News Release

PO 360
Trenton, NJ 08625-0360
Christine Grant
Commissioner
For Release:
November 9, 1999
For Further Information Contact:
Rita Manno
(609) 984-7160
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Advisory Commission on Hospitals

TRENTON -- Faced with a dramatic and steady decline in the finances of New Jersey hospitals, the Advisory Commission on Hospitals has come up with draft recommendations to help steady the future of hospitals and maintain the quality of health care services provided to the public.

The 33-member commission, which was created at the direction of Governor Christie Whitman, has been meeting since April. Commissioner Christine Grant, who chaired the commission, received the draft report after the final meeting this morning. She will review the recommendations before presenting the report to the Governor.

The commission recognized that all parties -- hospital management, boards of trustees, physicians and other health care professionals, state officials, payers, managed care companies and the general public -- share responsibility in understanding the changing financial dynamics of the marketplace and promoting changes that can help hospitals survive and maintain viability.

"No one party can be the sole agent of change," said Commissioner Grant. "Everyone needs to assume responsibility. And no single approach will lift the industry out of this downturn."

"The general public, boards and local officials need to educate themselves about the current financial situation and be open-minded about the evolving mix of healthcare services needed today," she added.

There are many factors that contribute to the financial problems in New Jersey hospitals including empty beds (In 1998, 45 percent of 30,000 licensed acute care beds were unoccupied), growth of ambulatory services, reduced admissions due to new medicines, widespread penetration of managed care, persistent longer lengths of stay, reduced federal Medicare payments and a growing number of uninsured patients.

The commission also recognized that in some instances boards of trustees, hospital management and physicians were resistant to change, did not fully understand the gravity of the financial situation or act on critical issues such as reducing the lengths of stay. Analysis of length of stay in New Jersey hospitals shows the average length of stay for Medicare patients is 1.5 days higher than the national average. Hospitals receive no additional revenue for the longer stays under the federal fixed rate. Some of the recommendations in the draft report are:

In studying the financial situation of hospitals, the commission heard numerous presentations and relied on three financial reports by PricewaterhouseCoopers, the New Jersey Hospital Association and the New Jersey Hospital Alliance.

According to the PWC report, profit margins for hospitals dropped from 4.40 percent in 1995 to 1.76 percent in 1997 to .55 percent in 1998. In 1997, 26 out of 84 acute care hospitals reported net losses from operations. The number increased to 42 in 1998.

Commission members represented interests such as hospitals, HMOs, nurses, physicians, cabinet commissioners, labor, business and consumers. A full list of members (PDF) is attached.

"This group performed remarkably in dealing with many contentious issues. It's one of the hardest working, focused groups we=ve ever convened," said Commissioner Grant.

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