Northern New Jersey Health Care Market Reflects Urban-Suburban Contrasts

Hospital Closures Reduce Overcapacity; Shore Up Remaining Hospitals' Financing

News Release
Dec. 23, 2010

FURTHER INFORMATION, CONTACT:
Alwyn Cassil (202) 264-3484 or acassil@hschange.org

WASHINGTON , DC—Northern New Jersey is a community of contrasts with affluent suburbs and financially strong health care providers juxtaposed against the fragile health care safety net of impoverished inner-city Newark, according to a new Community Report released today by the Center for Studying Health System Change (HSC).

The major hospital systems in the market are Saint Barnabas Health Care System and Atlantic Health System, which together represent approximately 40 percent of inpatient admissions. The University Hospital in Newark, the major teaching hospital of the University of Medicine and Dentistry of New Jersey, is the main safety net hospital.

The number of hospitals in the market—and the state more broadly—has declined in recent years. A 2008 report from the Governor’s Commission on Rationalizing Health Care Resources drew attention to an oversupply of hospital beds statewide and suggested that the patient loads of some struggling hospitals could be absorbed by other hospitals. Seven hospitals in the northern New Jersey market have closed for financial reasons in the last 10 years.

“The reduction in hospital capacity has shifted insured patients to the remaining hospitals, helping to stabilize their finances” said HSC President Paul B. Ginsburg, Ph.D.

In May 2010, HSC researchers visited the northern New Jersey metropolitan area—Essex, Hunterdon, Morris, Sussex and Union counties in New Jersey and Pike County, Pa.—to study how health care is organized, financed and delivered in the community. Researchers interviewed more than 40 northern News Jersey health care leaders, including representatives of major hospital systems, physician groups, insurers, employers, benefits consultants, community health centers, state and local health agencies, and others.

Northern New Jersey is one of 12 communities across the country tracked intensively as part of the Community Tracking Study site visits, which are jointly funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform. HSC has been tracking these communities since 1996. Key findings of the report, Northern New Jersey Health Care Market Reflects Urban-Suburban Contrasts, available online at www.hschange.org/CONTENT/1173/, include:

• While most physicians continue to work in small, independent private practices, some are facing more incentives to align with one another or with hospitals seeking to shore up referrals.
• Employers are passing along more health insurance costs to employees and implementing wellness programs, while health plans struggle to keep cost increases down, especially in a regulatory environment that encourages physicians to forgo participation in plan networks.
• Safety net providers are expanding primary care capacity and collaborating more as they attempt to improve access to care for low-income people.

While nonprofit Horizon Blue Cross Blue Shield of New Jersey (Horizon BCBS) has the largest share of the health insurance market, three for-profit national insurers—Aetna, UnitedHealth Group and CIGNA—have significant shares as well.

The market has a greater supply of specialists and primary care physicians (PCPs) than the average metropolitan area. Still, market observers reported a shortage of PCPs and expressed concern that new physicians were not seeking primary care careers at a rate sufficient to offset expected PCP retirements. Physicians in northern New Jersey generally practice in solo or small group practices, with a small portion working in larger groups.

New Jersey physicians face somewhat unusual incentives to remain outside of health plan networks. State law requires insurers to pay physicians out-of-network rates that generally exceed the rates paid to plans’ contracted physicians by a substantial amount. Health plans expect the prevalence and cost of out-of-network care to increase in 2011, when a new state assignment-of-benefits law goes into effect.

The new law is the culmination of a protracted legal dispute between health care providers and Horizon BCBS, which had contractually prohibited enrollees from assigning benefit payments to out-of-network providers. Instead, Horizon BCBS reportedly would send payments directly to patients, leaving out-of-network physicians to recover payment from patients who did not pay up front. The new law allows patients to assign benefits to out-of-network physicians, and if they do so, requires insurers to send payment directly to non-contracted physicians or issue joint-payee checks requiring both the provider’s and patient’s signatures.

While the safety net for low-income people in northern New Jersey historically has been sparse and fragmented, access to primary care has improved in recent years amid signs of increasing collaboration among providers. The number of federally qualified health center (FQHC) facilities has increased with federal and state financial support—FQHC status affords direct federal grant funding as well as enhanced Medicaid reimbursement.

Despite large state budget deficits, the Medicaid program has been largely protected from cuts. Acceptance of federal stimulus funding prevented any reductions in Medicaid eligibility, and the state has preserved optional benefits. Yet, access to physicians remains difficult for enrollees. New Jersey Medicaid physician reimbursement rates are among the lowest in the country.

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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded in part by the Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research.