance• Taxes

In addition to these obligations, it is important to note that equipment leases generally includepenalties for early cancellation. If the hospital has land and building leases, these alsogenerally have early cancellation penalties. Likewise, vendor service agreements often havepenalties for early cancellation, as do physician contracts.

Some of the major medical staff issues resulting from a hospital’s closure include:• Determination of assistance to be provided to physicians (e.g., facilitate expedited

credentialing at other facilities)• Physician contract review, notification and settlement• Continuing Medical Education (CME) credit reporting• Specialist coverage (e.g., anesthesia, E.R., radiology, pathology, etc.) through

transition/closure• Medical records completion

Issues to Address in Closing a Hospital


Issue Description

Legal

Patients

Operations

Asset Disposition

Legal issues surrounding the closure of a hospital permeate virtually all of the considerationsin closing a hospital. Other legal considerations associated with the closing of a hospitalinclude: • Loan agreements, supply contracts, deeds, contracts and option to purchase land, leases

and sub-leases, contracts with related organizations, guarantees, installment salesagreements, third-party managed care organizations, physician groups, HMOs, PPOs

• Settlement of contracts, including physician contracts, loan agreements, supply contracts,service contracts, deeds, leases (real estate and equipment) guarantees, installment salesagreements, bond documents

• Litigation and risk exposure, including insurance claims, threatened proceedings, consentdecrees, fraud and abuse claims, etc.

Issues affecting patients and their families relate primarily to redirecting patients to otherfacilities and providers once the hospital ceases operations. Key patient- and family-relatedcomponents of a hospital’s closure plans should include, for example:• A schedule for patient clinical care wind-down, based on State Department of Health and

Senior Services requirements and financial constraints• A plan for phase-out of acute care inpatient services, ED operations, ambulatory care

services and transfer of remaining patients• A patient/family communication plan

Operational considerations are a key aspect, as the hospital must continue to operate as itgoes through the process of ceasing operations. Some of the operational considerationsrelated to closing a hospital include:• Security plan for asset preservation• Facility upkeep• Supply control• Handling of confidential material, including retention and retrieval of medical records,

pharmacy records, employee records, legal documents, financial records, x-rays, medicalstaff records, etc.

Examples of assets at the hospital that will need to be disposed of when closing include:• Real estate – can be sold and the proceeds used to meet some of the hospital’s financial

obligations. • Owned equipment – can be offered for sale to physicians or other hospitals. Alternatively,

the hospital can solicit bids from a firm to purchase the equipment in its entirety.• Supplies and drugs – explore the potential for returns to vendors, offer to sell them to

other hospitals, clinics, or physicians, and/or arrange for overseas donation of certainitems.

Access and Equity for the Medically Underserved


Subcommittee Members

Jennifer Velez, J.D. – EX-OFFICIO Subcommittee Co-ChairMember, Commission on Rationalizing Health CareResourcesCommissioner, Department of Human Services

Peter Velez, M.P.H.Subcommittee Co-ChairMember, Commission on Rationalizing Health CareResourcesExecutive Director, Newark Community Health Centers, Inc.

James LapeSubcommittee Co-ChairVice President of Behavioral Health & PsychiatryTrinitas Hospital

Linda Garibaldi, J.D.Member, Commission on Rationalizing Health CareResourcesSenior Attorney, Legal Services of NJ

JoAnn Pietro, R.N., J.D.Member, Commission on Rationalizing Health CareResourcesPartner,Wahrenberger, Pietro and Sherman LLP

Carolyn HolmesLead Staff to SubcommitteeSenior Advisor to DHSS Commissioner

Carolyn BeauchampExecutive DirectorMental Health Association of NJ

Elsa Candelario, M.S.W.Executive DirectorHispanic Family Center of Southern NJ

Marlene Lao CollinsDirector for Social ConcernsNew Jersey Catholic Conference

Jim DieterleExecutive DirectorAARP of New Jersey

Larry Downs, Esq.PresidentMedical Society of NJ

Charles “Shai” GoldsteinExecutive DirectorNew Jersey Immigration Policy Network

Katherine Grant-DavisExecutive DirectorNJ Primary Care Association

Peter HaytaianAmeriGroup Corporation

Harvey HolzbergChief Executive OfficerHoboken University Medical Center

Suzanne IanniPresident/Chief Executive OfficerHospital Alliance of NJ

Phyllis Kinsler Executive DirectorPlanned Parenthood of Central NJ

Paul R. LangevinPresidentHealth Care Association of NJ

Appendix 8.1: FINAL SUBCOMMITTEE REPORTS

Subcommittee Report 1:Access and Equity for the Medically Underserved

Section I


John McGeePresident/Chief Executive OfficerSolaris Health System

Christopher Olivia, M.D.President/Chief Executive OfficerCooper University Health System

Beverly RobertsARC of New Jersey

Gloria Bonilla Santiago, Ph.D.DirectorCenter for Strategic Urban Community Leadership

Muriel Shore, Ed.D., R.N.Dean, Division of NursingFelician College

Cecilia ZalkindExecutive DirectorAssociation for the Children of New Jersey

Illise Zimmerman, P.H.N., M.S.PresidentNorthern NJ Maternal Child Health Consortium

Appendix 8.1

I. Subcommittee Charge

The Subcommittee on Access and Equity for theMedically Underserved was charged with developingrecommendations to address the breadth of needs oflow-income and medically underserved New Jerseyresidents. More particularly, this subcommitteeexamined the systemic gaps and other access barriersthat now exist, which often interfere with the availabilityand provision of quality primary, specialty and inpatientcare, including inpatient and outpatient mental healthand substance abuse care. In the context of the fullCommission’s final report, and in the environment ofincreasing numbers of hospital closures, theSubcommittee’s work focused on identifying potentialsolutions and alternative approaches to the provision ofhealthcare.

The gaps and access barriers identified by theSubcommittee included the following: over-relianceand/or inappropriate use of hospital emergency rooms,in the absence of other appropriate venues for thedelivery of healthcare services; disparate and/ordisconnected local health planning, in connection and incooperation with community-based partnerships; adearth of primary and specialty healthcare providers(doctors, nurses, nurse practitioners, physicianassistants, dentists and other oral healthcarepractitioners) and related workforce availability issues;transportation; cultural and communication barriers,including access for individuals who have mobilityimpairments, or are deaf, hard of hearing, blind or

visually impaired; access issues for persons for whomEnglish is not a primary language; medical and dentalcare needs for individuals with developmentaldisabilities; availability of healthcare insurance; andhistorically low Medicaid reimbursement rates.

II. Overview of Subcommittee Process

The Commission members and State agency staffconducted two planning meetings prior to convening thefull subcommittee, in order to identify data that wouldbe helpful to subcommittee members during theirdeliberations, including maps and charts that identify thelocation of hospitals, federally qualified health centers,mental health, and other state and federally fundedagencies located in medically underserved areas. Thisdata was made available through the New JerseyDepartment of Human Services.

The Subcommittee held three meetings with the fullmembership: July 25, August 8, and August 30, 2007.A final meeting with Commission members and Stateagency staff was then held on September 6, 2007.

During the first full meeting, the Subcommittee wasinitially divided into subgroups and tasked withanswering two fundamental questions:

(1) What are the basic and essential health services thatshould be available for New Jersey residents?

(2) Who constitutes the “medically underserved”?



For the purposes of this initial discussion, the subgroupsintentionally operated under some very artificialassumptions: that insurance coverage, costs of providingsuch services, financial viability of neighborhoodhospitals, access to transportation, and availability ofprimary and specialty care were issues of noconsequence. Instead, the task was more narrowlyfocused on the services themselves in order to identifyessential core services.

III. General Approach to the Issue

After much discussion regarding services to which NewJersey residents must have access, the Subcommitteedecided that basic and essential services could, for thepurposes of this report, be defined as those servicescovered by Medicaid Plan A, with some caveats. Theseservices, while not entirely all encompassing, coveredthe broadest range of needs, and included specialty carepopulations such as individuals with developmentaldisabilities.

The Subcommittee also grappled with defining themedically underserved population. Was one “medicallyunderserved”, for example, if one needed to travel asignificant distance in the state for a mammogram? Orfor bariatric surgery? After much deliberation, theSubcommittee agreed to use the definition of “MedicallyUnderserved Areas” as used by the U.S. Department ofHealth and Human Services when it determines areas forfunding programs and services for medicallyunderserved populations: http://bhpr.hrsa.gov/shortage/muaguide.htm This geographic narrowing appeared tosatisfy concern that a particular healthcare service, whileessential to some, may not necessarily be readilyavailable to all New Jersey residents.

As the Subcommittee delved more deeply into itscharge, it became apparent that barriers to care can bebroadly categorized as either economic orenvironmental, or both, in nature. Economic barriersincluded access to health insurance, hospital financesand Medicaid reimbursement rates. Environmentalbarriers included geographic proximity to some otherlocus of care as a viable alternative to a hospitalemergency room, transportation availability, languageand other cultural or communication difficulties,physical access barriers for individuals with mobilityimpairments, well-established behavior (one may be

accustomed to accessing care through a hospitalemergency room), and traditional focus on and fundingof acute versus preventative care. In addition, threepoints of agreement emerged as a backdrop againstwhich the group’s work took shape:

(1) Most fundamentally, the relationship between thecommunity and its hospitals was recognized ascomplex. A lack of services within a community,for example, often results in inappropriate or over-reliance on a given hospital, which strains thehospital’s finances and overall capacity.Conversely, hospital closures frequently straincommunity services and negatively impact capacity.What would ideally be a symbiotic relationship isoften fraught with tension. The proliferation ofambulatory care centers across the state, which arearguably better able than hospitals to control payermix, additionally strains hospital resources. Itshould be noted that while the Subcommittee diddiscuss this issue, it will be explored at greaterlength in the Commission’s full report.

(2) Recognition was paid to the fact that healthdisparities associated with income, race, ethnicityand disability are closely intertwined with the issueof health access and quality. Indeed, barriers toaccessing quality health care are at a least acontributing factor to the grim reality that death ratesfrom heart disease are more than 40 percent higherfor African Americans than for whites and thatHispanics are nearly twice as likely as non-Hispanicwhites to die from complications of diabetes.

(3) Last, but certainly not least, there was anacknowledgment that one of the most significantpredictors of access to health services and treatmentis health insurance coverage. As the solutions to thisfactor are entangled with political, financial andphilosophical differences, and therefore exceedinglycomplex, the Subcommittee did not devote any timeto solutions concerning this topic.

IV. Key Findings and Recommendations

A. There is an over-reliance and/or inappropriateutilization of hospital emergency rooms

Hospitals are in trouble, at least in part, because they areinappropriately serving patients. Hospitals in low-income areas all too often report a large volume of cases

Section II


that come to their emergency departments with latestage illnesses such as cancer and kidney failure or comerepeatedly for chronic conditions such as asthma,diabetes, and congestive heart failure. Indeed, aSeptember 2007 Rutgers Center for State Health Policyreport (Rutgers Study) noted that emergency departmentvisits are on the rise in New Jersey and that a significantpercentage of the visits might have been avoidedthrough better access to primary care.

Recommendation:

Successful patient case management models should besupported and replicated in order to address the largevolume of ambulatory care sensitive utilization. Forexample, certain case study hospitals included in theSeptember 2007 Rutgers Study have developed “fasttrack” systems to separate emergent from other cases inthe emergency department. Under this model, patientsare routinely referred to outpatient clinics for non-emergent care. Other hospitals are having success as aresult of developing elaborate case management andchronic disease management systems within theemergency department itself. While this is a cleardeparture from the traditional role of the emergencydepartment, these facilities have decided thatcommunity need and patient preference have made thedeparture necessary. (This report can be accessed in fullat: http://www.cshp.rutgers.edu/Downloads /7510.pdf).

Additionally, New Jersey should seek to replicate andimplement emergency room (ER) diversion programs.Under such programs, hospitals employ a nurse to caremanage patients after their ER visit. For Medicaidclients enrolled in an HMO, after the ER visit, the caremanager works with the patient and the HMO in orderto ensure that the proper follow-up care is coordinatedwith the patient’s medical home and primary carephysician. In cases of Medicaid fee-for-service, the caremanager connects the patient with the FQHC, as it willbecome the patient’s medical home. The purpose is toprovide primary care as part of the continuum of careneeded to prevent increased acute episodes.

B. Local health planning is disparate and/ordisconnected from community-based partnerships

B1. FQHC/Community-Based Clinic IssuesThrough a network of ninety-six satellite sites locatedstatewide, New Jersey’s nineteen Federally QualifiedHealth Centers (FQHCs) provide high quality

preventive, primary, and acute care medical services forits medically underserved population. In addition,community-based health centers, such as Volunteers inMedicine, family planning centers, and the like providesimilarly necessary services.

While the FQHCs and community health clinics aremodels for providing high quality primary andpreventive care services, most of these sites are notequipped to provide specialty care services for a widerange of specialty care needs of their patient population.At present, for example, most FQHCs provide specialtycare services through referrals to specialists affiliatedwith local hospitals or specialty care clinics as needed.Only a handful of these health centers have on-sitespecialty care services for selected specialties.

Since many of the medically underserved areas alsosuffer from severe shortages in health care providers, inmany instances, the current referral system fails toprovide timely treatment for the health center patientsoften resulting in harmful health effects, high number ofemergency department visits, and costly hospitaliza-tions. (For a fuller discussion of recommendationsrelated to the FQHCs’ role in New Jersey, go to:http://www.njpca.org/Medical%20Home%20Document.pdf). It should be noted that support for Federallegislation increasing the number of FQHCs across thecountry would provide meaningful impact on themedically underserved community.

Recommendation:

Increase the primary care infrastructure and supply ofspecialty care to patients served by FQHCs andcommunity-based clinics.

It is important to note that the Subcommittee generallyagreed that community-based health clinics and FQHCswere equally critical to providing primary and specialtycare. One solution proffered to accomplish the aboverecommendation was to encourage the New JerseyPrimary Care Association (NJPCA), in collaborationwith the Medical Society of New Jersey (MSNJ) andNew Jersey Hospital Association (NJHA), to work toestablish an expanded network of specialty careproviders and hospitals to provide additional specialtycare support for the health centers. By negotiatingletters of agreement with specialists and participatingspecialty care clinics and hospitals, health centers couldrefer their patients as needed.

Appendix 8.1



A related solution would encourage FQHCs and otherclinics to focus primarily on providing on-site specialtycare. The NJPCA has identified three approaches toproviding on-site specialty care. Since case overload isa major reason for backlog in the existing system ofspecialty networks, the first approach would be to recruitretired specialists to provide volunteer specialty careservices on-site at the health centers.

Costs associated with this approach include the cost ofmaintaining a valid license for retired physicians, thecost of registration for Continuing Medical Education(CME) credits and the cost of malpractice liabilitycoverage for retired specialists. Legislative support atthe national level is also needed to extend medicalmalpractice liability protections to volunteer physiciansat community health centers. (H.R. 1313, the“Community Health Center Volunteer PhysicianProtection Act of 2005” was introduced in November2005 to amend the existing Public Health Service Act toprovide liability protections for volunteer practitionersat health centers.) A New Jersey alternative to thisFederal legislation was introduced in 2003. While thesebills would act as a catalyst to help bolster theinfrastructure of physicians who volunteer service, bothhave been stalled in the process.

A second option would be to hire retired specialty carephysicians on a part-time basis at the health care centers.Once employed, these physicians would be eligible formalpractice coverage under the Federal Tort Claims Actof 1992.

Under a third approach, health centers would contractwith practicing specialists to provide on-site services fora few hours each week in high priority specialty areas.A related recommendation in this area was to encourageFQHC and community clinic physicians to join themedical staff of a single local hospital in order toencourage patient care through a team approach.

B2. Mental Health and Substance Abuse Services

Local hospitals are an integral part of the communitymental health and substance abuse systems with much ofthe emphasis on meeting the most acute, serious needsof these populations. Many hospitals offer a continuumof psychiatric and substance abuse services, whichfunction as acute care diversion services, as well as stepdown options from more intensive services. As they are

embedded in the community, these hospitals are criticalin responding to the needs of the community members.When hospitals close, it is imperative that these criticalservices remain available to the community at the samelevel of accessibility and clinical intensity.

While hospitals serve as an important part of the mentalhealth and substance abuse treatment system, somepatients seeking emergency room treatment presentsigns of mental health or substance abuse treatmentneeds. According to the 2007 Rutgers Study, NewJersey hospitals have increasingly become providers ofcare for mental health and substance abuse patients,particularly through the emergency department. Anumber of emergency department physicians haveattributed this rise to a decrease in the number ofpsychiatric beds and detoxification services andinsufficient funding for community-based mental healthand substance abuse care. Many admissions toemergency rooms are often related to drug or alcoholmisuse. Best practice indicates that substance abuse-related emergency room visits represent an opportunemoment for screening, brief intervention, and referral totreatment services. Currently, this practice is not widelyimplemented.

Additionally, the Subcommittee noted that thecontinuum of preventative, non-acute care provided bycommunity-based and hospital providers is lessexpensive, effective, and preferable to costlyemergency-based care. Available services and fundingsources from hospital closures could be transitioned toreplacement community or hospital-based services, andwhen possible, to more wellness and recovery-orientedservices.

Recommendation:

State health policy should expand mental health andsubstance abuse capacity in the community, prioritizefunding for mental health and substance abuse services,and insist on tailoring services to patients’ wellness andrecovery needs. In addition, it is also critical that acutepsychiatric and detoxification services, emergency andacute hospital inpatient care continue to be available in ahospital setting. As noted above, this could be fundedthrough a reallocation of resources available once a hospitalcloses. Similar resource shifts should likewise occur forsubstance abuse services, now available on an inpatientbasis in only limited parts of the State.

Section II


B3. Disconnect between community needs and theCertificate of Need process

The Subcommittee noted that the existing Certificate ofNeed (CN) process, which, in relevant part, examinesavailability and continuity of community resourceswhen a hospital is considering closure, is ripe forexamination and can be strengthened.

Recommendation:

Institute a community-based health planning processthat encourages partnerships and includes communityresources so that access to basic and essential healthcareservices is a proactive, rather than a reactive endeavor.To that end, the Subcommittee is recommending thatfour regional focus groups be convened over the nextyear to ensure that input into health system redesign isfocused on a consumer-driven system of care. If ahospital must ultimately close, county-based planningcan buttress the Department of Health and SeniorServices’ monitoring of the availability of sustained,alternate resource development.

C. There exists a dearth of primary and specialtyhealthcare providers (doctors, nurses, nursepractitioners, physician assistants, dentists andother oral healthcare practitioners) and relatedworkforce availability issues.

C1. Historically low Medicaid reimbursement rates

New Jersey’s historically low provider reimbursementrates for Medicaid are well documented, and have beendirectly associated with adversely impacting access to avariety of healthcare services. Indeed, the abysmallylow reimbursement rates have so severely impacted theavailability of healthcare professionals who are willingand/or financially able to offer services to Medicaidpatients in some cases, that meaningful access can becompromised by any reasonable level of geographicproximity to clients for care or may result in whollyinaccurate listings of practitioners willing to participatein such care.

Recommendation:

To improve the availability of quality care, theSubcommittee recommended that New Jersey should setprovider reimbursement rates for Medicaid and otherstate-funded health care services at 75% or more ofcurrent Medicare reimbursement rates. TheSubcommittee did note that Governor Corzine’s 2008Budget Initiative to include $5 million (a $20 millionfigure once annualized and matched with federal dollars)to increase Medicaid rates for services to children was afirst and meaningful step to address this long-standingconcern.

C2. Workforce issues and Graduate Medical andDental Education

According to the New Jersey Council of TeachingHospitals, New Jersey’s teaching hospitals provide 70percent of the medical care to the uninsured andunderinsured. Faculty medical staff and physicianresidents are key care providers to New Jersey’smedically underserved. New Jersey ranks 18th in thenation as to the number of physicians in training relativeto the State’s population. Furthermore, New Jersey hasa particularly high percentage (39.7%) of practicingphysicians who are International Medical Graduates(IMG), ranking us 2nd in the nation.

According to the Medical Society of New Jersey, ourState is currently experiencing a shortage of physiciansin the fields of obstetrics and gynecology, pediatricsubspecialties, neurosurgery, anesthesiology, familypractice, and general surgery. There is a similar shortageof dentists and other oral health practitioners. ASeptember 2000 GAO report, “Factors Contributing toLow Use of Dental Services by Low-IncomePopulations” (http://www.gao.gov/archive/2000/he00149.pdf), discusses not only the low Medicaidreimbursement rates for dentists but also the short supplyof dentists in many areas.

Recommendations:

• Loan forgiveness and scholarships. New Jerseyshould provide loan forgiveness and scholarships forprofessionals willing to serve in medicallyunderserved areas or in professional specialtiesexperiencing workforce shortages. Targeting incen-

Appendix 8.1



tives to areas of greatest need is important formaking health care services available where they areneeded most. For example, Medicaid could focus itsGraduate Medical Education (GME) funding to thespecialties experiencing the greatest workforceshortages. Advocacy is also needed on the federallevel to increase annual awards to physicians by theNational Service Corps to encourage more doctorsand dentists to practice in under-served areas whileaddressing rising medical/dental student debt.

• Boost class sizes in existing medical schools andestablish new medical schools.

• Advocate increasing the number of residencytraining positions funded by Medicare toaccommodate additional medical/dental schoolgraduates.

• Minority recruitment and training. The percentageof minority enrollees in medical schools remainedessentially unchanged between 1970 and 1996, andcontinued at a rate lower than minorityrepresentation in the general population.Addressing this trend is important because minorityphysicians most often serve in minoritycommunities and under-served areas. State policyshould establish goals to encourage the recruitmentand training of health care providers whose race,ethnicity, and language reflect the composition ofthe state and communities in need.

• Telemedicine for remote areas. Telemedicineapproaches enable the transfer of medicalinformation – including medical images, two-wayaudio and videoconferences, patient records, anddata from medical devices – for diagnosis, therapyand education. New Jersey should make use ofcurrently available technology to develop andsupport telemedicine systems that provide medicalexpertise to underserved geographic areas of thestate. Specifically, New Jersey could exploreexercising Medicaid options for reimbursingtelemedicine services and protect patients byrequiring out-of-state physicians to be licensed toprovide telemedicine services.

D. Lack of practical transportation options hindersaccess to care.

For those individuals who are not Medicaid eligible,transportation was noted as a significant barrier toaccessing healthcare – especially in rural communitiesand other areas where a robust transportation infrastruc-ture for seniors and those with disabilities is unavailable.In addition, the lack of coordination among existingsystems that serve special populations createsduplication and increased costs.

Recommendation:

• The Subcommittee noted that transportation needsare best resolved through local planning and shouldfigure prominently in the community and regionalplanning noted above. The federal government hasinitiated a “United We Ride” initiative that requiresstates to enhance access to transportation toimprove mobility, employment opportunities, andaccess to community services for persons who aretransportation-disadvantaged, including seniors,individuals with disabilities, and low incomehouseholds. (New Jersey’s Department of HumanServices manages this initiative.)

• When available, transportation for persons who areMedicaid eligible may be coordinated with existingcounty Paratransit trips. This will increase costefficiency and reduce duplication of trips routing.

• The federal regulations that govern the United WeRide initiative require that each state develop a localplanning process whereby the needs of the targetpopulations are examined and addressed. Localitieswho fail to develop transportation plans risk losingFederal Transportation Administration (FTA)funding.

• The United We Ride initiative offers the health carecommunity an opportunity to incorporate thetransportation needs of the medically underservedinto the local planning process. Since the planningprocess in ongoing, the health care communityshould verify that a member from their communityis participating on the local transportation steeringcommittee. This will ensure that, as transportationneeds of the population change, they are identifiedon the plan updates.


E. Cultural and communication barriers exist for anumber of special needs populations, includingaccess for individuals with disabilities, includingpersons who are deaf, hard of hearing, blind, orvisually impaired, or those for whom English is nota primary language.

E1. Special Needs Populations

E1a. Individuals who are Deaf or Hard of Hearing:

Generally speaking, the healthcare access needs for thispopulation are similarly affected by the access andequity issues noted above. One obvious complication,however, is the ability of healthcare professionals tomeaningfully communicate with persons who are deafor hard of hearing, so that the quality of care rendered isnot compromised. A 2005 study published in theJournal of General Internal Medicine examinedhealthcare system accessibility issues of deaf peoplefound communication to be pervasive healthcare accessproblem. This report can be found at:http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=1828091

Technological advancements are increasingly available,as are traditional resources such as American SignLanguage interpreters, although in diminishing supply.These resources can readily provide meaningfulcommunication for those with special needs, asappropriate. Access remains largely dependent,however, upon a healthcare facility’s investment in andcommitment to ensuring adequate availability of humanor technological resources for those who require suchassistance.

E1b. Individuals who are Blind or Visually Impaired:

Sensitivity and transportation issues permeate the accessand equity issues for blind and visually impairedindividuals. The ability to access health care is oftendependent on the ability to complete health forms. Lackof alternative media for medical forms and theavailability of staff to read forms creates a major barrierfor sight impaired individuals. A 2007 study conductedby the National Council on Disability points to theimportance of providing health care forms andinformation in alternative formats for those with visualimpairments. As with other populations, accessingbarrier free transportation is also an important issue. A

full copy of the National Council on Disability reportcan be found at: http://www.ncd.gov/newsroom/publications/2007/implementation_07-26-07.htm

E1c. Individuals with Physical Disabilities:

Generally speaking, the healthcare needs of individualswith physical disabilities are similarly affected by theaccess and equity issues noted above. Twocomplications, however, are barrier-free access to thelocus of care and meaningful access to transportation.The above mentioned National Council on Disabilityreport identified access to transportation as a significantbarrier to accessing healthcare. One example of animportant healthcare issue for this population is the lackof availability of accessible examination tables forpersons who are non-ambulatory.

E1d. Individuals with Developmental Disabilities:

The medical needs of individuals with developmentaldisabilities range enormously in their complexity. A 2002 publication by the Surgeon General titled“Closing the Gap: A National Blueprint to Improve the Health of Persons with Disabilities”(http://www.surgeongeneral.gov/topics/mentalretarda-tion/retardation.pdf) underscores the challenges inobtaining these services.

For those whose disability is mild to moderate, access totraditional hospital venues and/or community careclinics may suffice for routine medical or dental needs.For those with significant developmental disabilities,however, access to specialty medical and dental care, aswell as mental health care (if needed) is critical.Additional behavioral supports may be required forconsumers with challenging behaviors in order tofacilitate the exam and treatment provided by thephysician or dentist. A 2005 report by the SpecialOlympics highlights the gaps in health care for thosewith developmental disabilities. This report can beaccessed via the Special Olympics website, www.specialolympics.org, and visiting their research link. The issueof transportation, akin to that which was noted forindividuals with physical disabilities, is also a barrier toaccessing health care services. The Subcommittee alsonoted that the recently-enacted Danielle’s Law hasimposed some unintended stressors upon hospitalemergency rooms, as the frequency of such visits hasincreased.

Appendix 8.1



Recommendations:

While it is difficult to generalize the accessibilityconcerns of special needs populations, basicaccommodations such as communication support,barrier-free access, and specialized care are not alwayscostly and should be prioritized. One example of animportant and low-cost effort towards effectivecommunication is the Communication Picture Board,prepared through a collaboration of the New JerseyDepartment of Health and Senior Services/Office ofMinority and Multicultural Health and the New JerseyHospital Association. This board utilizes a variety ofpictures to enhance one’s expression of needs, and isdesigned for use by emergency service personnel andfrontline intake staff to better enable effectivecommunication with the public.

For individuals with developmental disabilities, thedearth of medical and dental specialists is particularlyacute. Articles at http://rtc.umn.edu/nhis/ andhttp://www. Pubmedcentral.nih.gov/picrender.fcgi?tool= pmcentrez&artid=1783697&blobtype=pdfcite accessibility and communication as barriers tomedical and dental services. As such, the establishmentof Centers of Excellence for medical, mental health anddental care for individuals with developmentaldisabilities should be explored. Finally, the recruitmentand retention issues noted above for medical and dentalprofessionals exist as well for those individuals withdevelopmental disabilities.

E2. Language

The increase in immigrant groups in New Jersey,coupled with higher incidence of chronic health careconditions requiring regular health care monitoring,argues strongly for health care services that canadequately serve linguistically, ethnically and culturallydiverse families.

Recommendation:

To provide better access to healthcare and preventunnecessary complications due to language and culturalbarriers, New Jersey should provide translation andoutreach and educational materials in the language ofthe patient populations. This can best be achieved bylocal planning efforts, outlined above.

Benchmarking for Efficiency and Quality



Subcommittee Report 2:Benchmarking for Efficiency and Quality

A. Overview

The Commission on Rationalizing Health CareResources was established to advise the Governor on astrategy for supporting a system of high quality,affordable, cost effective and accessible care. On anational level, changes in health care delivery haveresulted in changes in health care finances. This hasresulted in financial problems for many New Jerseyhospitals and requests for state financial subsidies. Inresponse, the Governor established the Commission toevaluate heath care delivery issues and to recommend arational way to evaluate requests for financialassistance.

In its June 2007 Interim Report, the Commissionproposed specific criteria to determine whether ahospital was essential to ensure the provision of the fullscope of health care services for all regions of the statebut not financially viable. In addition, the Commissionwanted to ensure that state determinations aboutessential hospitals and financial distress also consideredquality of care and efficiency. It is not reasonable toprovide financial subsidies to a poor quality hospital oran inefficient organization.

Subcommittee Charge:

Therefore, the Commission established theSubcommittee on Benchmarking and Quality infulfillment of Executive Order #39 to “Recommend thedevelopment of State policy to support essential generalacute care hospitals that are financially distressed,including the development of performance andoperational benchmarks for such hospitals,” and in orderto ensure that:

• public funds are used to support efficient and highquality health care facilities, and

• decisions about whether a facility is essential shouldconsider both quality and efficiency in addition tocommunity need and financial performance.

Overview of Subcommittee Process:

The Subcommittee was formed in May 2007 and wascomposed of thirteen members representing healthsystem management, medical and financial leadership aswell as academic and consumer representatives(Appendix 8.2A). Two members of the Commission onRationalizing Health Care Resources (David Hunter andJoAnn Pietro) served as Subcommittee members inorder to ensure consistency with overall Commissionneeds and approach. Mr. Hunter and Robert JacobsM.D. served as Subcommittee co-chairs. TheSubcommittee met five times between June and August2007 to review a general approach, to choose bothquality and efficiency measures and to develop astrategy for responding to hospitals which request asubsidy. The goal was to ensure development of a highquality and financially secure health care system,through the use of quality and efficiency measures thatserve as performance and operational benchmarks.

There was active discussion among Subcommitteemembers on all issues considering both theoretical andpractical perspectives. Subcommittee members areactively involved in managing hospitals and dealingwith financially troubled institutions and brought thatexperience to the discussion. There was substantialagreement among Subcommittee members on thecriteria for choosing measures, the quality and efficiencymeasures selected and the ways to use those metrics.The Subcommittee developed an approach to reviewinghospitals in financial distress, developing agreementswith those hospitals and monitoring performance.

The Subcommittee focused on the use of quality andefficiency measures but noted that issues beingconsidered by other Commission Subcommittees (e.g.,health care infrastructure including electronic medicalrecords and physician practice patterns) were significantdeterminants of hospital operations and performance.

Section I


Appendix 8.2

B. Measure Selection: General Approach to the Issue

The Subcommittee’s strategy was to select a wide rangeof measures which could be used to evaluate hospitalperformance and to determine whether operationalchanges were necessary. This dashboard for quality andefficiency could also be used to monitor hospitalperformance if a subsidy was provided by the State. Thefollowing criteria were used to guide measure selection:

• Clear data definitions of the measures must beavailable to ensure comparability across hospitals.

• Data must be currently available so that hospitalswill not face additional data collection burdens.

• Measures should represent a broad range of areasincluding clinical quality, outcomes, financialperformance and operating indicators, etc.

• Measures must be transparent so that calculationmethods and data sources are specified andavailable.

• Different measures could be important for differenthospitals because of areas of specialization.

Subcommittee members proposed a wide range ofquality and efficiency measures for consideration.There was general agreement that the Subcommitteeneeded to create a broad dashboard to accurately reflecthospital performance. The Subcommittee evaluatedthose measures using the agreed-upon criteria.

When several measures covering the same area wererecommended, one measure was chosen. Sincemeasures need to be widely available for all NJhospitals, a number of worthwhile measures were notincluded. There was also the recognition that while someproprietary systems could provide highly usefulinformation about hospital operations, these systemscould not be included since publicly available data wasnecessary.

There was general agreement that a hospital that appliedfor a subsidy might be asked to provide additionalinformation to describe performance. These measureswould be important to understand and evaluate ahospital’s performance but consistent statewide datamay be unavailable.

C. Key Findings - Quality and EfficiencyMeasures

Based on these criteria, a dashboard of quality andefficiency measures was developed to give a broadpicture of a hospital’s operations. The Subcommitteerecommended that these measures be used to evaluate ahospital that applies for a special subsidy. For many ofthese measures, it will be possible to calculate both stateand national medians to be used when evaluatingindividual hospitals. Whenever possible, a hospital willalso be evaluated in terms of its percentile on eachmeasure.

Recommended Quality Measures:

The recommended quality measures are presented inTable 1. These measures are based on a wide range ofdata sources and types of quality including consumersatisfaction, mortality and clinical process measures.The measures are largely based on information alreadycollected by the Department of Health and SeniorServices (DHSS):

• The perfect care scores can be calculated based onthe patient level data already submitted for the NewJersey Annual Hospital Performance Report. Theperfect care measures reflect how well a hospitalprovides all the correct care to a patient with a heartattack, pneumonia, congestive heart failure or asurgery patient.

• Mortality, readmission rates and average length ofstay (ALOS) can be calculated using the hospitaldischarge data collected by the Department. TheAPR-DRG risk adjustment will be used whenappropriate.

• H-CAHPS (Hospital-Consumer Assessment ofHealthcare Providers and Systems) is a standardizedsurvey to measure patients' perspectives on hospitalcare within the following composites: DoctorCommunication, Nurse Communication,Responsiveness of Hospital Staff, Cleanliness andQuiet Environment, Pain Management,Communication about Medicines and Dischargeinformation. HCAHPs measures will be availableon the CMS Hospital Compare and NJ HospitalPerformance web sites.



• The Department will be collecting and publiclyreporting on nosocomial infection rates as requiredby proposed legislation. Specific nosocomialinfection measures will be defined by theDepartment through the regulatory process with theadvice of the Department’s Quality ImprovementAdvisory Committee (QIAC).

• The Agency for Healthcare Research and Quality(AHRQ) has developed the Inpatient QualityIndicators (IQIs) which are a set of qualityindicators which reflect mortality, utilization andvolume based on hospital discharge data using theAPR-DRGs.

When a hospital needs a subsidy, other issues would beaddressed such as Board of Trustees involvement inquality oversight, inappropriate resource utilization,clinical efficiency and hospital resources allocated toquality improvement. The hospital might also be askedto provide information on pediatric care, obstetrical careand emergency care. These indicators are not part of thedashboard but could be considered for individualhospitals which apply for a subsidy.

Recommended Efficiency Measures:

The recommended efficiency measures are presented inTable 2. These measures assess a hospital’s costs,resource use, patient utilization review, staffing andrevenue cycle management. All measures, except forthe Denial Rate, can be calculated with informationreadily available from existing data bases maintained byDHSS:

• Data on full-time equivalent staffing, labor expensesand non-labor expenses are provided in the HospitalCost Reports provided to the DHSS annually. TheSubcommittee considered calculating the costmeasures on a per admission or per-patient daybasis; the Subcommittee chose per-admissionbecause a hospital’s cost per day could be acceptablebut the average length of stay too high. Admissionsare adjusted for outpatient activity (using grossrevenue figures from the Cost Reports) and case mixand severity (using APR-DRGs as applied to UB-92admissions data). The CMI will include anadjustment for severity as well as to improve theconsistency of these measures across hospitals.

• Already listed as a quality measure, average lengthof stay (ALOS) is included as an efficiency measureas well. The Subcommittee believes it is anindicator of the management’s ability to controlutilization, and hence, costs, at the hospital. Data tocalculate ALOS is included in the B-2 Reportsprovided quarterly to the DHSS. Like the costmeasures, ALOS should be adjusted for case mix toensure comparability across hospitals. TheSubcommittee noted that the unique utilizationpatterns associated with obstetric and psychiatricservices could make cross-hospital comparisonmisleading for facilities with large programs in thesespecialties.

• Although a hospital’s capital structure is essentiallyfixed in the short run, occupancy based onmaintained beds is under management’s control inthe short run. Low occupancy rates on maintainedbeds could be an indicator that the hospital isincurring costs to keep unneeded beds available.This measure can be calculated from data includedin the quarterly B-2 Reports provided to the DHSS.

• Days in accounts receivable and average paymentperiod can be calculated from data collected on aquarterly basis for the DHSS/NJ Health CareFacilities Financing Authority (HCFFA) financialdata base. The Subcommittee considered otherfinancial ratios (e.g., operating margin, debt servicecoverage ratio, days’ cash-on-hand). TheSubcommittee felt that those measures could besignificantly affected by factors and issues outsidemanagement’s control (e.g. payer mix) and thereforewould not be good measures of efficiency. Incontrast, days in accounts receivable and averagepayment period reflect the ability to effectivelymanage the process of generating and collectingpatient bills and paying vendors with the resultingcash flow.

The denial rate is included as an efficiency measurealthough there is no consistent source for this indicator.Subcommittee members felt that it is another importantmeasure of revenue cycle management and should beprovided by hospitals seeking additional financialsupport.

Section II


D. Key Findings - Response to Hospitals inFinancial Distress

The Subcommittee recommends that the followingapproach be used when a hospital requests a subsidy orsome form of financial support:

• Evaluation/Decision on Subsidy

If a hospital requests a subsidy or some form offinancial assistance, the hospital is evaluated basedon the criteria for financial distress and essentialhospitals established by the Commission in order todetermine whether a hospital is eligible for asubsidy. The final determination of a subsidy andthe agreement between the hospital and DHSS isbased on a examining the hospital’s performance onthe quality/efficiency dashboard. That reviewwould consider the hospital requesting a subsidy aswell as other hospitals in the area. The statewidebenchmark would be viewed as a comparison butnot the determining factor. The hospital could beasked to provide additional information based onareas of specialization (e.g., pediatric care) or toreview areas (e.g., denial rates) where consistentstatewide data are not available. The Departmentshould also review administrative overheadexpenses to ensure that expenditures are reasonable.

The decision on whether to provide a subsidy andthe amount of that subsidy will depend on thisevaluation and the amount of funds availableconsidering other hospitals requesting assistance.

• Development of an Agreement

If a decision is made to provide a subsidy, theDepartment and the hospital will form an agreementto ensure that public funds are appropriately spent.That agreement will involve one or more of thefollowing components:

• DHSS and the hospital will agree on an actionplan to resolve the issues identified in the DHSSreview or issues identified by the hospital. Thismay be developed by the hospital’s managementand may require a consultant or some newexecutive leadership.

• The hospital may be required to retain newexecutive leadership.

• The hospital agrees to meet specified targets onthe quality/efficiency dashboard. Those targetswill be developed based on state and/or nationalperformance norms and the hospital’s currentperformance. Other financial indicators mayalso be included in the agreement as describedabove.

• The hospital might be required to contract witha management consultant in order to evaluateand improve its operations.

• The hospital may be required to add specificmembers to its Board of Trustees and/or FinanceCommittee in order to support changes inpolicy/operations. These members would bechosen to provide the appropriate skills based onthe operating/financial issues and/or clinicalidentified during the evaluation process. Thesemembers would convey the DHSS position tothe Board and provide relevant information tothe Department.

• The hospital may be required to form a specifiedrelationship with a hospital system which wouldprovide greater financial stability, strategicplanning skills or executive leadership. Thatrelationship could take one of several forms, i.e.,a cooperative contract, an affiliation or a changein ownership.

• DHSS will be invited to all Board of Trusteesmeetings and receive all appropriate materialsduring the agreed upon contract period.

• The hospital will be required to provide specificoperational information at regular intervalsbased on the agreement.

• Implementation/Monitoring

The Department will monitor the hospital quarterlyand as often as monthly in order to ensurecompliance with the agreement and that the hospitalis moving toward financial, operational and clinicaltargets.

• If the hospital does not meet specified quarterlytargets, a corrective action plan would need to beprepared for DHSS review.

Appendix 8.2



• Continuation of the subsidy is dependent on thehospital meeting specified targets.

• The subsidy will be subject to review based onthe state’s financial resources.

E. Additional Issues

During the course development of the quality/efficiencydashboard and the response to hospitals which request asubsidy, the Subcommittee made the followingrecommendations:

• Given the importance of and recent emphasis onquality indicators, the State may want to consideradditional data collection in this area as part of alonger-term strategy. Those measures that warrantfuture consideration include: Institute of Healthcare

Improvement (IHI) safety measures; computerizedphysician order entry (CPOE), medical staffqualifications, such as board certification and/oreligibility, nurse staffing and agency nursingpercentages.

• Ensuring quality and efficiency requires both marketand financial viability to eventually fund aninfrastructure-culture, people, tools, processes.Decisions on support must consider whether fundsare available to create an infrastructure to support aquality performance operation.

• The Subcommittee agreed that information whichthe Department creates for the quality/efficiencydashboard should be available to the public.

Section II


Appendix 8.2

Table 1: Quality Measures

Available for Indicators All Hospitals* Source

Perfect Care Scores: AMI, pneumonia, Yes DHSS based on information collected for HospitalCHF, SCIP Performance Report

Nosocomial Infection Rates Yes in 2009 DHSS will phase-in based on hospital reports

Hospital CAHPS Yes in 2008 CMS

Mortality-Risk Adjusted for top 10 DRGs Yes DHSS based on APR-DRGs

AHRQ IQI Mortality:• Pneumonia DHSS calculates using AHRQ software • CHF Yes and APR-DRGs• AMI • Stroke

30 day Readmission Rates for Yes DHSS based on APR-DRGstop 10 DRGs

ALOS-Risk Adjusted for top 10 DRGs Yes DHSS based on APR-DRGs

Accreditation Status Yes Joint Commission

* Yes indicates that the measure may be calculated based on existing data.



Table 2: Efficiency Measures

Available for Indicators All Hospitals* Source Comments

FTE per adjusted Yes DHSS Cost Reports Adjust volume for outpatient activity (usingoccupied bed and UB-92 data gross revenue), case mix/severity (using

APR-DRGs)

Labor expense per Yes DHSS Cost Reports Adjust volume for outpatient activity (using adjusted admission and UB-92 data gross revenue), case mix/severity (using

APR-DRGs)

Non-labor expense per Yes DHSS Cost Reports Adjust volume for outpatient activity (usingadjusted admission and UB-92 data gross revenue), case mix/severity (using

APR-DRGs)

Total expense per Yes DHSS Cost Reports Adjust volume for outpatient activity (usingadjusted admission and UB-92 data gross revenue), case mix/severity (using

APR-DRGs)

Case mix adjusted ALOS Yes DHSS B-2 Forms Use APR-DRGs to calculate case mix indexand UB-92 data

Occupancy Yes DHSS B-2 Forms Licensed beds are fixed in short run but(maintained beds) maintained beds can be adjusted.

Days in accounts Yes DHSS/NJHCFFA Measures efficiency of revenue cyclereceivable Financial data base management.

Average payment period Yes DHSS/NJHCFFA Measures efficiency of revenue cycleFinancial data base management.

Denial rate No Voluntary reporting Will not calculate statewide benchmark from hospitals but will use as additional information to

evaluate revenue cycle management

*Yes indicates that the measures may be calculated based on existing data.


Appendix 8.2

David P. Hunter, MPH, Co-ChairHealth Care Consultant Commission Member

Robert Jacobs, MD, Co-ChairActing Chief Medical Officer Jersey City Medical Center

Philip Bonaparte, MDChief Medical OfficerHorizon NJ

Maureen Bueno, RN, PhDExec. Director of Practice Operations RWJ Univ. Medical Group

Derek DeLia, PhDSenior Policy AnalystRutgers Center for State Health Policy

Peter Gross, MDSr.Vice President & Chief Medical Officer Hackensack University Medical Center

Aline Holmes, RN, MSNSenior Vice President, Clinical AffairsNew Jersey Hospital Association

Robert IannacconeExecutive Vice President and COOSt. Mary’s Hospital

David Knowlton President and CEONJ Health Care Quality Institute

Richard P. MillerPresident & CEOVirtua Health

William PhillipsSenior VP Finance and CFOJersey Shore University Medical Center

JoAnn Pietro, RN, JDPartner Wahrenberger, Pietro and Sherman LLPCommission Member

Trish ZitaThe Kaufman-Zita Group

Staff

Cynthia Kirchner, Lead StaffSenior Policy Advisor Department of Health and Senior Services

Stephen FillebrownDirectorResearch and Investor RelationsHealth Care Facilities Financing Authority

Emmanuel Noggoh DirectorHealth Care Quality AssessmentDepartment of Health and Senior Services

Frances PrestianniProgram ManagerHealth Care Quality Assessment Department of Health and Senior Services

Appendix 8.2ABenchmarking for Efficiency and Quality

Subcommittee Membership

Infrastructure of Healthcare Delivery



Subcommittee Report 3:Infrastructure of Healthcare Delivery

Subcommittee Charge:

To explore the reasons for the lack of adequateinformation systems in health care, sketch the vision ofa 21st century health-care information system, examinehow much of that vision has been achieved by now inNew Jersey or is actively being pursued, and finallyoffer recommendations to move New Jersey health caretoward an information platform that adequately servesthe state’s people.

Overview

The Subcommittee was formed in May 2007 and wascomposed of 12 members which are listed below.

Membership

Uwe Reinhardt, Ph.D., ChairmanSubcommittee Co-ChairChairman, Commission on Rationalizing Health CareResourcesThe James Madison Professor of Political EconomyThe Woodrow Wilson School of Public & InternationalAffairs, Princeton University

Annette Catino, Subcommittee Co-ChairPresident & Chief Executive OfficerQualCare, Inc.

Matthew D’OriaLead Staff to SubcommitteeDHSS Deputy Commissioner

Bruce Vladeck, Ph.D.Member, Commission on Rationalizing Health CareResources

Mark BarnardSenior Vice Presidentof Information TechnologyHorizon Blue Cross/Blue Shield of New Jersey

Sonia DelgadoPrinceton Public Affairs Group, Inc.

Richard Goldstein, M.D.PresidentNJ Council of Teaching Hospitals

Vincent JosephSenior Vice PresidentUniversity Medical Center at Princeton

Michael MaronPresident/Chief Executive OfficerHoly Name Hospital

Mitchell Rubin, M.D.Neurology Consultants of BC

Kevin SlavinPresident/Chief Executive OfficerEast Orange General Hospital

Joseph SullivanChief Information OfficerSt. Barnabas Health Care System

Section I


Appendix 8.3

An Information Infrastructure for New JerseyHealth Care

It is fair to state that health care in New Jersey, in theUnited States and virtually everywhere in the world isrendered in a fog. People in that fog may be trying to dothe best they believe can be done, but collectively theyfall far short of the best that would be achievable with alifting of that fog.

The fog in question is the lack of pertinent informationthat can, at once, guide decision making in health careand hold the participants in the health care sectoraccountable for their actions. It is also fair to state that,relative to other sectors in modern economies – e.g., thefinancial sector, the travel industry, and the retailindustry, to mention but a few -- the health sector tendsto be a unique underachiever in this regard. It devotesrelatively fewer resources to information systems thando other industries and, for the resources it does deploy,achieves less. Much of the waste, fraud and abuse saidto be part of modern health systems and considerablehuman suffering – in the midst of much succor andmiraculous cures -- can be traced to this lack of anadequate information system.

The persistent fog surrounding the delivery of healthcare is particularly disturbing in the face of currentattempts to convert what hitherto had been known as“patients” into “consumers” who are expected to shoparound smartly for cost effective care under so-calledConsumer Directed Health Care. Unless strident effortsare made at long last to lift that fog through morewidespread application of modern informationtechnology (IT) in health care, these “consumers” willresemble nothing so much as blindfolded shoppersthrust into department stores, there to shop smartly forwanted or needed items.

The IT subcommittee report explores the reasons for thelack of adequate information systems in health care,sketches the vision of a 21st century health-careinformation system, examines how much of that visionhas been achieved by now in New Jersey or is activelybeing pursued, and finally offers some recommendationto move New Jersey health care toward an informationplatform that adequately serves the state’s people.

The Imperative of a Health System InformationInfrastructure

At the core of an efficiently functioning health-caresystem is an information infrastructure that enables thevarious decision makers in health care -– patients,physicians and nurses, the executives of health carefacilities, insurance companies and government officials-- to make decisions that result in timely and cost-effective health care. Remarkably, relative to othersectors in the economy, the health sector has beenuniquely lagging in its use of available IT. In exploringthe reasons why this is so, it will be helpful to divide thesector into its supply side and its demand side.

The Supply Side: As a general rule, suppliers in anyeconomic sector will actively seek the information thathelps them achieve their own goals, but otherwise willshun the transparency that might expose them to thebrunt of full-fledged competition on price and quality aswell as public accountability for the use they make ofresources.

That penchant is not evil. It is normal and perfectlyhuman. Therefore, the supply side in health care cannotbe expected to develop the information infrastructurerequired for cost-effective, high-quality health careunless it is mandated to do so by those who pay forhealth care. Here it must be noted that the users of healthcare (patients) and those who pay for health care(government and private insurers) so far have beenremarkably tolerant of a high variance in both the costand quality of the health care they procure, where “highvariance” is technical jargon for the phenomenon thatexcellent and shoddy quality and wasteful as well ascost-effective health care are permitted to exist side byside within the same health-care system – e.g., that of asingle state or even a single community. Instead, thepayers have simply trusted the providers of health careto do the right thing.

The Demand Side: One can understand why patients,who usually are well-insured from the cost of healthcare, would not show much concern over the total costof their care, as long as their out-of-pocket costs aretolerable. The patients’ manifest indifference towardvariations in the quality in health care, however, isnothing short of remarkable. The only sensible



explanation is that so far patients have been keptignorant of that variance, which has long been known tohealth policy analysts and at least some policy makers inthe private and public sectors. Why both public andprivate insurers have been so passive on this scoreremains a mystery.

High Variance in the Quality and Cost of Health Care

In the mid-1990s, for example, benefit managers at theGeneral Electric Co. popularized the six-sigma chart

shown below, indicating for a number of activities thenumber of defects per million opportunity for defect(DPMO), a metric used in six-sigma quality control. Thechart indicated that more errors occurred in a number ofmedical treatments than in baggage handling by airlines,a notoriously error-prone activity. It is a quite stunningstatement on the quality of U.S. health care, especiallybecause Americans so often boast that theirs is “the besthealth system in the world.

Figure 1: The Quality Imperative: The General Electric View

Section II


At the end of the decade, in 1999, the prestigiousInstitute of Medicine (IOM) of the National Academy ofSciences published its landmark study To Err Is Human:Building a Safer Health System, in which the Institute’spanel of experts estimated that somewhere between44,000 to 98,000 Americans died prematurely inhospitals as a result of avoidable medical errors, veryfrequently errors in the administration of drugs. Earlierin the decade, Lucien L. Leape, M.D. of HarvardUniversity had likened these premature deaths due tomedical errors in a seminal article published in theJournal of the American Medical Association as “theequivalent of three jumbo-jet crashes every 2 days.”1

The IOM’s 1995 report was followed, in 2001, by theInstitute’s Crossing the Quality Chasm: A New HealthSystem for the 21st Century. A passage in the ExecutiveSummary is instructive for present purposes:

The health care system as currently structureddoes not, as a whole, make the best use of itsresources. … A highly fragmented deliverysystem that largely lacks even rudimentaryclinical information capabilities results in poorlydesigned care processes characterized byunnecessary duplication of services and longwaiting times and delays. And there is substantialevidence documenting overuse of many services –services for which the potential risk of harmoutweighs the potential benefits. What is perhapsmost disturbing is the absence of any real progresstoward restructuring health care systems to

address both quality and cost concerns, or towardapplying information technology to improveadministrative and clinical processes (p. 3; Italicsadded).

Apparently, there has not been much progress since 2001either. In a paper entitled “The End of the Beginning:Patient Safety Five Years After ‘To Err is Human’,”Robert Wachter observes that

Since 1999, there has been progress, but it hasbeen insufficient. Stronger regulation has helped,as have some improvements in informationtechnology and in workforce organizations andtraining. Error-reporting systems have had littleimpact, and scant progress has been made inimproving accountability. Five years after thereport’s publication, we appear to be at “the end ofthe beginning.”2

Shown on the next page are data on clinical outcomesfrom three standard procedures in tertiary centers,broken down into those declared by the Blue Cross BlueShield Association to be Centers of Distinction and allother centers in the study. The data exhibit a remarkablevariance in clinical outcomes, especially in the mortalityrate associated with heart transplantation. These dataraise two questions. First, what factors drive this highvariance in clinical outcomes. Second, why do patientscontinue to be referred to centers with high mortalityrates, and why do private insurers pay for proceduresperformed in such centers?

Appendix 8.3

1 Lucien L. Leape, “Errors in Medicine,” Journal of the AmericanMedical Association, 272(23) (December 21, 1994): 1851-58.

2 Robert M. Wachter, “The End of the Beginning: Patient Safety FiveYears after ‘To Err is Human’,” Health Affairs Web Exclusive (30November,2004): W4-534-45.



Ignorance of these facts is likely to be the majorexplanation. While targeted studies can identify suchvariances, such data are not routinely collected,organized and publicized. Government’s casual attitudetowards these variances in mortality in the hospitalsector stands in stark contrast to the stringent patient-safety standards government imposes on thepharmaceutical and medical device industries. Whyshould an avoidable, premature death in a hospital betaken more lightly than a death from a problematicprescription drug or medical device? The subcommitteemakes note that New Jersey’s various health report cardsindicate significant and steady improvements in thequality of care at the State’s hospitals. This evidencefurther confirms that the availability and transparency ofhealth care data improves quality.

Finally, results from a recently published study in TheNew England Journal of Medicine suggest that, onaverage, children in the study received 46.5% of theindicated care3, a finding that parallels an earlier, similarstudy for adults published in the same journal.4

In sum, then, uneven quality of health care remains asignificant feature of the American health care system,and New Jersey’s health system, while improving, is notan exception to this finding. It would be puzzling indeedwhy patients accept this state of affairs with suchequanimity – why they would opt to receive care athospitals in which their chance of dying from low-quality care is higher than elsewhere -- were it not forthe fact that patients have absolutely no idea that suchquality differentials exist. Instead of transparency on soimportant a matter, patients have been lulled intocomplacency by the much-mouthed mantra that theAmerican health system is the best in the world, amantra actually contradicted by a growing body ofevidence. As a recent cross-national study by theCommonwealth Fund concludes:

Despite having the most costly health system inthe world, the United States consistentlyunderperforms on most dimensions ofperformance, relative to other countries. Thisreport—an update to two earlier editions—includes data from surveys of patients, as well as

Table 1: Blue Cross Blue Shield Outcomes Study for Tertiary Centers

Blue Distinction Centers All Other Centers

Mean Maximum Mean Maximum

Short-term Major Complications 5% 8% 7% 37%from Bariatric Surgery

Heart Transplant Patient 11% 30% 19% 57%One-Year Mortality Rate

Inpatient Mortality 7% 15% 9% 40%(Heart Attack)

Source: Data provided by Nat Kongtahworn, Director, Network Strategies, Office of Clinical Affairs, Blue Cross Blue Shield Association.

3 Rita Mangione-Smith, M.D., M.P.H., Alison H. DeCristofaro, M.P.H.,Claude M. Setodji, Ph.D., Joan Keesey, B.A., David J. Klein, M.S.,John L. Adams, Ph.D., Mark A. Schuster, M.D., Ph.D., and ElizabethA. McGlynn, Ph.D., “The Quality of Ambulatory Care Delivered toChildren in the United States, “The New England Journal ofMedicine,” 272(15) (October 11, 2007): 1515-23.

4 Steven M. Asch, M.D., M.P.H., Eve A. Kerr, M.D., M.P.H., Joan Keesey,B.A., John L. Adams, Ph.D., Claude M. Setodji, Ph.D., Shaista Malik,M.D., M.P.H., and Elizabeth A. McGlynn, Ph.D.,

Section II


Appendix 8.3

information from primary care physicians abouttheir medical practices and views of theircountries' health systems. Compared with fiveother nations—Australia, Canada, Germany, NewZealand, the United Kingdom—the U.S. healthcare system ranks last or next-to-last on fivedimensions of a high performance health system:quality, access, efficiency, equity, and healthylives. The U.S. is the only country in the studywithout universal health insurance coverage,partly accounting for its poor performance onaccess, equity, and health outcomes. The inclusionof physician survey data also shows the U.S.lagging in adoption of information technology anduse of nurses to improve care coordination for thechronically ill.5

Information on the Cost of Hospital Care

In the context of health care the word “cost” has twomeanings. It could mean the payment the patient’sinsurer makes for a hospital service. A better term for itwould be the “price” the insurer pays for the service. Orit could mean the cost the hospital (or doctor) incurs todeliver the treatment, that is, the cash providers pay forthe inputs they use in the treatment of patients. Notmuch is known publicly about the payments hospitalsreceive from different payers for the same service.Almost nothing is known about the input costs differenthospitals incur for different services or medical cases.

Payments to Hospitals: The price hospitals receivefrom insurers for a standard service varies significantlyfrom private insurer to insurer, usually in inverseproportion to the insurer’s market power. That price isdifferent again for Medicaid and different once again forMedicare. Finally, because they have virtually no marketpower vis a vis hospitals uninsured patients tend to becharged the highest prices, unless they are outright

charity cases. In the end, however, what low-incomeuninsured and non-charity patients actually payhospitals tends to be just a fraction of the prices theywere charged.

All of these varied prices for the same service havevirtually no systematic relationship with the cost ofproviding these services, whatever they may be.Furthermore, with the exception of prices paid byMedicare and Medicaid, all prices paid hospitals fromthe various parties are kept a tightly guarded tradesecret. Although, in principle, uninsured patients orthose with high deductible health insurance ought tohave information on the prices hospitals might chargethem, as a rule there does not exist an information baseto provide that information.

There is also a great variation in the volume of servicesfor which New Jersey hospitals bill insurers for roughlysimilar patients. As Table 2 indicates, during the period1999-2003, per Medicare beneficiary in the last twoyears of life, the number of hospital days, Medicarepayments per day and Medicare payments for the entiretwo years varied by a factor of more than 3 acrosshospitals in New Jersey. The CMS Technical QualityScore appears to be completely unrelated to theseresource costs.

Although the medical cases represented by thesepatients were not 100% identical, so that differences inpatients might explain some of this variation, it is hardto believe that genuine differences in acuity could haveaccounted for such vast differences in health-careutilization. A more plausible explanation is that thesedifferences reflect largely differences in the affiliatedphysicians’ preferred practice style. That style may bepreferred for purely professional reasons, or foreconomic reasons, or both.

5 Karen Davis, Ph.D., Cathy Schoen, M.S., Stephen C. Schoenbaum,M.D., M.P.H., Michelle M. Doty, Ph.D., M.P.H., Alyssa L. Holmgren,M.P.A., Jennifer L. Kriss, and Katherine K. Shea , Mirror, Mirror onthe Wall: An International Update on the Comparative Performance ofAmerican Health Care (May 16, 2007), available at www.cmwf.org.



Unfortunately, under our system of physician-hospitalaffiliation, physicians have great leeway in this regardand can literally conscript the hospital’s resources atwill, and cause the hospital to bear costs, without beingproperly accountable to anyone for their use of society’shealth care resources or at personal risk for causingthese expenses.

Technology exists that allows hospital executives totrack every order entry by every affiliated physicians forevery input used in the treatment of every hospital case.To be sure, the administrators of some hospitals mayroutinely assemble resource-use data by individualphysician affiliated with the hospital, but such data areunlikely to provide adequate leverage in dealing withphysicians on whose goodwill and referrals the hospitalmust rely for its revenue flow. After all, it is not usuallythe hospital patient but the referring physician who

effectively is the hospital’s customer. The question theGovernor and State legislators must explore whetherthan information should also be available to them toassess the efficiency with which a hospital is run beforedeciding whether or not a hospital warrants statesubsidies of any sort.

The Input-Cost of Hospital Services: The hospitalindustry regularly laments that Medicare and Medicaidpay hospitals less than 100% of the full cost of treatingMedicare and Medicaid patients in hospitals. It is aplausible argument, but it leaves open the questionwhether the ‘costs” to which the payers’ payment ratesare compared are invariably justified. To say thatMedicaid pays only about 70% of a hospitals cost bemisleading if the hospital’s cost are 120% of areasonable benchmark of what efficiently producedhealth care in hospitals should cost.

Table 2: Medicare Payments for Inpatient Care During the Last Two Years of Life of Medicare Beneficiaries

(Ratio of New Jersey Hospital’s Data to Comparable U.S. Average, 1999-2003)

Inpatient Hospital Reimbursements CMSReimbursements Days per Day Technical

Quality Score

St. Michaels Medical Center 3.21 2.34 1.37 0.91

Kimball Medical Center 2.32 1.26 1.83 0.95

Raritan Bay medical Center 1.86 1.85 1.01 0.81

Christ Hospital 1.83 1.83 1 0.59

St. Mary’s Hospital Hoboken 1.75 1.72 1.02 0.74

Beth Israel Hospital 1.58 1.86 0.85 0.83

Overlook Hospital 1.27 1.36 0.94 0.90

Medical Center at Princeton 1.17 1.26 0.93 0.94

Atlantic Medical Center 1.11 1.12 0.97 0.89

Source: Data supplied to the Commission by John H. Wennberg, M.D., Director of the Dartmouth Atlas Project, December 2006.


Appendix 8.3

Here, too, New Jersey lacks a sophisticated informationsystem that can routinely inform government on how aparticular hospital’s cost compares to reasonablebenchmark costs.

The Potential Role of State Government in HealthInformation Systems

The troublesome circumstances described in thepreceding subsections lead to the question what roleState government has in financing and constructing aninformation infrastructure designed to drive the entirehealth system – patients, insurers and providers alike --towards higher levels of performance. Alternatively put,the question is whether Americans can rely on theprivate sector to develop that infrastructure, given thatsector’s undistinguished history in this regard.

So far, neither the federal nor the state governmentshave done much to force greater transparency on theactivities of the providers of health care whose revenuesdepend heavily on government financing. Only in thepast few years have governments begun to address thisimportant task seriously. Although private employersand their agents (private health insurers) equally hadevery opportunity in the past several decades to hold theproviders of health care more rigorously accountable forthe cost and quality of the services paid for by privateinsurers, and to provide the insured public with greatertransparency on the cost and quality of health caredelivered by health care providers, for the most partthey, too, have failed to do so and are only now makingtimid steps in that direction.

If the state’s government wishes to drive the state’shealth system more rapidly towards high performance,in terms of both cost and quality, government probablywill have to intervene rather heavily to guide theinvisible and timid hand of the private market place. Toillustrate, a good faith cooperative effort is currentlyunder way by Horizon Blue Cross Blue Shield of NewJersey and the New Jersey Hospital Association todevelop a so-called regional health informationorganization (RHIO) that would facilitate the sharing ofclinical information on patients across providers.Participation in any such effort, however, would bevoluntary and thereby makes it difficult to develop abusiness model for the system from the individualhospital’s perspective.

A strong business case for such an infrastructure couldbe provided if government mandated participation in theRHIO which, in turn, probably would require sustainedfinancial support of the venture by government. Thatsupport could easily be defended on economic grounds,as a RHIO has a strong dimension of a public good.Economists make the case that, left to its own devices,the private sector will always under-supply publicgoods, unless their production is subsidized explicitly bygovernment.

A Full-Fledged 21st Century Health InformationSystem

A full-fledged, state-of-the art health-care informationsystem already being developed in several parts of thiscountry and, sometimes even more rapidly, in othernations would serve the following distinct objectives.

1. It would allow physicians and other providers ofcare throughout the state carefully authorized accessto each patient’s complete medical record.

2. It would endow patients with a personal electronichealth record that would help them better to managetheir health and their use of health care.

3. It would offer the providers of health care and thosewho pay for it (mainly third-party payers) adequateinformation to facilitate the business transactionssurrounding health care more smoothly and morecost-effectively than is now the case.

4. It would routinely provide data required especiallyby government (which pays for close to 50% of allhealth care in the U.S.) and communities to hold theproviders of health care accountable for their use ofreal health care resources in the treatment ofpatients.

5. In particular, it would yield the data to holdphysicians routinely accountable for their use oftheir own and their affiliated hospital’s realresources in the treatment of patients. Thus onecould explore, for example, the huge variations inresource-use exhibited in Table 2 above and hold theindividual physicians driving these variancesformally accountable for them.

Different Records in a Health Information System

It would not make sense to develop one giant electronicrecord that could serve all of these diverse objectives atonce. Instead, there should be a common master file –



sometimes called the “spine” – that would contain dataused in raw form or transformed by several or all of a setof electronic records customized and enriched with yetother data to serve the narrower objectives listed above.These various electronic records may be described asfollows.

Electronic Health Record (EHR): An electronic record isany combination of text, graphics, data, audio, pictorial,or other information representation in digital form that iscreated, modified, maintained, archived, retrieved, ordistributed by a computer system. An EHR is a largerconcept in that the electronic information is more thanthe clinical information; it includes demographicinformation and sometimes payment codes, such as IDCand CPT codes. The electronic information may beshared within a larger organization or with a secondoutside health care entity and follows federallyrecognized standards such as HL7 and X12. EHR canand should be certified by the CCHIT. The master“spine” might consists of such EHRs.

Electronic Medical Record (EMR): The purpose of theEMR is designed to be an electronic interface amongclinicians. It would allow any physician authorized todo so by the patient or the patient’s guardian to accessthat patient’s full medical record, or authorized parts ofit, which would include a medical history, the patient’scurrent drug regimen, all tests previously done andobservations recorded by other physicians. The EMRwould be kept in the clinical language understood byclinicians. This objective could be accomplished eitherby a smart card carried by the patient or by what isknown as the VISA system, that is, a card carried bypatients that permits authorized access to a centralstorage location for the patient’s file. The EMR wouldmeet the first of the objectives listed above.

Personal Electronic Health Record (PEHR): The secondobjective listed above is met in various locations aroundthe world by a PEHR, which is a multipurpose recordwritten in language lay people can understand andallowing patients to see their most recent test results,graphical or tabular histories of test scores for particularmetrics (e.g., blood pressure), their current and pastprescription-drug regimen and so on. There would beelectronic links from test results to explanations of theseresults and further links to the relevant literature,

perhaps ordered by level of difficulty. Patients wouldalso find on this record relevant treatment options forparticular medical conditions, and guidance for properhealth maintenance, including nutrition. Ideally, such afile should also provide links to reliable information onsundry dimensions of the quality of care rendered byindividual providers of health care and, to the extent thatit is relevant to patients, information on their share of thecost for procuring health care from particular providersof care. Finally, patients could make appointments withphysicians via this record, or communicate directly withindividual physicians.

All of these desiderata may appear as too much of a loadfor a PEHR to carry. The fact is, however, that suchrecords are already in use here and abroad and arespreading rapidly. Here it must be noted that theestablishment and maintenance of a PEHR requires asponsor who both finances and manages it. Onealternative is to lodge that responsibility with third-partypayers, who could recover their costs through premiumsor user fees levied on the insured. Another alternativewould be to lodge that responsibility with the patient’s“medical home,” that is, the patient’s primary-carephysician, who would be explicitly paid for that serviceby third-party payers (or strictly by government). Themodel of the “medical home,” now still mainly aconcept on the drawing board, has captured theimagination of health policy makers around the world.

One could imagine entrepreneurial companies toestablish medical homes, replete with sizeable computersystems and staff to support it, should physicians in theirmedical practices shun this task. These entrepreneurialcompanies could contract with both private and publicinsurance systems.

The other objectives listed above would similarly be metby customized electronic records all of which, however,would share a common, standard nomenclature, topermit easy transmission and comparability of the data.History suggests that the development and adoption ofsuch a nomenclature would require the guiding hand ofgovernment, along with at least some public financing.

Of particular note here would be a data system tailoredto meet the fifth objective listed above, namely, a systemcapable of tracking the hospital resource use of


individual, affiliated physicians by medical case and byinput, to facilitate holding physicians accountable forthe health-care costs they authorize over their signature.

The Financing of a Health Information System

As noted in passing earlier, a state’s or nation’s healthinformation system has dimensions of a public good. Ineconomic analysis a public good is one whoseconsumption or use by one person does not detract fromany other person’s use of that good. A second, lessimportant dimension of a pure public good is that it isnon-excludable, which means that everyone can enjoyits use.6

The information produced by scientific research is apure public good – e.g., Einstein’s famous equation E =MC2 or the Pythagorean theorem – is a pure publicgood, as is the security provided by national defense andhomeland security. Clearly, a common database, once itis established, has this feature. Economic theory showsthat such goods would be underproduced by the privatesector unless their production were collectivelyfinanced, typically by mandatory levies such as taxes.

Even goods that appear basically private consumptiongoods exhibit so-called “positive ties” that representpublic-good dimensions. Telephone networks, forexample, are such goods, because the value of aprivately owned telephone increases with the number ofother privately owned phones to which each telephoneconnects. When one person buys a telephone, all othertelephone owners benefit. Economic theory suggeststhat the production or purchase of such goods shouldreceive public subsidies as well if society wishes themto be produced in sufficient quantity.

The upshot of these reflections is that, because of itsconnectedness across the health system, a healthcareinformation infrastructure has dimensions of a public goodand thus ought to be supported with public subsidies. Thedevelopment and maintenance of the system’s commondata base (its “spine”) in particular should be heavilygovernment funded, even if the actual development andmaintenance is delegated to a private entity.

Furthermore, as already noted as well, to reap the fullbenefit of a health information infrastructure,participation in it by individual providers of health careshould be mandatory.

Progress to Date in New Jersey

Legislation has been proposed that would create acentral repository under the authority of the Departmentof Banking and Insurance. Under the proposal the initialsource data for populating the repository would be theelectronic claims data processed and maintained byhealth insurers, including the NJ Medicaid program.

In addition to that information, the proposed repositorycould also be populated with health data maintained bystate agencies, including the following:

• NJ Hospital Discharges (UB-92)• Cardiac Utilization • Quality Reporting• Patient Safety Reporting• Cancer Registry• Childhood Immunization Health Registries • Medicaid/NJ FamilyCare Claims• Annual Hospital Cost Reports• Annual Hospital Financial Statements• Unaudited Quarterly Financial and Utilization

Reports

As referenced earlier, the New Jersey HospitalAssociation and New Jersey Blue Cross/Blue Shieldformed the EMR/EHR taskforce to develop RegionalHealth Information Organizations (RHIO) around thestate. Data collected through these organizations couldalso be used to populate the repository.

Recommendations

New Jersey should develop a clearinghouse/repositoryfor electronic health data that can be accessed by allinterested parties.

In essence it is envisioned that the clearinghouse wouldfunction as a spine from which users would be able toextract and utilize data to suit their particular needs.While it is anticipated the development of such a systemwill take several years and occur in incremental steps,there are basic guiding principles that must be followed.

Appendix 8.3

6 Sometimes an intrinsically public good is artificially made excludablethrough law – e.g., by patent protection.



1. Public/Private Partnership – the sensitivity of thedata mandates that security is paramount. Thereforethe oversight and control must ultimately reside withgovernment but the operation and output shouldinclude and reflect private sector concerns.

2. Standardization – As with any system theconsistency of the terminology is critical.

3. Transparency – the systems basic functionality anddata elements must be available at little to no costand be understood by the general public.

4. Routine Outcome/Health Status Reporting – thereshould be regular periodic publications thatsummarize and report key utilization and healthindicators.

5. Information already available in payer datawarehouses must be used to begin populating thedatabase with historical information that alreadyexists.

6. Hospitals and individual practitioners must have aneasy-to-use, one stop repository that can be accessedsecurely over the internet without forcing theadoption of another unique hardware/softwareconfiguration.

7. Laboratories, imaging and radiological facilitiesshould file test results, reports and digitized imageswith the EHR Custodian for use by providers.

8. Pharmacy Benefit Managers should be required tosupply filed prescription information with the EHRCustodian. Steps should be taken to remindconsumers to follow recommended medicationusage especially in chronic disease management.

9. Durable Medical Equipment Providers and otherhealth care support providers should file reportswith the EHR Custodian.

Conclusion

Transparency is a critical step toward improving theperformance and accountability of the health caresystem to “lift the fog” that is currently hinderingprogress toward high quality, cost-effective care. Aninformation infrastructure is necessary to address theunjustified variances in clinical practice across the stateand the nation as a whole. Government must play animportant role in the creation of a 21st Century healthinformation system. The characteristics of such asystem resemble that of a public good, which firmlycalls for a government role – the absence of such a rolewill lead to chronic underinvestment in this importantarea and a failure to maximize value from the health caresystem.

Reimbursement and Payment



Subcommittee Report 4:Reimbursement and Payment

Subcommittee Charge

The Reimbursement and Payment Subcommittee of theNew Jersey Commission on Rationalizing Health CareResources will undertake a review of the followingissues and report back to the full Commission in the fallof 2007. Among the issues the Subcommittee willreview are:

1. The long term viability and adequacy of the CharityCare payment system

2. The adequacy of the current Medicaid paymentrates, to both general acute care hospitals and tophysicians including recommendations for potentialchanges. The Work Group will address therecommendation of the NJHA proposal for theestablishment of a Medicaid Commission to reviewthe performance of the Medicaid Managed Carecompanies operating in New Jersey and overallpayment rates for Medicaid Services.

3. Review with the Department of Banking andInsurance current policy regarding Medical LossRatio’s of private health insurers in New Jersey andother issues related to the adequacy of privateinsurer payment rates to general acute care hospitals.

4. Assess and quantify the loss of Medicare outlierpayments to the State of New Jersey in light ofrecent Medicare changes.

5. Identify the potential impact to New Jersey hospitalsof proposed Medicare changes to GME and DSHpayments.

6. Propose a plan of work for a robust forecast of likelyimpacts of payment changes over the next severalyears to the financial state of hospitals in NewJersey.

7. As appropriate the Work Group will solicit the viewsfrom a wide range of stake holders on the itemslisted in 1 – 6 above.


See Appendix 8.4A for a list of the subcommittee members

Overview of Subcommittee Process

The Subcommittee met three times during the summerof 2007. In addition to the meetings, members wereprovided with materials related to issues listed in thesubcommittee’s charge. These included data on statepayments to hospitals (subsidies and Medicaidreimbursement) and white papers on some of the issues(NJHA paper on freestanding ambulatory surgerycenters and RWJ Hospital paper on NJ SubsidyPrograms).

The meetings generally involved a review of materialsprovided by subcommittee members, then discussion ofthe various issues included in the subcommittee’scharge. Although the subcommittee looked at all issueslisted in the charge, members felt that some were beyondeither the subcommittee’s or the commission’s ability tomake a difference (e.g. Medicare reimbursement issues).Because the subcommittee did not want to get ahead ofDOBI’s planned initiatives to improve transparency inthe payment claims process, it did not develop anyrecommendations on this issue. Limits on time andresources also led the committee to focus on threeprimary topics – how hospital closures can makeexisting reimbursement “go farther,” leveling theplaying field with respect to freestanding ambulatorysurgery centers, and more effective distribution of statesubsidies.

Section I


Appendix 8.4

Key Findings

Distribution of charity care subsidies

The subcommittee was persuaded that there are manyflaws in the current methodology for distributing charitycare subsidies. Based in part on a white paper preparedby John Gantner, CFO at the Robert Wood JohnsonUniversity Hospital the subcommittee found that:

1) by not taking into account efficiency, some subsidiesare rewarding inefficient hospitals;

2) by not taking account profitability, some subsidiesare going to hospitals that do not need them to befinancially viable;

3) lags in data collection and hold harmless provisionsprevent the subsidies from truly following thepatients;

4) the documentation requirements encourage hospitalsto spend money on documenting charity care ratherthan pursue collection procedures;

5) hospitals often have to use a portion of theirsubsidies to pay for physician services for charitycare patients; and

6) the delivery of charity care is totally unmanaged.

As a result, there appears to be little correlation betweenthe distribution of the charity care subsidies and countywide poverty rates.

The subcommittee believes that part of the problem isthat the state has never really settled on whether thesubsidies are support to institutions that serve aparticular population or an insurance plan forindividuals meeting a certain eligibility tests. On theone hand, there are the documentation requirements andthe specific calculations to determine the number ofcharity care patients seen by each hospital that make itlook like an insurance program. On the other hand, thelegislative earmarks and hold harmless provisions makeit look like an institutional support plan.

The subcommittee recognizes that no supplementalfunding is available at this time to expand the variousstate subsidies. Therefore, the subcommittee discussedtwo alternative approaches to distributing charity caresubsidies.

1. Refine the existing methodology to factor inefficiency and/or profitability.

The Benchmarks Subcommittee has identified a numberof efficiency criteria, including measures such as costper adjusted admission, full-time equivalent staff peradjusted admission, case mix adjusted average length ofstay, and days in accounts receivable (a complete list isincluded in Appendix 8.4B). Charity care subsidiescould be adjusted based on an evaluation of hospitalsusing these or other efficiency measures.

Similarly, the subsidies could be limited to hospitalsbelow certain profitability levels. Calculation ofprofitability should exclude subsidies because somehospitals with positive operating and/or profit marginswould be losing money without the subsidy dollars. Thelimits could be based on absolute cutoffs or graduatedreductions. For example, one approach would be to saythat any hospital with an operating margin above x %would be ineligible for a subsidy; an alternative wouldbe to reduce the subsidy for each dollar the hospital wasabove that target.

Separately or together, these refinements would funnelthe subsidies to an arguably more deserving set ofhospitals. However, it would still leave issues related totime lags and documentation.

2. Incorporate charity care and other subsidyfunding into the Medicaid rates

This proposal is based on the belief that there is a highcorrelation between a hospital’s Medicaid and charitycare patient loads. In other words, the subsidy dollarswould go to the hospitals provided the bulk of charitycare. Such an approach would also eliminate the need tospend millions documenting charity care and theproblems associated with data lags.

This proposal carries with it several implications. First,it is in part driven by the notion that current Medicaidrates are low. Second, there would be a shift in theadministration of the charity care funding from theDepartment of Health and Senior Services to Medicaid,



within the Department of Human Services. Third, sincesome Medicaid managed care rates are linked toMedicaid fee-for-service rates, the State would have toadjust payments to the managed care companies.Fourth, putting the entire amount of the charity caresubsidies into Medicaid rates would cause the State toexceed the Medicaid upper payment limit. This problemcould be addressed by distributing the subsidies basedon the distribution of Medicaid reimbursement (fee forservice and managed care) without actually folding thesubsidies into the Medicaid rates.

Freestanding ambulatory surgery centers

Subcommittee members found two significant problemscreated by freestanding ambulatory surgery centers(ASCs). While most of the discussion in this area wasin the context of ASCs, subcommittee members notedthat many of the same issues applied to other types offreestanding outpatient facilities as well.

First, the ASCs are not legally obligated to takeMedicaid and charity care patients while hospitals arebound by law to accept such patients. For the hospitals,the ASCs represent an economic threat to their financialviability by taking some of the most profitable patientsout of the hospitals.

Payers benefit from the lower unit cost at freestandingcenters, which makes the ASCs the providers of choicefor some plans. However, they also recognize that inrate negotiations, the hospitals attempt to recover thelost reimbursement that results from this adverseselection.

The subcommittee discussed requiring that ASCs serveall payer classes but doubts that such a proposal isworkable. Another approach is to deny licenses to newASCs unless they are partnered with a hospital. Manydoubted that this was possible and noted that if onlyapplied to new facilities, it could only have a limitedaffect at best.

There was more consensus within the subcommittee onthe need to level the playing field with regard toregulations and data reporting. Currently, ASCs are not

subject to certificate of need requirements, facilitieswith a single operating room are not licensed by theDepartment of Health and Senior Services, andreportable events for ASCs are not consistent withreporting requirements for hospitals. The state has littledata beyond the number of freestanding facilities; otherinformation on volumes, revenues, and quality is notroutinely reported.

If the Commission accepts the need for moreconsistency, the steps to cure the situation are complexand will require either new regulation and/or additionallegislative authority. The subcommittee was inagreement that all operating rooms should be regulatedfor quality and data reporting regardless of the setting orthe number at a particular location. The subcommitteealso agreed that, as has been the case in New York State(which recently passed a law imposing new oversightauthority for operating rooms in physicians’ offices),that it is most likely merely a matter of time before asignificant medical error would occur in an office-basedoperating room. Therefore, reportable events should besame, regardless of the setting. Finally, thesubcommittee (with the Medical Society of New Jerseydissenting) recommended that the licensure exceptionfor facilities and offices with a single operating roomshould be removed.

Incentives to encourage hospital closings

The subcommittee has strongly articulated the view thatthe “hospital system” would be financially stronger if asubset of hospitals closed. The argument is essentiallythat the reimbursement that follows the patients to theremaining hospitals will exceed the marginal costs oftreating those patients, resulting in improved operatingmargins for the remaining hospitals. An ancillarybenefit of such closures could be improved quality aswell, given that the closed hospital was strugglingfinancially and may not have had sufficient volume toensure high quality of care.

The state could create a pool of funds to pay some or allof the costs of closing, which could include theoutstanding debts, covering losses during a wind downperiod, and costs to transition the facility to other uses.

Section II


The pool need not be funded solely with State monies.Surviving hospitals in the region might be required tocontribute to the fund since they would be expected tosee a financial boost from the closure of a competitor.Using a simplified model in which the costs of closingwere assumed to be net liabilities plus 6 months ofoperating losses at a rate of 15%, the cost of closingeight hospitals currently in severe financial distress wasabout $150 million. On the other hand, the modelsuggests that closing those eight hospitals wouldgenerate an additional $160 million in operating gainsfor surviving hospitals in the first year after closure.

A core issue here is pacing: Should the State avoidmarket intervention and allow hospitals to wither awayat their own pace or should the process be expedited,through intervention, in an effort to restructure themarket in favor of essential hospitals? Subcommitteemembers suggested that a slow process could createquality of care concerns and increase the costs of theeventual workout.

Appendix 8.4



Karen ClarkPresident/Chief Operating OfficerHorizon NJ Health

Michael D'AgnesPresident/Chief Executive OfficerRaritan Bay Medical Center

Douglas DuchakPresident/Chief Executive OfficerEnglewood Hospital

John GantnerTreasurer, Executive Vice PresidentRWJ University Hospital

Steven Goldman, J.D., L.L.M.Commissioner, Department of Banking and InsuranceEx-Officio Member, Commission on RationalizingHealth Care Resources

Gerry Goodrich, J.D., M.P.H.Subcommittee ChairDirector of Practice Operations,Weill Cornell Medical College, Cornell UniversityMember, Commission on Rationalizing Health CareResources

Richard KeenanSenior Vice President of Finance and Chief FinancialOfficer,Valley Hospital

Michael KornettChief Executive Officer and Executive DirectorNJ Medical Society

George LaufenbergHealthcare Payers Coalition of New Jersey

James LeonardSenior Vice PresidentGovernmental RelationsNJ Chamber of Commerce

William McDonaldPresident/Chief Executive OfficerSt. Joseph's Regional Medical Center

Ward SandersPresidentNJ Association of Health Plans

Christine Stearns, Esq.Vice President, Health, Legal Affairs and Small BusinessIssues, NJ Business and Industry

Michael UngvaryRegional Head of ContractingAetna, Inc.

Bruce Vladeck, Ph.D.Member, Commission on Rationalizing Health CareResources

Patrick WormserVice President, ContractingUnited Healthcare

Staff

Steve FillebrownLead Staff to SubcommitteeDirector of Research, Investor Relations andCompliance, NJ Health Care Facilities FinancingAuthority

John GuhlDirector, Division of Medical Assistance and HealthService, NJ Department of Human Services

Michele GuhlExecutive DirectorCommission on Rationalizing Health Care Resources

John JacobiSenior Associate CouncelOffice of the Governor

Michael KeeveyDirector, Office of ReimbursementDivision of Medical Assistance and Health ServiceNJ Department of Human Services

Cynthia McGettiganExecutive AssistantCommission on Rationalizing Health Care Resources

Appendix 8.4AReimbursement and Payments Subcommittee Members

Section II


Appendix 8.4

Appendix 8.4BEfficiency Measures

prepared by the Benchmarking for Efficiency and Quality Subcommittee

Available for Indicators All Hospitals* Source Comments

FTE per adjusted Yes DHSS Cost Reports Adjust volume for outpatient activity (usingoccupied bed and UB-92 data gross revenue), case mix/severity (using

APR-DRGs)

Labor expense per Yes DHSS Cost Reports Adjust volume for outpatient activity (using adjusted admission and UB-92 data gross revenue), case mix/severity (using

APR-DRGs)

Non-labor expense per Yes DHSS Cost Reports Adjust volume for outpatient activity (usingadjusted admission and UB-92 data gross revenue), case mix/severity (using

APR-DRGs)

Total expense per Yes DHSS Cost Reports Adjust volume for outpatient activity (usingadjusted admission and UB-92 data gross revenue), case mix/severity (using

APR-DRGs)

Case mix adjusted ALOS Yes DHSS B-2 Forms Use APR-DRGs to calculate case mix indexand UB-92 data

Occupancy Yes DHSS B-2 Forms Licensed beds are fixed in short run but(maintained beds) maintained beds can be adjusted.

Days in accounts Yes DHSS/NJHCFFA Measures efficiency of revenue cyclereceivable Financial data base management.

Average payment period Yes DHSS/NJHCFFA Measures efficiency of revenue cycleFinancial data base management.

Denial rate No Voluntary reporting Will not calculate statewide benchmark from hospitals but will use as additional information to

evaluate revenue cycle management

* Yes indicates that the measure may be calculated based on existing data.

Regulatory and Legal Reform



Subcommittee Report 5:Regulatory and Legal Reform

Introduction

The New Jersey Commission on Rationalizing HealthCare Resources was established to advise the Governoron issues related to maintaining a system of high-quality,affordable, and accessible health care. The Commissionin particular was charged with examining the NewJersey acute care hospital system. The evolution ofhealth care in the United States and in New Jersey haspresented challenges to New Jersey’s hospitals.Hospitals are faced with severe fiscal strains, the peopleof New Jersey are faced with reductions in theavailability of care, and the State is presented with thechallenge of whether, and in what manner, to interveneto serve the public good.

The Commission acknowledged in its June 29, 2007Interim Report the fiscal pressures faced by hospitals,and made some preliminary recommendations regardingfunding. It noted, however, that other factors must beconsidered in fulfilling its charge. The Commissioncharged the Regulatory and Legal ReformSubcommittee with those issues concerning theregulatory structure within which hospitals operate. TheSubcommittee met six times. It was chaired byCommission Member Joel Cantor, and includedCommission Members Debra DiLorenzo and StevenGoldman, and twenty experts on New Jersey health carelaw and regulation.1

A primary recommendation of this Subcommittee is thatthe systematic under-funding of acute care hospitals inthis State must be addressed. While otherrecommendations can and should be made, it is thebelief of this Subcommittee that until the underpaymentissues are addressed, the acute care hospital industry inNew Jersey will continue to struggle. This is evidencedby the 17 closures in the past decade and fivebankruptcies in the past 18 months.

I. Subcommittee Charge

The Commission charged six Subcommittees to addressparticular issues to advance the overall project of theCommission. The Commission charged the Regulatoryand Legal Reform Subcommittee as follows:

To gather and review background informationabout current statutory and regulatoryrequirements governing health care facilitiesspecifically in regards to licensing, certificate ofneed, and oversight through reporting ofadministrative, financial, and quality data;identify and review issues pertaining to theCertificate of Need Program including impact oftrends in health care delivery, issues related to theimplementation of the Certificate of NeedProgram, and recommendations; identify andreview issues related to licensure and health caredelivery; recommend revisions in statutes,administrative rules and programs; and serve asliaison to Commission subcommittees to assessnecessity for legislative reforms.

II. Overview of Subcommittee Process

The Subcommittee met six times from August toDecember 2007. Rutgers’ Center for State Health Policyin New Brunswick generously hosted the meetings.Before the meetings, staff circulated material describingNew Jersey’s statutory and regulatory structure,particularly as it pertains to Certificate of Need (“CON”)and licensure. Staff also circulated materials on otherstates’ regulatory structures, and materials producedfrom non-governmental sources such as the AmericanHealth Lawyers Association and the Joint Commission.The Subcommittee requested and received copies ofreports of two Commission subcommittees:Benchmarking for Efficiency & Quality andReimbursements/Payers.

1 See Appendix 8.5A for full roster of Subcommittee members.

Section I


Appendix 8.5

The deliberations focused on CON matters associatedwith the closure of hospitals and alternatives to theexisting statutory process for closure, including, but notlimited to, the development of an early warning systemfor distressed hospitals. Additionally, deliberationsfocused on licensure matters, particularly thoseconcerning the interrelationship of hospitals andambulatory care facilities and those concerning thegovernance structure of hospitals. The deliberationswere informed by the proceedings of other committeesand the Commission activities generally. There wasrobust discussion, sometimes disagreement, butultimately the consensus of the subcommittee reached anumber of recommendations.

III. General Approach to the Issues

Deliberations focused on several clusters of issues, towhich the members returned regularly. These cross-cutting concerns arose in discussion of CON structure,licensure, and other statutory and regulatory issues:

• Adequacy of hospital reimbursement. Membersrecognized that other Subcommittees were primarilyresponsible for this issue, but asserted forcefully thatthe under-funding of acute care hospitals in thisState must be addressed. It is the belief of thissubcommittee that until the underpayment issues areaddressed, the acute care hospital industry in NewJersey will continue to struggle

• Planning. Members recommended several steps toimprove the function of health planning.- The State of New Jersey, through both the

Department of Health and Senior Services (theDepartment) and the Health Care FacilitiesFinancing Authority (the HCFFA), has data thatcan be used to create an “early warning system.”

- CON regulations should be reviewed regularlyto assure that they are consistent with industryand regulatory practice.

- Prospective health planning should beemployed to rationalize health care (particularlyhospital) delivery when market forces drive theclosure of hospitals. In particular, local andmarket area health planning was advocated as ameans to avoid problems that arise when marketforces, rather than prospective planning, areallowed to drive the closure of hospitals.

- The CON process should be comprehensivelyreviewed to respond to the unacceptableconsequences of market forces, which limitaccess to essential health care services.

- In particular, the CON process for hospitalclosure should be modified to recognize therealities of the process of the winding down of afailing hospital.

• “Leveling the playing field.” The mixture ofregulation and markets in New Jersey leads to somediscontinuities disadvantageous to hospitals. Areasof focus included,- The imbalance between the regulatory burden

on hospitals and ambulatory care facilities,particularly in terms of hours of operation andobligations to accept all patients.

- The imbalance in the regulatory attention paidto hospitals and ambulatory care facilities,particularly in terms of monitoring quality andreporting of utilization, quality measures, andpayer data.

• Governance. Although much of the distress sufferedby New Jersey hospitals has resulted from outsideforces, members considered possible changes in theregulation of hospital boards. Discussion focusedon two issues:- Best practices, including some drawn from the

application of Sarbanes-Oxley to non-profitboards, should be included in licensureregulations.

- The Department of Health and Senior Servicesrole should be to improve the ability ofgoverning bodies to respond to changing marketconditions. In particular, • Board members should receive appropriate

training, which is already mandated for newboard members by the Hospital TrusteeEducation law, P.L.2007, c 74 . TheDepartment is in the process ofpromulgating regulations to implement thisnew law.

• The Department should provide “earlywarning” information to boards to allowthem to make informed decisions well inadvance of times of distress.

• Other legal/regulatory issues. Two additionalconcerns were the subject of substantial discussion:- New Jersey’s physician self-referral law (the

“Codey law”) has been interpreted by the Board



of Medical Examiners to permit physicians tooperate ambulatory care facilities in a mannerthat creates challenges to hospitals.

A Superior Court decision (Garcia v. Health Net)recently adopted an interpretation of the Codey law thatappears to be substantially narrower than that articulatedby the Board of Medical Examiners. Some members ofthe Subcommittee advocated a narrower interpretationof the Codey Law to reduce this competitive pressure.

- The competitive relationship betweenphysicians and hospitals raises concerns, someof which are addressed by otherSubcommittees. Two in particular were raised:• Hospitals and physicians experience

conflicting incentives with respect to theintensity of services provided inpatients;some realignment is called for.

• The fiscal pressures experienced byphysicians, combined with the sometimescompetitive nature of the relationshipbetween hospitals and physicians, haveresulted in hospitals experiencing difficultyin providing physician coverage foressential services.

IV. Findings and Recommendations

A. Reimbursement shortfalls drive many of theproblems in New Jersey’s hospital industry.

A major factor that must be taken into consideration inexamining the distress experienced by New Jersey’shospitals is the level of reimbursement paid bygovernmental payers. In particular, Medicaid andCharity Care reimburse most hospitals for mostprocedures at a level below hospitals’ costs, and belowthe level of Medicare and private payers. Hospitals canno longer cost-shift to make up the difference.

Recommendation:

Governmental payers’ practices must be reviewed toensure that adequate reimbursement is provided tohospitals and healthcare providers who provide servicesto beneficiaries of public programs and to the under-insured and uninsured.

B. New Jersey’s health planning process at timesdoes not match with the evolving needs of thehealth care delivery system.

New Jersey’s health care system is subject to bothmarket pressure and State regulation. Market conditionscan change more quickly than regulatory systems.Health planning regulations should be reexamined tomake sure that they perform their intended functions inthis mixed economy.

B.1. Planning regulations sometimes fall out ofdate, and are eclipsed by practice.

Recommendation:

The Department should review its CON regulationsand update those that are no longer reflective ofpractice, and discard those that are no longer usedby the Department.

B.2. CON regulation of hospital and other healthcare services clashes at times with themarket-driven pressures to which health careproviders are also subjected, but proper CONregulation may help to rationalize NewJersey’s health care services.

The Health Care Facilities Planning Act, N.J.S.A.26:2H-1 et seq., established the CON process to ensure“that hospital and health care services of the highestquality, of demonstrated need, efficiently provided, andproperly utilized at a reasonable cost are of vital concernto the public health.” The original purpose of the Actwas to encourage highly centralized regional planning.See N.J.S.A. 26:2H-6.1. This process has largely beensupplanted by a regulatory process that maintains thestructure of planning while becoming largely reactive tomarket forces rather than prospectively identifying need.Reestablishment of comprehensive State health planningcould be problematic because the speed of marketchanges tends to render regulations quickly obsolete. Inaddition, the resources that would be needed to maintaina comprehensive planning process are not likely to bereadily available to the Department. The Subcommitteeagreed, however, that continued State health planning insome form – some argued in a very robust form – isnecessary to maintain rationality in the health caredelivery market.

Section II


The time constraints on the Subcommittee processprevented the full review of this issue that is warranted.The Department should convene a workgroup to reviewNew Jersey’s CON process.

B.3. In some areas of the State, somereconfiguration of hospitals will take place,through market forces or otherwise. TheState currently approaches these problems ona hospital-by-hospital basis, and tends tointervene only when a hospital has failed.This process is unnecessarily disruptive to thecommunities served in these areas.

Recommendation:

The State health planning process should undertakea review of a troubled hospital’s market area topermit a more rational hospital closure andrealignment process than results from market forcesand the bankruptcy process.

In addition, the Subcommittee stronglyrecommends that the State of New Jersey create an“Early Warning System” under whichrepresentatives of the State, including theCommissioner of Health and Senior Services, aDeputy Commissioner of Health and SeniorServices, and the Executive Director of HCFFA (ora senior member of HCFFA), would meet with anyhospital CEO and Board of a hospital whosefinancial indicators moving in the wrong directionearly in the process when the hospital might still beable to turn things around. While the Subcommitteedid not definitively agree upon the financialindicators to be utilized and instead deferred this tothe appropriate Commission subcommittee, wediscussed indicators such as “days cash-on-hand,total margin of facility, occupancy, and period oftime in which bills are paid. The concept of theEarly Warning System is that the State has muchdata that it receives that shows early signs ofhospital distress. Since some members of theSubcommittee expressed concern that hospitalboards are not always kept apprised of such distress,this Early Warning System would be utilized to alertthe CEO and the Executive Committee of the Board(who can then alert the full board) that the State seessigns of trouble, and give the facility time enough towork on a turn around plan. The feeling of the

Subcommittee is that State officials are ofteninvolved in a situation of financial distress when it istoo late in the process, and since they end upspending enormous amounts of time with distressedfacilities prior to closing, this would be time wellspent by all involved.

B.4. The current closure process is unwieldy andtoo narrowly focused on the hospital itself. Ifa hospital must be closed, the process shouldbe well coordinated to minimize adverseeffects on available health care serviceswithin the community, and facilitate thecontinuation of services in the most effectivesettings possible.

CON applications for closure authorization usuallycome when closure is a foregone conclusion. Theapplications, then, become applications for assistance inmaintenance of continued operation of survivingservices and in ensuring access to other facilities’resources until shutdown. Problems with cashshortages, labor shifts, and loss of control over theavailability of community services can be exacerbated ifa bankruptcy court is involved. On the positive side, theCON closure process allows for public involvement andinput and often highlights issues related to disposition ofemployee benefits and essential health care servicesneeds. In limited circumstances, the CON closureprocess allows the Commissioner to establish conditionsfor services to continue in a new setting to maintaincommunity access.

The Subcommittee discussed the possibly of shorteningthe length of time it takes to allow a financially troubledhospital to close, including shortening the completenessreview to a specific number of days from applicationfiling. The subcommittee also discussed thecoordination of hearing processes required by the StateHealth Planning Board (SHPB) and the Office of theAttorney General, in order to avoid duplication whileprotecting the community’s interests.

The Subcommittee advocates a revision in the CON statuteto emphasize the need, during the closure process, formaintaining and coordinating the continuation of neededservices as a facility is closed. The statutory process shouldfocus on the need for the hospital and the Department toplan for a closure, with the goal of facilitating community

Appendix 8.5


notification and input, and supporting the creation ofalternative health care services and provision of essentialresources, rather than the simple unwinding of the failedhospital business.

Recommendation:

There should be a specific deadline for theDepartment completeness review of hospital closureapplications, along with the Commissioner of Healthand Senior Service’s final determination. TheDepartment’s completeness review should not exceed60 days, which will allow time for the Department’sinitial review, submission of questions to the hospitalif the additional information is needed andconsideration of the hospital’s response. Finalapproval by the Commissioner should occur within 30days of receiving recommendations from the SHPB.

The public hearing held by the Office of AttorneyGeneral pursuant to the Community Health AssetsProtection Act and the public hearing held by theSHPB for a CN Closure should be coordinated to occuron one hearing date.

C. Ambulatory care facilities have expanded in NewJersey, as elsewhere. In many cases, for example,ambulatory surgery centers, the facilitiescompete directly with hospitals. The competitiveplaying field, however, is not level, as hospitalsretain obligations that have not been imposed onambulatory care facilities.

New Jersey has partially deregulated health carefacilities in recent years. Following this deregulation,ambulatory care facilities have increased throughout theState. See Appendices 8.5B and 8.5C. Thisderegulation, in addition to being partial, is also unevenin its application. For example, ambulatory carefacilities, unlike hospitals, are no longer subject to CONrequirements, although they are subject to licensingregulations. See P.L. 1998, c. 43. For example,hospitals are required by law to provide “charity care”access for all medically necessary treatments, althoughthe State’s reimbursement for those services is in manycases far short of the hospital’s cost of providing thosetreatments. In contrast, ambulatory care facilities haveno such obligation, even in those circumstances, such asoutpatient surgery, where the hospitals and ambulatoryfacilities are in direct competition.

Hospitals face hurdles not faced by the ambulatory carefacilities in addition to the incompletely reimbursedcosts of charity care. For example, most hospitalfacilities must be available 24/7 in order to serve theneeds of emergency departments. In addition, hospitalsassert that the ambulatory care facilities with which theyare in competition “cherry pick” the less intense cases aswell as the insured cases, leaving the more complex andunder-insured or uninsured (and therefore moreexpensive) cases for the hospitals. Finally, hospitalsassert that the entrepreneurial nature of modern practicereduces the availability of physician coverage forhospitals, including hospital emergency departments –in part because the charity care system does not payphysicians for their services.

Some of these tensions are the inevitable result of shiftin medical practice, as more and more services mayappropriately and conveniently be provided inambulatory settings away from the hospital. TheSubcommittee determined, however, that the unevenapplication of regulations to the two settings exacerbatesthe effect of this shift, harming hospitals and creatingwindfalls for ambulatory care providers. TheSubcommittee considered two types of regulations inthis context: those that mandate the provision ofservices, and those by which the State engages inoversight, data collection, and quality control.

As to the former, the solutions are somewhat uncertain.The burden of providing charity care, focused as it issolely on hospitals, might be extended to somecategories of ambulatory care facilities. For example,New Jersey recently enacted a law that requiresoutpatient renal dialysis facilities to provide a limitedamount of free care. See P.L. 2007, c. 79. In addition,many ambulatory care facilities are required to payassessments in lieu of providing free care.2 The fundsderived from this assessment during the 2005 – 2007period is significant, but many of the Subcommitteebelieved it was not adequate to fairly offset the cost ofcharity care provided by hospitals during that time.Some members suggested that a careful study is

2 NJSA 26:2H-18.57 establishes the ambulatory care facility assessment. Itrequires facilities with gross receipts of at least $300,000 and licensed toprovide one or more of the following services to pay a gross receiptsassessment: ambulatory surgery, computerized axial tomography,comprehensive outpatient rehabilitation, extracorporeal shock wavelithotripsy, magnetic resonance imaging, megavoltage radiation oncology,positron emission tomography, orthotripsy, and sleep disorder.


Section II


Appendix 8.5

necessary to assess the burdens of providing charity careand the impact on hospitals and ambulatory carefacilities to determine an equitable and appropriateassessment.

With respect to data collection and quality assurance, theSubcommittee was able to reach concreterecommendations. The Subcommittee determined thatthe licensure regulations for ambulatory care facilitiesshould be amended to require forms of data reportingand quality control at a level similar to those applied tohospitals, while taking into account the differencesbetween the forms of operation.

C.1. The current structure of health deliveryresults in direct competition betweenhospitals and ambulatory care facilities formany services, but the regulatory burden onhospitals to operate emergency departmentsand to provide care to all regardless of abilityto pay or source of payment imposes animbalance that should be addressed.

Recommendation:

The State should remedy the competitive imbalancebetween hospitals and ambulatory care facilities tothe extent the imbalance is exacerbated by Stateregulation. If charity care continues to be requiredto be provided by hospitals across all hospitalsettings (emergency room, inpatient care, surgery,outpatient care, etc.), the State must take steps toassure that the burden of charity care does notunfairly disadvantage hospitals in their competitionwith ambulatory care facilities. Similarly, the

requirement that hospitals, but not ambulatory carefacilities, accept Medicaid and other public forms ofinsurance suggests that the State should act so as toavoid this requirement from creating unfaircompetitive imbalance.

C.2. The migration of increasingly complexservices to ambulatory care facilities has notbeen matched by proportionate regulatoryoversight of these facilities. As a result, theState may not adequately monitor the servicequality, payer mix, and administrativestructure of these facilities.

Recommendation:

The Department of Health and Senior Servicesshould review the reporting requirements ofambulatory care facilities to ensure that it receivesappropriate information to permit it to monitor thequality of the care provided, and to ensure itreceives appropriate data on utilization, payersources, cost reporting, and the identity and numberof practitioners participating in care. The gatheringof these data could be provided through the use ofuniform bills and other reporting mechanisms nowemployed to gather information from hospitals.

The Department should examine whether it canadopt the standards employed by such organizationsas the Accreditation Association for AmbulatoryHealth Care (AAAHC) or the American Associationfor the Accreditation of Ambulatory SurgeryFacilities (AAAASF) for these purposes. Adoptingapproval by these oversight entities as “deemed

Number of Facilities State Fiscal Year Total fees collected

287 2005 $24,100,628

288 2006 $23,426,868

307 2007 $26,554,395



status” for at least some purposes could streamlinethe regulatory process for both the Department andthe facilities.

C.3. The Department should develop reportingmechanisms and implement reportingrequirements for ambulatory care facilities toprovide complete data regarding utilization,patient visits by payment source, number ofvisits, number of practitioners, cost reportingand quality measures. In additionfreestanding ambulatory care centers mustissue a uniform bill (UB04) for all patients sovolumes and referrals may be tracked.Ambulatory care centers should have tocomply with all aspects of the Patient SafetyAct, and be subject to the same reporting andquality requirements as hospitals. Physicianspecific data should be unblended so thatphysician referral patterns may be trackedand evaluated.

D. The governance of non-profit hospitals in NewJersey is accomplished through the leadershipand/or contributions of volunteer directors andtrustees. The structure of this governance andthe regulation of non-profit boards have changedlittle during the decades in which the operation ofhospitals has grown increasingly complex. Theregulation of these boards and therecommendation of best practices to theirmembers should be reviewed and brought up todate.

Non-profit hospitals rely on their boards to oversee thehospital’s management, and to ensure that the hospitaloperates in a way that is consistent with the needs of thecommunity. Those boards are populated by volunteers,often people from the community with little experiencein the oversight of entities operating on the scale ofmodern hospitals, and frequently with little familiaritywith hospital operations. This community source andorientation of board members has remained unchangedas hospitals have become more complex.

Several national organizations have examined the role,structure and regulation of non-profit boards, includingthe boards of non-profit hospitals in recent years. TheJoint Commission, the American Law Institute, and the

American Health Lawyers Association are all engagedin such reviews.

D.1. Board members need appropriate educationon their obligations, their hospital’s mission,and the operations of non-profit hospitals.Orientation of new members is particularlyimportant.

Recommendation:

The law requiring new hospital board members toattend orientation sessions should be implementedto maximize new members’ ability to engage inappropriate oversight. N.J.S.A. 26:2H-12.34.

D.2. New Jersey law vests with the AttorneyGeneral the responsibility of overseeing theconduct of the boards of not for profitcorporations. This oversight is particularlyimportant as not for profit corporations,unlike for-profit corporations do not haveshareholders with an interest and the abilityto monitor the corporation’s conduct. TheAttorney General is charged by law with fillingthis void by exercising appropriate oversightof board conduct.

Recommendation:

The New Jersey Attorney General should respondappropriately to information, from whatever source,tending to show that the board of a non-profithospital is derelict in its obligations to carefullyoversee the management of the hospital. It shouldinvestigate promptly to determine if boardmisconduct or inattentiveness imperils the hospital.The Department, as the regulatory agency mostintimately familiar with hospital operations, shouldin appropriate cases make referrals to the AttorneyGeneral for such purposes. The Attorney Generalshould intrude into board affairs only whennecessary to preserve the hospital’s communitymission.

D.3. The Subcommittee recognizes concerns thatboard members are sometimes unaware of ahospital’s financial difficulties until too late,and that they are sometimes not provided by


Appendix 8.5

hospital management with adequateinformation to respond to financial crises.

Recommendation:

Hospital management should be encouraged toshare appropriate financial information with boardmembers on a timely basis. The Department shouldwork with hospital management, boards, and theHCFFA to ensure that boards are aware of financialcrises as well as the options available to salvage thehospital’s resources and health care mission, on atimely basis. Sale and closure should not occur incircumstances of extreme crisis, and should beinitiated well before significant dissipation of assetsand allow conversion of resources to sustainableuses that are mission-consistent.

D.4. Information regarding the makeup ofhospital boards, even including the names ofthe people who serve as directors or trustees,is often not available to the people of thecommunity. Hospitals are importantcommunity assets, and the governance ofboards should be approached with an eyetoward transparency.

Recommendation:

Information regarding the governance of hospitalsshould be available to the people of the community.While dated, much of the information is availableon the Internet for those who know where to find itat locations such as www.guidestar.com.] SomeSubcommittee members believed Hospital Boardsshould place information on the hospital’s website,including their Form 990, an information return thatmost secular exempt organizations with incomesabove $25,000 are required to file annually with theIRS, to permit easy access for the public.

D.5. Board governance in the for-profit sector hasbeen rocked by repeated scandals in recentyears, as board members and managementhave intentionally flouted their responsibili-ties to their shareholders and the public. Oneresult was the passage of the AmericanCompetitiveness and CorporateAccountability Act of 2002 (the “Sarbanes-

Oxley Act”), which mandated certaincorrective steps in corporate governance.Many of the steps mandated for commercialfirms have been recommended for adoption bynon-profit firms.

Recommendation:

The Department should mandate the adoption ofsuitable portions of the Sarbanes-Oxleyrequirements by non-profit healthcare facilities. Itshould be noted that time constraints prevented thesubcommittee from identifying which provisions ofSarbanes-Oxley should be extended to non-profitproviders in New Jersey.

E. The relationship between hospitals and theirphysicians is sometimes not harmonious, andinstead creates competitive tensions. As isdescribed above, ambulatory care facilities are indirect competition with hospitals for someservices, and those facilities are often operatedby the hospital’s own physicians. In addition,hospitals and physicians can experience conflicton the management of patients within thehospital, and can disagree on the obligations ofphysicians to cover needed patient care serviceswithin the hospital.

Several developments in health finance have combinedto complicate the relationship between hospitals andphysicians. As is noted above, hospitals have contendedincreasingly with competition from ambulatory carefacilities. Those facilities are typically owned byphysicians. The physician-owners perform proceduresin these ambulatory care facilities that they hadpreviously performed in the hospitals with which theynow compete.

New Jersey and federal law limit the ability ofphysicians to refer patients to facilities in which theyhave an ownership interest. See 42 U.S.C. 1395NN(the “Stark Act”) and N.J.S.A. 45:9-22.4 et seq. (the“Codey law”). There is currently conflicting authorityon the proper interpretation of the Codey law. TheBoard of Medical Examiners has described aninterpretation of the Codey law that permits physiciansto refer to ambulatory care facilities in which they have



an ownership interest, while a recent Superior Courtdecision has articulated a narrower interpretation.Several members of the Subcommittee urged that thelaw is most properly interpreted narrowly to restrictmany of the forms of ownership and referral currentlypermitted under decisions of the New Jersey Board ofMedical Examiners.

In addition, the Subcommittee considered the tensionsthat distort hospital finances when payers – particularlybut not exclusively Medicare – create incentives forhospitals to economize on patient care andsimultaneously for physicians to practice expansivelywithin the hospital. As it is physicians and not hospitalsthat control admission, management, and discharge ofpatients, this conflict is difficult for hospitals to manage.This issue, as the Subcommittee was informed, is withinthe charge of another Subcommittee.

Finally, the changing economic pressures and incentivesexperienced by physicians interfere with a cooperativerelationship by which hospitals have historically staffednecessary services such as emergency departments.Physicians are under increased pressure to stay in theiroffices, seeing patients, rather than taking call athospitals. In addition, some of the call services are indirect conflict with the activities of some of thesephysicians within their outside ambulatory carefacilities.

E.1. Hospitals, physicians, and proprietors ofambulatory care facilities disagree on theproper scope of self-referral laws, particularlythe Codey law. It is in New Jersey’s interest tohave this conflict resolved quickly.

Recommendation:

The Department, in conjunction with the Office ofthe Attorney General, Division of Consumer Affairsand the Board of Medical Examiners, should takemeasures to ensure that the self-referral provisionsof federal and state law are properly enforced.

E.2. Hospitals and physicians are subject toconflicting pressures with respect to themanagement of hospital patients. Thisconflict distorts the management of hospitals,and limits the ability of hospitals to managepatient care consistently and appropriately.

Recommendation:

The Department should examine methods to alignthe incentives of hospitals and physicians in themanagement of patients, consistent with appropriatepatient protection standards.

E.3. Changes in physician practice has erodedthe ability of hospitals to rely on voluntarystaffing by physicians of necessary hospitalservices.

Recommendation:

The Department should undertake a comprehensivereview of this problem in conjunction with hospitalsand physicians. To the extent it can be addressedcooperatively by accommodating the needs of allparties, such cooperative solutions should befavored.


Joel Cantor, Sc.D.Subcommittee ChairMember, Commission on Rationalizing Health CareResourcesDirector, Center for State Health Policy,Rutgers University

Debra DiLorenzoMember, Commission on Rationalizing Health CareResourcesChamber of Commerce of Southern NJ

Steven Goldman, J.D., L.L.M.Member, Commission on Rationalizing Health CareResourcesCommissioner, Department of Banking and Insurance

Andrea Aughenbaugh, RNCEO, New Jersey Nurses AssociationTrustee, New Jersey Health Care Quality Institute

Michael P. Baker, Esq.Chair, Health Care Administration BoardHoagland Longo Moran, Dunst and Doukas

Kathleen M. Boozang, J.D., LL.M.Seton Hall Law SchoolFounding Director of the Health Law and PolicyProgram

Sherl Brand, RN, BSN, CCMPresident and CEOHome Care Association of New Jersey

Frank Ciesla, Esq.Giordano, Halleran and Ciesla

Judy Donlen, RN, DNScChair, State Health Planning BoardSouthern Perinatal Cooperative

William G. Dressel, Jr.Executive DirectorNew Jersey League of Municipalities

Harold B. GarwinPresident/Executive DirectorCommunity Health Law Project

Enza GuagentiPresident,The New Jersey Association of AmbulatoryCare Centers

David KostinasKostinas and Associates

Alan LieberChief Executive OfficerOverlook Hospital

Connie Bentley McGhee, Esq.Member, State Health Planning BoardPrivate Practice

Elizabeth McNuttPresident,The Healthcare Planning and MarketingSociety of NJ

David P. Pascrell, Esq.Gibbons, P.C.

Judith M. PersichilliMember, Health Care Administration BoardExecutive Vice President, Mid-Atlantic Division,Catholic Health East

Jeffrey RubinProfessor of EconomicsDepartment of EconomicsRutgers, the State University of New Jersey

Elizabeth Ryan, Esq.Chief Operating OfficerNew Jersey Hospital Association

Rebecca B.WolffDirector of Corporate PlanningMeridian Health

Charles WowkanechPresidentNew Jersey State AFL-CIO

Barbara Wright, Ph.D., R.N., FAANPolicy Advisor

Appendix 8.5

Appendix 8.5ARegulatory and Legal Reform Subcommittee Members



Appendix 8.5BAmbulatory Care Facilities, New Jersey

OCEAN

ATLANTIC

BURLINGTON

SALEM

MONMOUTH

CUMBERLAND

CAPE MAY

MERCER

CAMDEN

GLOUCESTER

SUSSEX

MORRISWARREN

HUNTERDON

BERGEN

MIDDLESEX

SOMERSET

PASSAIC

ESSEX

UNION

HUDSON

Ambulatory Care Facilities

County Boundary

As of August 2007, New Jersey has 766 ambulatorycare facilities. However, due to geocoding limitations,only 759 could be mapped, and several facilitylocations are approximate.


Appendix 8.5

Appendix 8.5CAmbulatory Care Facilities, New Jersey

OCEAN

ATLANTIC

BURLINGTON

SALEM

MONMOUTH

CUMBERLAND

CAPE MAY

MERCER

CAMDEN

GLOUCESTER

SUSSEX

MORRISWARREN

HUNTERDON

BERGEN

MIDDLESEX

SOMERSET

PASSAIC

ESSEX

UNION

HUDSON

As of August 2007, New Jersey has 766 ambulatorycare facilities. However, due to geocoding limitations,only 759 could be mapped, and several facilitylocations are approximate.

County Boundary

Density of Ambulatory Care Facilities

Low

High

Hospital/Physician Relations and Practice Efficiency



Subcommittee Report 6:Hospital/Physician Relations and Practice Efficiency

Executive Summary

n The present report represents the work of theSubcommittee on Hospital/Physician Relations &Practice Efficiency, one of six empanelled to advisethe Commission on Rationalizing Health CareResources in New Jersey Commission establishedunder Executive Order 39, promulgated byGovernor Jon S. Corzine on October 19, 2006.

n The Subcommittee on Hospital/Physician Relationsand Practice Efficiency was charged to:

- Identify and characterize the most significantfactors and aspects of the relationship amongNew Jersey’s acute care hospitals andphysicians.

- Focus on high-cost high reward aspects ofphysician practices and performance.

- Evaluate the importance and application ofavailable standards and metrics.

- Report findings and recommendations to the fullCommission.

n The Subcommittee met in plenary session four timeswith additional workgroup meetings, consideredexpert opinion and information, raised issues anddiscussed possible initiatives and action in thefollowing four areas:

- Payment System- Institutional infrastructure- Metrics and Reporting- Regional Coordination

n The Subcommittee’s attention was drawn to severalareas that bear critically on hospital and physicianrelationships but which are too broad to fit within itscharge. Reform and change in these areas is vital tothe long-term improvement of New Jersey’s healthcare system.- Regionalization of health care resource

allocation and utilizations.- Tort reform.

- Medical Malpractice insurance reform and relief.- Alternative concepts for delivery of acute care

services.

n The Subcommittee proposes ten recommendationsspecifically addressed to improving hospital andphysician relations and improving practiceefficiency.

- These recommendations are especially relevantand essential for financially stressed institutions.

- These ideas also have general applicability toand offer value to all acute care institutions.

- These recommendations are summarized belowfor ready reference and discussed in detail in thebody of this final report.

Summary Recommendations

1. Encourage alignment-oriented payment systemsor models for acute hospital care that financiallyimpact, engage and involve physicians.

Structural non-alignment of financial incentivesinvites abuse and rewards medically irrationaland counter-productive decisions.

2. Promote physician accountability through aphysician report card of evidence-based acute careperformance and outcomes measures.

Evidence-based medicine standards are under-utilized and un-enforced in the acute caresetting.

3. Coordinate care from admission through post-discharge with standards and incentives based onquantitative metrics and results.

Coordinated patient care from admissionthrough in-patient treatment to discharge andfollow-up treatment and services is not thestandard of care in New Jersey.

Section I


Appendix 8.6

4. Increase institutional transparency for acute carecosts, utilization and care alternatives to enable costand treatment-effective decisions.

Imperfect knowledge of acute care costs andresources inhibits informed, rational choices,decreases trust and confidence and disablesaccountability.

5. Establish 365 day standards of operation for anexpanded range of services that optimize acute careresources utilization.

Service and coverage reductions on weekendsand off-hours inhibit best practices and cost-effective resource utilization.

6. Set standard and parameters for physician on-callobligations for emergency department serviceregionally and state-wide.

Hospitals cannot impose ED service callobligations on physicians, and often paysignificant fees to secure essential coverage.

7. Make “intensivist model” the standard of ICUcare and a priority for all hospitals, especiallyfinancially distressed institutions.

Intensive Care Units provide patients with life-sustaining medical and nursing care on a 24-hr.basis but are not typically staffed with optimallytrained personnel.

8. Leverage scarce physician services through theexpanded use of practice-extenders and other meansto increase effective access and availability.

Scarcity of key medical specialties can createservice bottlenecks and inefficiencies.

9. Exploit existing IT systems and technology toenhance physicians-hospital interaction, improveaccess to in-patient data, and take greater advantageof information resources.

Hospitals do not to take advantage of IT toincrease interaction with physicians.

10. Create an acute care data warehouse, hospitalnetwork, and uniform data standards and formats.

Comparative hospital performance metrics, datacompatibility and exchange capabilities arelacking in New Jersey.




Anthony C.Antonacci, M.D., SM, FACS,Co-ChairVice President for Medical Affairs & Chief QualityOfficer, Christ Hospital

Risa Lavizzo-Mourey, M.D.,Co-ChairPresident and CEO, Robert Wood Johnson FoundationMember, Commission on Rationalizing Health CareResources

Fred M. Jacobs, M.D., JD, EX-OFFICIOCommissioner, Department of Health and SeniorServicesMember, Commission on Rationalizing Health CareResources

Henry Amoroso, CEOCathedral Healthcare Systems

Carolyn E. Bekes, M.D.Senior Vice President, Academic and Medical Affairs,Chief Compliance Officer, Cooper Health System

Darlene CoxPresident, CEO, University Hospital

William B. Felegi, D.O.Past President, American College of EmergencyPhysicians, New Jersey Chapter

Linda Gural, R.N.President, New Jersey State Nurses Association

Gary S. HoranPresident, CEO,Trinitas Hospital

John V. Jacobi, J.D.Senior Associate Counsel, Office of the Governor

Michael J. Kalison, EsqKalison, McBride, Jackson & Murphy, P.A.

Fr. Joseph W. KukuraPresident, Catholic Health Partnership of New Jersey

Ira P. Monka, D.O.President, New Jersey Association of OsteopathicPhysicians and Surgeons

Charles M. Moss, M.D.President, Medical Society of New Jersey

Richard G. Popiel, M.D., MBAVice President, Chief Medical Officer, Health Affairs,Horizon Blue Cross Blue Shield

Gregory J. Rokosz, D.O., J.D.Senior Vice President for Medical and Academic Affairs,Saint Barnabas Medical Center

William A. Rough, M.D.President,American College of Surgeons

Michael Shebabb, CPA, COONorth Hudson Comm. Health Center, New JerseyPrimary Care Association

Robert Spierer, M.D.Past President, New Jersey Academy of Family Physician

Virginia Treacy, R.N.Executive Director, JNESO, District Council 1 IUOE

Ann TwomeyPresident, Health Professionals and Allied Employees,AFT,AFL-CIO

Sara Wallach, M.D.President, New Jersey Chapter, American College ofPhysicians

Benjamin Weinstein, M.D., Ph.D.Senior Vice President/Medical Dir, New Jersey HospitalAssociation (CentraState Healthcare System)

Administrative Personnel

Michele Guhl, Executive DirectorThe Commission on Rationalizing Health Care Resources inNew JerseyDepartment of Health and Senior Services

Cynthia McGettiganThe Commission on Rationalizing Health Care Resources inNew JerseyDepartment of Health and Senior Services

Gabriel B. Milton, J.D., LL.M.Staff to the Subcommittee On Hospital/PhysicianRelations & Practice EfficiencyOffice of the CommissionerDepartment of Health and Senior Services

Section II


Introduction

On October 19, 2006, Governor Jon S. Corzinepromulgated Executive Order #39, identifying the needto examine the availability and delivery of health careservices in New Jersey, and develop recommendationstoward the creation of a state wide health plan. TheCommission on Rationalizing Health Care Resources inNew Jersey, chaired by Dr. Uwe E. Reinhardt, Professorof Economics and Public Affairs, Woodrow WilsonSchool, Princeton University was established toimplement the Order.

The work of the Commission was assigned to sixsubcommittees, each addressing a particular topicrelevant to the overall mission. The present reportrepresents the efforts of the Subcommittee onHospital/Physician Relations & Practice Efficiency, co-chaired by Risa Lavizzo-Mourey, MD, Co-Chair,President and CEO, Robert Wood Johnson Foundation,and Anthony C. Antonacci, MD, SM, FACS, Co-Chair,Vice President for Medical Affairs & Chief QualityOfficer, Christ Hospital. Fred M. Jacobs, M.D., J.D.,Commissioner, Department of Health & SeniorServices, also served on this subcommittee.

Charge

The Subcommittee on Hospital/Physician Relations andPractice Efficiency will:• Identify and characterize the most significant

factors and aspects of the relationship between NewJersey’s acute care hospitals and physiciansaffecting institutional viability and financialintegrity, cost-effective use of resources, physicianrelations and practice efficiency, and the delivery ofquality health care.

• Focus on high cost-high reward aspects of physicianpractices and performance. Examine key criteria,including: length of stay, prescription drug charges,procedure charges, consults, etc.

• Evaluate the importance and application ofavailable standards and metrics, e.g., best practices,Leapfrog, “report cards”, etc., paying specialattention to the impact and importance of theseissues to the situation of New Jersey’s mostfinancially stressed acute care hospitals.

• Report findings and conclusions to the fullCommission and recommend institutional,legislative and policy initiatives that will positively

impact the financial and care crisis affecting NewJersey’s acute care institutions.

Membership

The Subcommittee on Hospital Physician Relations andPractice Efficiency consisted of 23 individuals whofreely contributed their time and energy to achieving itsgoals. Candidates were identified and selected througha painstaking process undertaken by the Commission, itsExecutive Director and the Governor’s Office ofAppointments. The membership of the subcommitteenow represents a wide range of interests, backgroundsand perspectives relevant to many of the shared concernsand issue affecting hospitals and physicians. A list ofmembers and administrative personnel appearsimmediately before the introduction to this report.

Meeting Schedule:

The Subcommittee held four meetings in the course ofits operations. The initial meeting was held at theDepartment of Heath and Senior Services, the RobertWood Johnson Foundation provide meeting space,conference facilities and amenities for the second andthird meetings, and the final meeting was hosted by theMedical Society of New Jersey. The Subcommitteegratefully acknowledges the organizations and their stafffor making the required arrangements. The schedule ofmeetings held appears below:

• July 5, 2007• July 24, 2007• August 21, 2007• September 10, 2007

Methodology

The Subcommittee convened its initial meeting underthe co-chairship of Drs. Risa Lavizzo-Mourey andAnthony C. Antonacci on July 5, 2007. Fifteen membersattended in person and 7 by conference call. Themeeting proceeded in open discussion resulting in adecision to develop and circulate a conceptualframework that would guide the work to be done.

A second meeting was held on July 24, 2007 with 20members present and one call-in. The conceptual frameworkwas reviewed and a decision made to divide the work of theSubcommittee among four areas of strategic focus:

Appendix 8.6


• Payment System – addressing issues ofdiscontinuities and disparities among payors,individual providers and institutions, incompensation, reimbursement and their relationshipto abuse and medically irrational and counter-productive decisions.

• Institutional Infrastructure and Support Systems –addressing the unmet needs of acute care institutionsfor systems and procedures that incorporate bestpractices and make optimum use of availableresources to minimize excess costs, delays andwaste.

• Institutional Reporting and Metrics – addressingthe potential for improving adverse event andoutcome reporting and quality metrics throughoutNew Jersey’s acute care facilities.

• Regional Coordination of In-Patient and Out-Patient Care – addressing deficiencies in pre-admission and post-discharge care and follow-up tominimize admissions, maximize clinical progress,and reduce readmission rates.

Each member picked an area of interest and contributedin subsequent work sessions.

Workgroup assignments were as follows:

WG1 - PAYMENT SYSTEMGregory J. Rokosz, D.O., J.DWilliam A. Rough, MDWilliam B. Felegi, D.O.Robert Spierer, MDIra P. Monka, DORichard G. Popiel, MD, MBAMichael J. Kalison, Esq.

WG2 – INFRASTRUCTURE Carolyn E. Bekes, MDLinda Gural, R.N.Benjamin Weinstein, MD, PhD Virginia Treacy Sara Wallach, MD

WG3 - REGIONAL COODINATIONAnthony C. Antonacci, MD, Co-ChairHenry AmorosoAnn TwomeyJoseph W. Kukura, Rev.Michael Shebabb, CPAGary S. Horan

WG4 - METRICS AND REPORTING Risa Lavizzo-Mourey, MD, Co-ChairDarlene Cox Charles M. Moss, M.D.

These work groups each produced a brief report andrecommendations which provided the basis for furtherdiscussion and comment and formed the foundation ofthis report.

On August 21, 2007, the Subcommittee held its thirdmeeting. Sixteen members attended, with three call-insand 4 members unavailable. The work groups sharedtheir discussions, findings and recommendations withthe entire subcommittee. Comments and suggestionswhere noted. Core recommendations were prepared andcirculated prefatory to submission of a draft report to themembership for review and revision.

All input was collected and incorporated in a draft reportsent to the membership in advance of the final meetingof the Subcommittee held on Monday, September 10,2007 at the Medical Society of New Jersey. Twenty-onemembers attended with three call-ins and one memberunavailable. Comments, changes and editorialsuggestion were made and a final report sent by emailfor approval. The present final report represents theend-product of that process.


Section II


Appendix 8.6

General Observations and Comments

The New Jersey Commission on RationalizingHealthcare Resources is focused on the situation facedby New Jersey’s most financially distressed hospitalsand the critical factors contributing to their distress. Thetasks of its subcommittees are aimed at identifyingproblems and issues and developing recommendationsthat will aid institutions in crisis regain a sounderfinancial footing, improve management and efficiency,enhance the delivery of quality health care, and maintainessential services in light of current and future healthcare needs.

The Subcommittee on Hospital Physician Relations andPractice Efficiency has made a number of specificrecommendations which it believes may together orseparately contribute to improving elements of therelationship among New Jersey’s acute care hospitalsand their physicians. While many of theserecommendations will require the agreement andcollaboration of different stakeholders and may takeconsiderable time and energy to implement, thegovernors, trustees and senior management of eachacute care institution bear direct and ultimateresponsibility for the fortunes of facilities under theircollective direction and control.

Management, oversight and direction of the State’s acutecare institutions must start from within, be driven fromthe highest levels of executive authority, and carry theweight of organizational commitment. Each individualholding a senior position of responsibility mustunderstand his or her role as an active and engagedparticipant in the life of the hospital, and understand thatrole as one for which they can and will be heldaccountable.

The Subcommittee is also aware that itsrecommendations cannot be considered apart fromlarger issues affecting health care in New Jersey. Issuessuch as the state’s fiscal crises, medical insurance andtort reform, economic and life-style pressures onphysicians, the needs of New Jersey’s highly diversepopulation, and the growing number of under- or non-insured persons all contribute to and complicate thepresent crisis.

Acute care facilities in New Jersey share a responsibilityto deliver a comprehensive range of care to all persons,

regardless of their ability to pay. Notwithstanding, it isimpossible and irrational, medically, economically andotherwise to maintain identical capabilities at all acutecare institutions. Some form of regional coordination isessential to rationalize the utilization of scarce resourcesand provide essential services to all populations in thestate. Regionalization of scarce health care servicesmust play a key role in rationalizing health care in NewJersey.

Medical malpractice insurance costs and the threat ofcostly, even devastating litigation is a powerfuldisincentive to systemic reform, practice improvement,and innovation. It dissuades physicians from practicingin this state and contributes to shortages in keyspecialties. Tort reform is a politically charged,legislatively challenging but essential component of along term solution to New Jersey’s health care crisis.

Declining revenues are as much a cause of the financialdistress experienced by many of New Jersey’s Hospitalsas rising expenses. In a long-term trend, both privateand public payors have reduced payments andreimbursements for medical services, consumables andresources, and have adopted more restrictiveauthorization standards. The financial squeeze isexacerbated by the growing impact of non-paying users– the uninsured or under-insured.

It is beyond the scope of this report to examine orcomment on the implications, justifications andrationale for the present state of affairs – it may beenough to observe that even as the base of adequatelyinsured, paying patients weakens, the weight ofuninsured care grows unabated. This is a questionablerecipe for a sustainable system of care.

Physician-owned for-profit ambulatory care centershave made significant inroads into the traditional profitbase of many acute care institutions. It is increasinglydifficult for traditional acute care institutions to derivesufficient income from insured patients and high-valueprocedures to offset the costs of uninsured charity care.State charity care payments defray only a portion ofthose costs. While ambulatory care centers undoubtedlymeet a growing market demand and often offer a cost-and quality effective alternative to acute careinstitutions, there are pragmatic as well as ethicallygrounded reasons that argue these centers should sharesome of the charity care burden.



In some localities, the state is now virtually supportingcertain acute care institutions. Close scrutiny andoversight of performance and management are requiredin circumstances where significant public funds arebeing spent. The imposition of these controls, however,is creating something very like virtual public hospitals.This unintended consequence begs the question ofwhether, assuming the prospects of these institutions isunlikely to change, instituting some more formal andexplicit system of public health care ought, in somecases, be examined as an alternative.

Regardless of which recommendations may be selectedfor further study, the Subcommittee strongly urges thatall “stakeholders” be involved from the earliest planningstages through implementation and ongoingmanagement and oversight of initiatives. Only if allparties affected understand the crisis, are assured theirinterests are represented and viewpoints considered, andhave confidence that needed changes and compromisesfurther the common good and not a private or partisanagenda will there be reasonable prospects for success.Private, not-for-profit and public entities can play a vitalrole in the necessary process of public education,discourse and debate.

Much use of the term “stakeholders” is made in thisreport and elsewhere in discussing the healthcaresystem. In the interests of clarity the Subcommitteeoffers its own, non-exclusive list of “essential”stakeholders and potential participants:

New Jersey’s acute care hospitals and health caresystems

Medical Society of New Jersey (MSNJ)The New Jersey Association of Osteopathic Physicians

and Surgeons (NJOAPS)New Jersey Hospitals Association (NJHA)Catholic Health Partnership of New JerseyNew Jersey Council of Teaching Hospitals (NJCTH)State Board of Medical ExaminersNew Jersey State Nurses Association Physicians’ professional associationsPrivate medical insurers and payorsHealth care worker’s unions and associationsPublic Sector payors (Medicaid, Medicare)New Jersey Department of Health and Senior Services

(NJDHSS)New Jersey Department of Banking and Insurance

(NJDOBI)

Issues, Findings and Recommendations

The Subcommittee has selected what, in its view, are themost critical issues for New Jersey’s acute care hospitalsand physicians. While many of the recommendationsmade in this report can be expected to make a significantimpact on financially distressed institutions, they alsohave broad relevance for the relationships among NewJersey’s acute care hospitals, physicians and payors, aswell as the communities they serve.

The relationship among New Jersey’s acute carehospitals and the physicians who provide essential careis complex, and no one factor or solution can beidentified as either the cause or cure for all problems andrisks. Some of the more salient aspects of the situationare mentioned below:

• Hospitals and physicians do not operate on acommon or compatible set of practice-oriented andfinancial concerns with respect to the medicalmanagement of patients and the provision of in-patient services.

• Hospitals have not provided financial details andtransparency on the cost of services or care. It is notsurprising that physicians have little appreciation ofthe cost implications of their care and treatmentdecisions on hospitals.

• Physicians face little accountability for consumptionof hospital resources, consults, length of stay, etc.Over-utilization of medical resources and“defensive medicine” is common practice at manyinstitutions.

• There are no accepted standards of measurement forhospitals and physicians and consequently no meansto compare or evaluate performance, quality,effectiveness and efficiency.

• New Jersey physicians have not, in many instances,been quick to adopt even the most widelyrecognized and accepted evidence-based protocols,guidelines, and best practices.

• There are no financial incentives to coordinate careor assure patients have access to continued care oncethey leave the hospital.

• Economics of small practice groups whichcharacterize the New Jersey market makes broad-based innovation and change more difficult than inmarkets characterized by larger specialty group andmulti-specialty group practices


Appendix 8.6

The Subcommittee on Hospital Physician Relations andPractice Efficiency believes its findings andrecommendations provide insight and guidance for thebetter management of acute care facilities in general andespecially those facing financial challenges.

Payment System

Closer alignment of hospital and physician financialincentives for hospital care almost certainly holdssignificant potential for improving cost efficiency andrationality of health care resource utilization. There areseveral strategies that may be employed to help achievesuch a goal including goal-based incentives,reimbursement systems for physicians based onseverity-adjusted Diagnosis-Related Groups (DRGs) orRelative Value Units (RVUs), or other means of sharinggains in productivity and cost-savings. Detailed studyand evaluation of plans and strategies for improvingalignment of payors1, hospital and physician financialincentives is a key recommendation.

Certain physician practices and behaviors can have asignificant impact on the effectiveness (quality) and theefficiency (resource consumption) of outpatient andinpatient care resulting in waste, inefficiency, delay andunfunded inpatient care. For example, a commercialpayor may deny or downgrade a hospital stay asmedically unjustified, but nonetheless reimburse thephysician responsible for the decision. Medicare payorspay hospitals a fixed rate, but hospitals remain at risk ifa physician is an inefficient user of hospital resources.Presently, hospitals have no effective means available tocorrect, discipline, or exclude outliers and even outrightabusers.

On the other hand, New Jersey physicians receive someof the lowest reimbursement rates in the nation fortreating Medicaid patients, while hospitals are paid atconsiderably higher rates. Such a misalignment ofincentives is regarded as a key reason for lack ofphysician availability in hospitals serving a largeproportion of Medicaid patients.

Better alignment of financial and practice incentivesamong hospital systems, physicians and payors will help

close service gaps, reduce counter-productive attitudes,and encourage more cost-effective practices. Any suchinitiative must take measures to avoid the risk that, asphysicians and hospitals payments are more closelyaligned, patients’ interests may be unduly constrained.For example, patients who, for medical reasons, shouldreceive extended or more intensive care may be facedwith increased or more complex barriers. Safeguardsincluding procedural checks, rights to second opinions,and a swift and straightforward route of review andappeal are essential to assure fairness and protection ofpatient rights as the economic interests of physicians,hospitals and payors are brought into alignment.

Institutional Infrastructure and Support Systems

Hospital infrastructures and support systems are in manycases ill-adapted to present institutional needs, financialrealities and physician practices. Attempts by physiciansand hospital staffs to compensate for these deficienciescan result in practices and behaviors that can weaken theinstitution and diminish the quality of care.

Unlike some hospital resources, sickness, disease andtrauma do not diminish on weekends and holidays. Serviceand coverage reductions on weekends and off-hours impactmore than patient care and convenience. They can result inneedlessly extending hospital stays, may place patients atgreater risk for hospital related complications, and causewaste and delay. New Jersey’s acute care institutionsshould consider the economic feasibility of providing amore comprehensive range of services every day of theweek to ensure timely and effective care, optimize resourceutilization, and control costs.

Physician availability, particularly among certainspecialties and especially in the ED, is a major limitingfactor in improving the overall performance of EDservices and optimizing the use of physical and humanresources on a daily basis. There is a growingdisinclination among some physicians to accepttraditional on-call obligations, an increasing trendtoward limiting care for charity cases to the initial EDencounter, little apparent interest in innovations such asthe increased use of practice extenders, or receptivity toimprovements in practice and practice models.

1 “Payors” as used here refers to public and private third party payers,and excludes self-insured individuals or co-payees.



Reductions in public and private physicianreimbursements, increasing concerns over medicalliability, life-style issues, and increasing numbers ofunder- or uninsured individuals all play some role increating and perpetuating this situation. Physiciansmust become active partners and be convinced of thevalue to themselves and their patients of making practicechanges and working with their institutional partners toachieve desired changes.

Metrics and Reporting

Establishment of standards and measures of quality,outcomes and efficiency for physicians and hospitals isa key to strengthening the acute care system. It is wellestablished that measurement improves performanceamong hospital staff, physicians, and institutions ingeneral. Tracking resource utilization, length-of-stay,end-of-life issues, and performance on key clinicalindicators associated with the most frequently usedDRGs, among other metrics, is a key to raising quality,efficiency and performance.

Lack of confidence in and acceptance of performancecriteria, collection methods, data analysis and reportinghave been major hurdles to agreement on the meaningand interpretation of results, their relevance and validity,identifying problems, and deciding on action steps andsolutions. The logistics, IT resources, expertise andcosts involved in developing establishing andmaintaining state-wide metrics and reporting aresignificant. No one institution can or should bear thiscost. The source of funds to defray expenses andprovide the necessary resources requires serious andcareful consideration. Unless these issues can beresolved, they will mean defeat for any effort toestablish quantitative standards.

The implementation of professionally endorsed,evidence based, and unbiased institutional and physicianmetrics and reporting would be a major step forward inrealizing the benefits of evidence-based medicine on abroad scale in New Jersey. Active engagement of all keystakeholders in the endeavor is essential.

Regional Coordination of Health Care

Regionalization can be an important strategy inachieving a more rational and sustainable health caresystem. Coordination of care on a regional basisinvolves redefining acute care “market areas” within abroadened conceptual framework. Such a frameworkmust take into consideration a range of economic anddemographic factors and an evaluation of the“essentiality” of both institutions and key servicesmodules.

Regionalization is one way hospitals may achieve thegoal of providing a comprehensive range of services onan everyday basis. It is very likely some institutions willfind it impossible to provide all such services in the faceof shortages of key specialists, or simply because it iseconomically unfeasible to do so. In such cases,providing certain services on a regional basis may be thebest workable solution.

The concept of Centers of Excellence is not new in thehealth care field but is one that can be readily adapted toprovide enhanced service and quality, sounder financialmanagement, and improved utilization and efficiency ona regional basis. New Jersey has already made asignificant move in this direction with the establishmentof its Level 1 Trauma Centers. Conditions of a non-emergent nature could be candidates for similarprograms.

The subcommittee is aware this topic is receiving in-depth consideration by other subcommittees advisingthe Commission and is confident their recommendationswill be in accord with its own concerns.

Critical Areas for Structural Reform

Regionalization of health care resources, tort reform,restructuring medical malpractice insurance within NewJersey and consideration of alternatives to traditionalconcepts and patterns for delivering acute care will haveprofound and far-reaching impact in and outside thehealth care system. While specific recommendations forchange and reform in these areas are outside the chargeand scope of this Subcommittee, these issues areregarded as so crucial to the long-term resolution ofNew Jersey’s health care crisis they demands mention


here, even in summary manner. The Subcommittee isconfident these subjects are being thoroughly studied byother subcommittees advising the Commission and thatwell-considered recommendations will be forthcoming.

Regional Coordination of Health Care

Regionalization of scarce health care services offerssome of the most challenging and potentially rewardingopportunities to rationalize New Jersey’s acute caresystem. There is a wide disparity across the state in thescope, quality and availability of acute care services.Acute care facilities in New Jersey vary considerably intheir economic resources, physician and staffavailability, scope of physical plant and in-housecapabilities and services.

Many institutions are essential to their service areas butcannot, for financial or other reasons, provide all neededservices on a sustainable basis. Conversely, there areother institutions with ample physical plant and medicalresources which would benefit from increasedutilization. Nevertheless, they all have an equalresponsibility to deliver a comprehensive spectrum ofcare to all persons, regardless of ability to pay.

Regional coordination will require either regulatory orlegislative action and in any case will not beimmediately attainable. An effective plan ofregionalization must take into account a thoroughassessment of community needs on a local and regionalbasis. Such a plan may need to encompass adding orexpanding essential services where gaps are identified,as well as combining capabilities and eliminating orreducing clinical redundancies. Support will berequired to assist institutions transitioning operationsfrom non-essential to essential services, and relocatingunder-utilized resources and capabilities to more robustinstitutions. Above all, hospitals (and other keystakeholders, such as unions) must be persuaded suchfar-reaching structural changes are in their best long-term institutional and financial interest.

The following points represent some of key issues andconcerns that will arise in considering howregionalization can be realized:

n What is the structure envisaged? Vertical (acute,rehab, LTC, etc.)? Horizontal (new shared serviceentities)? Hybrid?

n Community needs must be balanced againstinstitutional viability and rationality at every point inthe process of regionalization.

n Are physical, intellectual and human resourcesbeing rationalized, re-used, recycled, retooled andrestructured wherever possible?

n Is there a net positive impact on quality care, accessand cost? How does this break down by patients,physicians, communities, payors, and caregivers?

n How well are logistics, transportation, andcommunity needs addressed?

n Does the regionalization plan serve a broad range ofpatient needs efficiently and effectively?

Regionalization should be the initiated on ademonstration or pilot basis, with the involvement andoversight of the Commissioner, Department of Healthand Senior Services. Such an initiative should engageand involve all key stakeholders, including communitygroups, payors, physicians, institutional staff andmanagement and focus on meeting service gaps incritical specialties and redirecting utilization of scarceresources. Hudson County may be especially well-suited for such a demonstration project.

Reformation of Tort Liability Law

There is now a serious lack of key specialties in NewJersey (e.g. obstetrics, neurosurgery, mammographyservices) driven in part by the reputation of New Jersey’scourts as “plaintiff-friendly” and the steep rise inmedical liability insurance rates. Action by thelegislature will undoubtedly be needed if meaningful tortreform is to become a reality in New Jersey.Comprehensive tort reform represents a formidablepolitical and legal challenge but remains one of the keyobjectives for improving the long-term viability andvitality of New Jersey’s health care system.

A crucial objective is ensuring the continued availabilityof essential on-call specialties and reducing the disparityin tort liability between acute care institutions andphysicians providing ED services. This could beaccomplished by raising the tort standard from simplenegligence to gross negligence/willful misconduct for allcare rendered for such services by on-call physicians.

Appendix 8.6



Medical Malpractice Insurance Relief

Increases in medical liability premiums in New Jerseyhave contributed to a crisis in both the availability andaffordability of mandatory medical liability insuranceMoreover, recent court decisions suggest a continuingjudicial bias in favor of plaintiffs, notwithstandingcontractual and other legal barriers. A key long-termobjective should be to ameliorate the burden of medicalliability insurance first on specialists in high riskpractice areas to ensure New Jersey residents continuedaccess and availability to these vital services, and thenmore generally to physicians in all lines of practice.

The state should explore affordable, alternative means ofobtaining insurance at appropriate levels, whilemaintaining the right of injured individuals torecompense for damages. It may also be feasible tocondition such preferred liability coverage to approvedprograms that incorporate compliance with well-validated and widely recognized, evidence-basedstandards of care and treatment.

Comprehensive medical malpractice insurance and tortliability reform must be part of long-term plans torationalize health care resource utilization in NewJersey. Targeted tort reforms aimed at retaining keyacute care specialties and services must at a minimumreceive serious consideration.

n On-call/ER physician servicesn Obstetricsn Neurosurgeryn Critical care and trauma physiciansn Oral/maxillofacial specialists n Primary Care

Alternative Concepts for Delivery of Acute CareServices

For-profit ambulatory care centers are a growingpresence on the health care landscape. Many physicianshave significant financial interests in these centers andoften refer their patients to them in preference tohospitals providing the same services. Procedures doneat these centers are typically high value, and even if not

“cherry-picked,” divert an important revenue streamaway from acute care hospitals. If New Jersey is to havea unified system of care, these centers should berequired to shoulder some portion of the burden ofcharity and uncompensated care which now fallsentirely on the hospitals and the physicians providingthat care.

In other markets, the payer mix, demographics, access,and population density may be insufficient to sustain thenecessary level of care and services, even with the bestmanagement, processes and oversight available. Somehospitals in these areas seem chronically resistant tochange, have persistent issues of fiscal crisis andmismanagement, and suffer from consistently sub-standard quality and patterns of misuse and abuse.

Regionalization, service initiatives, programs andmandates may not be enough to address the problemsthese hospitals face. While these same institutions areoften vital and “essential” to the communities theyserve, they may only continue to operate with massivelong-term financial support from the state.

The necessity for oversight and accountability for publicfunds is creating in some of the most severely stressedinstitutions something approaching a de facto publichospital status. In view of this, it may be prudent toconsider a broader range of options, including but notlimited to the creation of a formal public hospitaldesignation or perhaps a state-funded public hospitalscorporation with the mandated requirements ofperformance, transparency and accountability.Obviously, such a step is not to be undertaken lightly,but it should be borne in mind that such systems canwork and in fact have long records of meeting vitalpublic health needs.


Recommendations

1. Alignment of Hospital and Physician FinancialIncentives

Issue

Structural misalignment among payors, individualproviders and institutions, and inadequatereimbursement invites abuse and rewards medicallyirrational and counter-productive decisions. Inefficientpatterns of practice, misuse of scarce resources, denialsor delays in coverage or payment, unduly burdensomepre-certification processes, and panels with too fewparticipants may serve short-term financial interests, buthave lasting adverse effects on physicians’ willingnessto provide care, institutional strength and patient healthand well-being.

Acute care institutions are often caught betweenconflicting demands for service by physicians andcoverage decisions by payors. The absence of acoherent framework of incentives for providing andcompensating cost-effective medicine and care is at theroot of the problem.

Discussion

Admissions and discharges are typically driven byphysician decisions. However, where such decisions donot meet reimbursement criteria for medical necessity orlevel of services, it is irrational and inimical toinstitutional financial health for payors to denyreimbursement to the hospital while continuing tocompensate for physician services.

There are also instances where a payor may cover an EDvisit, but deny payment for physician services. Forexample, it is common for a payor to require referral toan “in-network” provider for a patient stabilized in theED service. But if a patient cannot locate such aspecialist promptly, and requires subsequent follow-upin the ED, coverage may well be denied for the treatingphysician’s services.

Misuse and overuse of consultants is a significantproblem in many institutions. Presently, hospitals havelittle or no control over this aspect of physician practicewhich can lead to sharply increased expenses without animprovement in patient care. Beyond instances of

outright abuse, there is a large opportunity to improvepractice and reduce costs by eliminating unnecessaryand extended consults.

Examples of irrational decisions and counter-productiveresults could be multiplied, but the lesson to be drawn isthe same. Payment and coverage decision-making isdeeply and often critically disconnected from care-giving and medical decision-making, often to thedetriment of patients and providers. While payordecisions are clearly a major factor, it is a dangerousoversimplification to place the blame entirely oninsurers, or for that matter, any other single player orstakeholder group. New paradigms of care, payment,accountability, and patient involvement andresponsibility are clearly needed.

If a medical or treatment decision, admission, continuedstay or discharge is not medically necessary, both theinstitution and physician should bear similar financialand legal consequences. Both the physician and thehospital should be at risk for non-payment if a medicallyinappropriate decision (i.e. one not supported by anagreed treatment algorithm) is made, and conversely beequally exposed to (or protected from) litigation for theconsequences. Institutions, physicians and patients alikeshould have ready access to review and revision if suchany decision results, or is likely to result, in patientharm. This would stimulate better working relationsamong physicians, the hospital, physician advisors andcase managers to improve overall efficiency inoperations and rational utilization of resources, whileassured patients rights are maintained, protected anddefended.

However, not every medical decision translates readilyinto increased or decreased costs or impacts length ofstay, nor can desired change in all cases be achieved byplacing pressure on the primary care physician. Forexample, if a treatment or test is postponed because aservice is closed or a specialist unavailable, it is bothunfair and ineffective to penalize the primary carephysician for the delay. Thus, an across-the-boardsystem of rewards and correction cannot be applied to allphysician decisions that may result in additional in-patient days.

One solution to avoidable delays and extensions of staysmay lie in achieving seven-day per week operations as

Appendix 8.6



discussed elsewhere. Another approach may involveinnovative ideas regarding compensation of physiciansfor in-patient care that increase alignment of financialincentive among physicians, hospitals and payors.

Alignment-oriented payment schemes that providephysicians appropriate incentives for cost-efficient casemanagement through case-rates or severity-adjustedpayments but that do not unduly impose penalties forunavoidable or unintended consequences should bethoroughly examined. This is an area requiring carefulstudy of alternatives and demonstration projects beforewidespread implementation can confidently berecommended.

Physician education is a key to rationalizing proper useof consultants. The process should begin in medicalschools and continue through training programs andCME. Demonstrating that cost-effective medicine has apositive financial impact and that over-utilizationneither improves outcomes nor reduces lawsuits is anavailable strategy that may reduce the use of non-essential consults.

Public payors and private insurers must adopt uniformstandards of review and consequences so physicians andhospitals can make consistent and rational decisionswithout regard to the source of payment.

Benefits and Risks:

• Educate and incent physicians to practice cost-effective medicine, reward physicians based onsystem cost savings, and eliminate or reduceincentives to over-utilize resources and continuedefensive medicine tactics.

• Rationalize the appropriate use of consultants andconsulting practices through physician and medicalstudent education.

• Align financial interests and liability exposure forhospitals and physicians to improve physicianaccountability for appropriate use of hospitalresources.

• Establish uniform hospital and physician paymentcriteria for all payors (public and private sector.)

• Alignment-oriented payment systems must notactually or apparently improperly incentivizehospitals, physicians or payors to withhold, curtail,or deny medically necessary care.

Recommendation

• Establish, enable or support the implementation ofalignment-oriented payment models or systems foracute hospital care that financially impact, engageand involve physicians.

- Funding for the incentives required to implementsuch a system must come from savingsgenerated within the present scope of paymentsand reimbursements.

- Payor fees schedules should be completely andpublicly disclosed.

- Safeguards must be built-in to protect patientrights to all medically necessary care andprovide percentage-based payment for out ofnetwork services.

- A carefully designed, geographically limited andclosely monitored pilot or demonstration projectwould be a prudent first step.

2. Physician Accountability and Evidence-BasedPractice in Acute Care Institutions.

Issue

The value of evidence-based medicine standards is well-recognized for producing improved case management,better patient outcomes and cost-efficiencies in the acutecare setting. This is especially true for some of the mostcommon and costly diagnoses where such standardshave been extensively researched and promulgated.

Even where such standards are widely recognized,however, New Jersey hospitals and physicians havemade little progress in agreeing how to implement them,measure results, or how to reward, induce or coercecompliance. This has made it nearly impossible toassess the level of practice, identify leaders and outliersand implement any system of evidence-based rewardsand corrective action within a given institution.

Discussion

Though hospitals have a vital interest in physicianspracticing the most cost-effective medicine, their abilityto induce such behaviors is limited. Collection anddissemination of information on physician performance,whether available to the public at large or a more limited


peer group can promote physician accountability andadherence to evidence based practice guidelines.

Many physicians regard such measures with suspicionas unwarranted intrusions into their professionalprerogatives. Some find the mere suggestion ofstandards and the threat of publicity offensive, if notthreatening, and move business to less aggressivelymanaged hospitals. Unless the effort is based regionallyor state-wide, attempts to use metrics and peer-pressurewill put all but the strongest institutions at increasedcompetitive disadvantage and potential financial risk.

Physician report cards can work only if they aredesigned so that the information is valued and used bythe physicians themselves. Standards of measurementmust be widely accepted and validated if ratings andrankings have the desired effect of motivating andmodulating behavior in positive directions.Implementation of such tools demands a cooperativeand collaborative effort, as well as agreement on sharedgoals and outcomes.

Many insurers have access to demographic and clinicaldata that can be used to produce performance metrics atthe physician and patient level. New Jersey insurorsshould be strongly urged to cooperate in developingstandardized quality performance reports for NewJersey similar to those developed in New York(MetroPlus) and Minnesota (HealthPartners). Suchreports could represent an important component of anacute care report card initiative.

Benefits and Risks

• Broad participation in standards developmentencourages buy-in and reduces bias concerns.

• Regional implementation of physician report cardslevels the playing field for weak and stronginstitutions and encourages best practices,especially in key specialties.

• Implementation may disadvantage institutionsdependent on marginal providers and possiblydivert business elsewhere.

Recommendation

• A properly validated, well-accepted, independentlycomplied, and publicly available physician reportcard system that measures performance and

outcomes on critical, evidence-based standards ofacute care practice should be developed andimplemented on a regional or state-wide basis.

- Priority and focus should be first placed on keyspecialties and high-cost, high-risk conditionsand diagnoses.

- Insurors, MSNJ, NJHA and other state-wideorganizations should participate in the study,research and validation required for this effort.

3. Coordinating the Continuum of Care

Issue

New Jersey’s health care system does not adequatelyensure the management of a patient from admissionthrough in-patient treatment to discharge and follow-uptreatment and services. Lack of organizationalstructures and financial incentives for such a continuumof care adversely affects medical outcomes and increasesthe total cost of medical care. Discontinued care or lackof follow-up can result in a readmission which mighthave been avoided by a more timely intervention.

The problem is made worse by the practice of somephysicians who restrict their engagement with charitycare patients to a single ED encounter, limit the range ofservices they are willing to perform, or fail to managethe clinical condition to conclusion. Reimbursement andliability concerns are likely drivers, but fall short ofexcuses, for such behaviors, which in extreme cases canamount to the virtual “abandonment” of the patient. Thisincreases clinical costs, creates liability exposure, mayplace patients at increased risk and degrades health carequality.

Discussion

There are at least three key components to establishing acontinuum of care that are within the existingcapabilities of New Jersey’s acute care facilities.Hospitals can establish guidelines to assure patients areadmitted to the most medically appropriate service,insist ED physicians manage patients to an appropriatepoint of transfer, and ensure discharge proceduresprovide for appropriate follow-up, after-care, oroutpatient services.

Hospitals traditionally do not question admission to aprimary care provider’s service or make an independent

Appendix 8.6



determination whether another service or specialist carewould be more appropriate and efficient. However,procedures that ensure patients are admitted to theappropriate service will increase their likelihood ofreceiving well-managed treatment from the onset of carethrough discharge or transfer. Consultation and/orrecruitment of other providers should be coordinated bythe appropriate admitting physician. In situations wherehospitals lack needed specialty resources, regionalrelationships could fill the gap.

Hospital policies must clarify the scope of physicianresponsibility for all ED cases, and articulateunambiguous professional, ethical and legal standards toensure patients receiving treatment in the ED service aremanaged through to clinical resolution and appropriatelystabilized, discharged or transferred. Strongerinducements, including legislative mandates may benecessary if such encouragements prove insufficient.

Utilization of appropriate post-discharge care can meanbetter outcomes, more compassionate care, and greatercost-efficiency. This may include local or regionalaccess to long term ventilation units, vent/dialysis units,long-term acute care facilities (aka LTACs), nursinghomes, and hospice care. Discharge procedures shouldencourage such choices and efforts should be made toreduce or eliminate any financial barriers that mayinhibit considering such alternatives.

Managing the continuum of care for the highest costdiagnoses (DRGs) may offer the best opportunity forrealizing a measurable benefit from a coordinatedapproach. CHF (congestive heart failure) is a goodexample, representing one of the most common andcostliest DRGs. Coordination of in-patient care andoutpatient support through specialists, anticoagulationand/or CHF clinics is likely to prove a readily available,cost-effective strategy.

In all cases, incentives or other forms of encouragementare needed to achieve better management of patientsthroughout the continuum of care.

Benefits and Risks

• Ensure optimal management of all patients fromadmission to post-discharge treatment to conservesthe benefit of treatment, reduce readmission rates,and forestall clinical deterioration.

• Ensure involvement of the appropriate specialistfrom admission through discharge or transfer.

• Restructuring significant aspects of the physician-patient relationship and ED practice patterns willrequire engagement and commitment by seniormanagement and institutional governance.

Recommendation:

• Encourage coordinated care through a system ofappropriate incentives and standards for achievingmeasurable results, that will at a minimum:

- Assure patients are admitted to the mostmedically appropriate service

- Require ED physicians to manage patients to anappropriate point of transfer, and

- Establish discharge procedures that provide forappropriate follow-up after-care or outpatientservices.

• Study and development of specific guidelines forimplementing coordinated care on an individualinstitutional basis is a likely necessity and stronglyurged.

4. Transparency & Accountability for Acute CareResource Utilization Costs

Issue

Imperfect or non-existent knowledge of the cost of careand resources inhibits physicians and consumers frommaking informed, rational choices, decreases trust andconfidence and disables accountability for decisions.

Discussion

The cost of hospitalization and associated resourceutilization is not widely appreciated by treatingphysicians, much less by the public at large. Withoutsuch information, physicians and patients may makeunwarranted or inappropriate demands for non-essentialservices, over-use or misuse hospital resources, and failto appreciate justified denials or consider alternatives tosuch services. These factors tend to raise the overalllevel of dissatisfaction in and distrust of many aspects ofthe health care system.

Greater financial transparency would increasecomprehension of the financial impact of treatment


decisions and make creation and adoption of quality andcost performance expectations for physicians rationaland equitable.

Benefits and Risks

• Financial transparency engages physicians inresource utilization decisions

• Removes elements of uncertainty contributing tosuspicion and distrust

• Empowers consumer-directed health care choices.• May threaten marginal institutions dependent on

higher cost services to offset uncompensated care.

Recommendation

• Increase institutional transparency for acute carecosts, utilization and care alternatives to enable costand treatment-effective decisions.

- Hospitals should explore ways of publishing andcommunicating accurate, relevant and timelyinformation on the cost of care, resourceutilization and alternatives to inform and helpguide physician decision toward the most costand treatment-effective choices.

5. 365 day Optimization of Hospital Resources

Issue

Hospitals maintain emergency department and otheressential services at all hours of the day or night,providing vital and life-saving resources to theircommunities. However, hospital staffs and ancillary in-patient services are reduced or limited on weekends andoff-hours which, while saving money, can meanimportant diagnostic tests or treatments must bedelayed, sometimes for days.

Consequences of this may include medicallyunnecessary stays, patient inconvenience and exposureto infection risk, and associated waste, delay and cost.While some service capabilities should undoubtedly beprovided on a 365-day basis, it is unclear whether and towhat extent non-essential services would be cost-justified if available on a similar basis.

Discussion

Optimizing hospital resource utilization throughout theyear is not formulaic and will require study, tailoredrecommendations and well-managed implementation foreach institution’s unique situation. The importance androle of institutional governance in such an endeavorcannot be too strongly emphasized.

While it may not be possible for a hospital to provideevery service at all hours throughout the day, there areidentifiable aspects of effective coverage that allhospitals can and should maintain every day throughoutthe year. These include the implementation of speciallytrained coverage for ICU units, physician extenders andactions to address any deficits in on-call coverage.

Benefits and Risks

• Enhanced patient care, improved outcomes.• Incremental implementation can start with highest

cost units.• Spread work load to normally less productive hours.• Reduce unjustified (and unreimbursed) LOS

Recommendation

• Hospitals management should be encouraged todefine and adopt standards of operation for anexpanded range of services that optimize utilizationof physical plant and human resources on a 365 daybasis.

- Where essential in-house resources orspecialized services are unavailable or not cost-justified, management should seek to formand/or par ticipate in regional networks toaddress the identified deficiencies.

- Hospitals should invest in and incent programssuch as Intensivist and physician extenderprograms that are proven to have a measurableimpact on cost-savings, resource optimization,efficiency and effective patient care.

• Funding of such programs must be internally cost-justified. The State should provide assistance indeveloping economic and business modeling forfinancially distressed hospitals.

Appendix 8.6



6. Standardization of Emergency Department ServiceCall Requirements

Issue

New Jersey is one of the few states in the Union that hasforegone creation of public hospitals in favor of a state-mandated requirement that all acute care hospitalsprovide medical care to all persons regardless of abilityto pay – the so-called “Charity Care” system. As apractical matter, this often means the EmergencyDepartment must provide an extensive range ofcomprehensive care and services.

In addition, the Emergency Medical Treatment andActive Labor Act (EMTALA), also known as the patientanti-dumping law, encompasses emergency care in theED (including on-call specialists as required), OB carefor women in labor, and psychiatric emergencies. Thelaw provides for an appropriate medical screeningexamination for any person requesting examination ortreatment for a medical condition at an emergencydepartment. It is the hospital’s obligation to determineif there is an emergency medical condition and if so, tostabilize the patient or arrange transfer him to anotherappropriate facility.

Many hospitals can no longer enforce EmergencyDepartment (ED) service call obligations on physicians,and in a growing trend, must pay significant fees tophysicians in order to secure urgently needed andessential coverage. While this may not be a burden tosome institutions, it is undoubtedly problematic forothers.

In some cases, the lack of ED on-call physicians meanspatients have limited access to needed medical care andlack of appropriate follow-up or continuity. Change isneeded to ensure all acute care institutions have theaccess to critical specialty physicians needed to fulfilltheir obligations.

Discussion

Physicians (specialty physicians in particular) areincreasingly disinclined to accept on-call obligations,resulting in strains on access and availability of keymedical services to the particularly vulnerablepopulations for whom the ED may represent the onlymeans of access to the health care system. "On-call"

physicians are (unlike hospitals and their employees)fully exposed to tort liability and risk not beingcompensated for treating the uninsured (unless, as isincreasingly the case, the hospital has contracted them todo so.)

Historically, ED service obligations were more or lessexpected from physicians in consideration of attendingprivileges. A return to the former “soft” system ofobligation is not anticipated. One option is a mandatoryon-call requirement for all physicians. However,making on-call service “mandatory” for all physiciansvia regulation, legislation or hospital policy raisesdifficult questions of equity, bargaining power, legalityand enforcement.

Fines and licensure actions seem too extreme, whilesuspension or curtailment of privileges is not a realisticoption for many institutions. Moreover, the institutionallandscape is not uniform. Requiring obligatory on-callservice would be far less burdensome on physicians insuburban hospitals due to the relatively small number ofcharity care and Medicaid cases. Urban hospitals, incontrast, would face difficulty recruiting and retainingphysicians who could expect to shoulder a substantialburden of uncompensated care. (There is also awidespread but largely anecdotal perception that charitycare patients pose a higher medical liability risk thanother patients.)

Paying for on-call services is a poor but in some casesnecessary strategy, inasmuch as hospitals are mandatedto provide certain services under EMTALA. Wheresuch arrangements provide for flat fees only and do notpay for each episode of care, there is a built-in biastoward under-delivery and over-payment. Moreover,flat fees are paid independent of any reimbursement orother compensation a physician might receive. A bettersystem might tie payments to services actually renderedon some equitable pre-determined basis.

Initiatives considered elsewhere in this report andperhaps by other subcommittees may provide a partialsolution. Establishment of and participation in acomprehensive system of regionalized care or Centers ofExcellence and expedited transfers may provide amedically responsible and financially sustainable meansmeeting public expectations of the ED service, as well asthe legal demands of Charity Care and EMTALA


mandates. The widespread use of such centers has thepotential to change the current paradigm of ED care andalter the traditional pattern of reliance on on-callservices.

The crisis in on-call service is exacerbated by theproblems and risks, real or perceived, of providing carein the ED setting. The issues of compensation andliability for providing such services need to beaddressed to ensure adequate and consistent on-callcoverage and continuity of care.

Benefits and Risks

• Increasing on-call service will reduce servicebottlenecks and disparities in care for under-servedpopulations.

• Increasing the trend toward payment for “on-call”status is a poor solution that places additional strainon institutional finances.

• Mandating on-call obligations is a controversial andpotentially divisive concept that poses majorobstacle to implementation, may adversely impactcare, and perhaps reduce availability and access.

• Compensation for on-call services is a betterapproach in principle but presents unresolved issuesof funding.

• Regionalization could reduce the need for eachinstitution to have access a wide range of on-callspecialties.

Recommendations:

• Physician obligations and expectations with respectto ED service should be standardized (or at leastrationalized) regionally or even state-wide to ensureadequate medical coverage and fulfillment ofstatutory mandates. However, there is lack ofconsensus on the means to accomplish this end.Several ideas have been proposed:

- Mandatory (via statute or regulation) call andcontinuity of care obligations for all physiciansat all facilities.

- Increased incentives for Medicaid and uninsuredcases, compensation for taking call in urbanareas, and perhaps malpractice premium relief.

- Compensation for EMTALA-related services onan episode-of-care basis rather on a flat feebasis.

- Regional Coordination and Centers of Excellenceshould be examined in light of their impact ondemand for on-call services.

- Lifetime or age cap for on-call service hours.

7. Intensivist Model for ICUS

Issue

Intensive Care Units provide patients with life-sustaining medical and nursing care on a 24 hour basisbut are not typically staffed with specially trainedpersonnel. Typically, ICU patients are among thesickest, highest risk and most expensive cases in thehospital.

Discussion

Quality of care and cost-effective treatment in the ICUsetting are maximized when they are provided by trainedstaff whose only responsibility is the care of patients inthe unit. Such “Intensivist” programs, when properlyexecuted are recognized as cost-savings measures thatalso improves the quality of patient care.

A minimum requirement for such a program wouldprovide service on a 365 day basis for at least eight hoursper day, preferably during hours of greatest risk and/orlimited coverage. In some institutions, telemedicine andremote centers can be a highly effective and cost-efficient means to implement intensivist capabilities inwhole or in part. An “Intensivist Model” of ICU careand case management provides multiple benefits.

Benefits and Risks

• Better utilization of resources and ICU beds,organizational throughput and lower LOS,

• Better adherence to practice guidelines and bestpractices and coordination of care in complex cases

• Better patient outcomes, lower mortality rates,potentially higher patient and family satisfaction,more effective treatment of end-of-life issues,improved organ donation efforts.

Recommendation:

• Adoption or implementation of an Intensivist Modelof ICU Care should be a priority for acute carehospitals statewide and especially financiallydistressed institutions.

Appendix 8.6



- Hospitals should be encouraged, rewardedand/or recognized for implementing intensivistprograms and capabilities.

- The State or other organizations should enableand assist program development whereverpossible.

8. Leverage Professional Resources

Issue

Physician availability is a critical factor that impacts ahospital’s ability to respond effectively to patient needand efficiently utilize its resources. Reduced services,staffs and coverage on week-end and holidays, declinesin on-call physician availability and shortages of keymedical specialties can limit access and availability.

Even where physicians are available to provide in-patient coverage, the pressure to maximize the use oftheir professional hours is often extreme, reducing theamount of time available to each case and each situationdemanding their attention. These factors contribute toservice bottlenecks and inefficiencies, and may result inadded costs and increased risk.

Discussion

While there is no short-term means for increasing thesupply of specialty physicians in under-served localitiesin New Jersey, there are other strategies for leveragingscarce physician resources in the acute care setting thatpotentially offer economic and quality improvements.

In many situations, “practice extenders”, such asIntensivists, case managers, hospitalists, physicianassistants and advance practice nurses have the potentialto provide cost-effective means of achieving quality andefficiency goals in appropriate circumstances.Advanced practice nurses, for example haveindependent practitioner (IP) status which enables themto be independently compensated. Recognition of andcompensation for the services of other practiceextenders, such as Physicians' Assistants (“PAs”), wouldexpand their use, helping to realize more effective andcost-efficient resource utilization.

According a class of practice extenders such asPhysicians' Assistants IP status might facilitate this, andcould allow greater flexibility in matters such as getting

orders co-signed within narrow time constraints. On theother hand, this may raise new issues of practiceautonomy, training and expertise, and liability. It is alsonot clear whether and under what circumstancesPhysicians' Assistants themselves might desire or acceptindependent status. Any such change will requirefurther study and should not distract attention from theneed to expand their utilization through recognition ofand compensation for the value added.

Other capabilities such as telemedicine services could, ifappropriately compensated, help multiply the effectivereach of vital physician services. Financial incentives orsupport from the state or other organizations may berequired to overcome cost barriers to acquiring the ITinfrastructure needed for telemedicine and remotemonitoring.

Extensive implementation of leveraging strategies willimpact and alter the practice model of individualphysicians in important and perhaps radical ways.Institutional priorities must reflect and embody thecommitment of the governing board and seniormanagement to the needed change and establish cleargoals. Practice leaders, staff and employeerepresentatives must be brought into and “buy into” theprocess.

Benefits and Risks

• Reimbursement for the services practice extendersmore generally would expand their use and enablemore cost-effective leverage of scarce physicianresources.

• Patients will receive a net increase in care, hospitalswill gain greater coverage at reduced cost, andphysicians can make better and more profitable useof billable time.

• Various combinations and patterns of practiceextenders, intensivists, case managers, hospitalists,advance practice nurses, remote and telemedicinecapabilities can be combined to augment thedelivery of care and expand physicians’ availability.

• Solutions can and should be tailored to meet theneeds and capabilities of each individual particularinstitution and health care system.

• Initiatives in this area must be undertaken andendorsed at the highest levels of hospitalgovernance in cooperation with payors, physicians


and representatives of the various groups of practiceextenders to succeed.

• Hospitals (and especially financially stressedinstitutions) may need guidance to make cost-effective selections among the wide range ofavailable options.

Recommendation

• Hospital management should explore and expandthe use of practice extenders and other options forleveraging, extending and augmenting theprofessional presence and expertise of physicians.

- Provide enhanced compensation for the use ofselected practice extenders, such as PhysicianAssistants, even if not separately compensatedas “Independent Practitioners”.

- Hospitals should work closely and cooperativelywith its physicians and regional hospitals tooptimize the benefit of such efforts for patients,doctors and the institution itself.

- The State should assist financially-distressedinstitutions in identifying qualified consultantsand solution providers who can help define andimplement such initiatives.

9. Exploit Existing Electronic Capabilities and IT

Issue

Electronic data, communication and informationtechnologies continue to evolve and proliferate throughthe economy and society, but so far these tools areunderutilized by the healthcare system. There aresignificant efforts already underway, notably NJHA’sefforts to enable a Regional Health InformationOrganization (RHIO) in New Jersey which promise todramatically improve connectivity and communicationamong physician, hospital facilities and staff. Theseefforts require long-term commitment, substantialinvestment, support and encouragement. Nonetheless, itmay be possible to realize more modest gains sooner,and with much less effort and cost.

Discussion

There are many ways to make use of advances ininformation technology that are far less complicated andmore readily attainable than the widespreadimplementation of electronic medical records or thecreation of broad-based health information complexes.

The web is an existing resource that could dramaticallyenhance the relationship and communication betweenphysicians and hospital staff without majorreengineering or capital investment. Existing hospital ITsystems could be used to provide physicians’ officeswith the ability to remotely monitor hospital patients toachieve more timely, quality- and cost-effective decisionon interventions, treatment, discharge or otherdispositions.

On-line information, consultation and referenceresources for physicians and hospital staff are withinreach of existing technology and could be implementedat comparatively low cost. Electronic sharing ofinformation, case histories, and best practices could be acost effective means of education and promoting bettermedical and cost-efficient management. Intranetmessaging may prove a useful and readily accessiblemeans of communication as it has in other contexts.

The discharge and transfer process could be betterhandled through electronic means and as discussedelsewhere, may help ensure continuity of care.Electronic means could be used to obtain real or near-time information on discharge and intermediate careoptions, hospice, palliative care, rehab, LTC, etc., toshorten discharge time. The state might be able to offerassistance in locating consultants and solution providers.

Finally, institutions, payors and other stakeholders,perhaps pharmaceutical firms or insurers might be find itin their interest to support aspects of the effort toimprove connectivity and communication among targetgroups of practitioners and selected institutions, even ona limited basis.

Benefits

• Improve physician-hospital communications toincrease efficiency and productivity.

• Near or real-time remote access to patient recordscan improve accuracy and timeliness of clinicaldecisions.

• Distance learning technologies can enhance accessto reference resources, learning and enableinformation exchange.

• Private sector support and/or funding are worthexploring.

Appendix 8.6



• Legal and regulatory issues (HIPAA, Stark, IRS,etc.) must be considered and addressed.

Recommendations:

• Utilize existing hospital IT systems and standardweb access to provide physicians remote, real-timeaccess to clinical monitoring and/or data.

- Institutional and text messaging, physician homepage, etc could be an integral part of such asystem

• Establish on-line practice resources and institutionalphysician information

- Medical references, research, journals and otherlibrary services

- Institutional and/or healthcare system-specificinformation on resources, treatment protocols,best practices and other informational bulletinsand updates.

- State IT and library resources may be availableto help pool resources and reduce subscriptioncosts.

• Explore feasibility of using on-line dischargeinformation systems or providers to shortendischarge wait times and improve patient placement.

10. New Jersey Health Care Data Warehouse

Issue

Quantitative comparative measures of hospitalperformance do not exist in New Jersey. Disagreementover whom and what to measure delays or preventsneeded action, and can have but one outcome for afailing institution. Beyond agreement on the tools andcriteria, there must be confidence in the impartiality andobjectivity of the process.

Discussion

A vital task of the Commission is to help determine theviability of hospitals that are currently operating“marginally,” and recommend incentives forimprovement. The availability of reference standardsand measures of performance would inform and benefitall acute care institutions, but is an absolute necessity forthe effective management of hospitals in crisis.

The mechanics of such a system – the data collectioninstruments and evaluation algorithms and criteria - canbe developed on a regional or state-wide basis, drawingfrom good practices, experience and evidence-basedguidelines and use quality assurance experts, trainedstatisticians and data base development experts asneeded. Data on patient outcomes and institutionalperformance would be submitted by New Jersey’s acutecare hospitals to a central data repository or warehouse.

It is essential that all stakeholders be involved in theprocess of developing metrics and the methodology ofcollection, collation and dissemination of theinformation. The end product should be acomprehensive hospital patient health care andoutcomes data set, collectively designed andindependently maintained, to serve as a publiclyavailable reference standard.

Such a system may well be implemented as a spin-off ofthe RHIO initiative mentioned above. However, as thedata warehouse concept could be implemented at anearlier date and with less expense. It might also beutilized as a precursor to the more ambitious datacollection aims of the RHIO project.

Benefits and Risks• Increase transparency and metrics for New Jersey’s

acute care hospitals and health care system• Wide availability to all payors, healthcare plans,

institutions and physicians will encourage broadlyaccepted metrics and performance standards.

• Serve as the mandatory standard of reference for allinstitutions requesting or requiring extraordinary(beyond currently authorized Charity Care) statefinancial assistance for their operations.

• May impose extra costs on institutions, competewith or made superfluous by other public or privateefforts.

Related initiatives that may further such a project:

New Jersey Hospital Management Data Network

New Jersey acute care hospitals do not presentlyhave the means for real-time exchange of non-proprietary, non-confidential data. Like many


institutions in the state, hospitals tend to be localand relatively isolated, with limited interaction withpeer institutions.

- A hospital management data network, createdby the hospital associations and memberinstitutions, could provide managers of acutecare institutions non-confidential information tobetter assess their performance and progresscompared with their peers.

Uniform Data Standards and Formats

Uniform data standards and formats would enablemuch improved oversight, data and best-practicessharing, as well as transparency, measurement andaccountability among New Jersey’s acute careinstitutions.

- Standard for forms and data capture and entryshould be created and promulgatedimplemented by all hospitals. Immediatecandidates for standardization include a uniformclinical data reporting sheet and a new,customized New Jersey UB Type 04 medicalclaim form.

Recommendations

• Consideration should be given to establishing aNew Jersey Health Care Data Warehouse containingoutcomes and performance data from a widespectrum of participating acute care institutions.

- New Jersey should assist all acute careinstitutions in identifying consultants andsolution providers to develop the required IT andMIS resources.

- Standardization (or at a minimum, agreed waysof normalizing) of admission, char ting,treatment and discharge procedures should bedeveloped to allow comparative assessments ofperformance.

- Contributors must include the Medical Society ofNew Jersey, the hospital associations, healthcare insurers, public payors, appropriateprofessional societies and the final product mustbear their unanimous endorsement.

- The state should explore options to host, supportand maintain the database, to assure compliancewith HIPAA and other applicable laws andregulations, and provide neutrality.

- Funding options should be explored, includinggrants, user fees, subscriptions or subsidies forfinancially distressed institutions.

Conclusion

The crisis in acute care facing many communities andinstitutions in New Jersey is profoundly affected by therelationship between the hospitals that provide access toservices and the physicians who provide the care. Whilethese stakeholders share many interests and goals indelivering effective and high quality medical care, in toomany instances financial pressures, structuralinefficiencies, imperfect information and irrationalpatterns of traditional practice, resource allocation anduse defeat or deflect the achievement of these ends.The recommendations provided in this report ifimplemented in whole or in part, can be part of theanswer to rescuing New Jersey’s most at-riskinstitutions, bringing quality care to underservedcommunities, and raising the level of health careavailable to all persons seeking it within the state.

Appendix 8.6

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