Center for Studying Health System Change

he Newark Primary Metropolitan Statistical Area (PMSA) has over 1.9 million residents and encompasses five Northern New Jersey counties representing a mix of urban, suburban and rural communities.¹ The 1,570-square-mile region is framed by the Hudson River to the east, the Delaware River and Pennsylvania State border to the west, the New York State border to the north and, to some extent, Interstate 78 to the south. A network of interstate highways and an interstate transit rail system connect New Jersey to New York State and Pennsylvania.

Nearly 40 percent of the region’s population is concentrated in Essex County, which includes the city of Newark. Fifty percent of the population is split fairly evenly between Morris County and Union County, which includes Elizabeth. The remaining 10 percent live in Sussex and Warren counties. Approximately 14 percent of the metropolitan area’s residents live in the city of Newark and about 6 percent live in Elizabeth. The region’s population density ranges from 2,340 persons per kilometer in Essex County to 103 persons per kilometer in Warren County.²

The Newark area has some of the highest concentrations of poverty and affluence in New Jersey. About 6.6 percent of families in the region live below the poverty level compared with the national average of 10 percent, but the poverty rate jumps to 11.3 percent in Essex County, 13.7 percent in Elizabeth and 22.8 percent in the city of Newark. These same disparities exist for median family income, which ranges from $56,273³ in Morris County to $25,816⁴ in the city of Newark. Newark’s urban poverty has spread from the inner cities to nearby surrounding areas. A recent analysis of public health in the city of Newark notes that it lags behind most large U.S. cities in many socioeconomic and quality-of-life indicators. For example, Newark’s violent crime rate was nearly triple the average of the nation’s 100 largest cities.⁵

The Newark metropolitan area’s racial and ethnic mix also varies across and within counties. Twenty-two percent of Newark area residents are African American compared with 12.1 percent nationally. Most of the area’s African American population is concentrated in the city of Newark and its surrounding areas. African Americans comprise 46 percent of the population in Essex County, 58.5 percent in the city of Newark and 89 percent in East Orange. The remainder of Essex is only 4 percent African American. Union County is 18.8 percent African American while Newark’s remaining three counties are primarily white. The region’s Hispanic population is slightly above the national average of 9 percent, but 39 percent of Elizabeth’s residents are Hispanic.⁶ Large concentrations of undocumented immigrants were reported in the cities of Newark and Elizabeth.

Disparities in the health status of Newark residents are striking by race and across counties. The region’s infant mortality rate of 6.9 per 1,000 live births for whites is lower than the national rate of 7.8, but the 15.5 rate for non-whites is 25 percent greater than the national average for non-whites.⁷ Other health status indicators are poor, particularly in the city of Newark and nearby communities such as the Oranges, where there are high rates of tuberculosis and substance abuse, high rates of hospitalization for ambulatory care-sensitive conditions such as asthma and one of the most severe HIV/AIDS epidemics in the nation.⁸

THE HEALTH CARE MARKET

The Newark metropolitan area is not a self-contained health care market. Rather, it is an intersection of several larger multistate markets for health care. For example, even though the PMSA is composed of five counties, Newark is sometimes referred to as part of the 11-county Northern New Jersey region. It also includes several distinct sub-markets. Health care organizations in Newark have competitive and collaborative relationships with providers in counties outside the metropolitan area such as Bergen and Passaic.

Most of the health plans operating in the Newark metropolitan area have a regional, statewide or national focus. The lack of orientation toward a local market is related to the ambiguity of market boundaries in the region. Blue Cross and Blue Shield of New Jersey (BCBS-NJ), Aetna Health Plans and Prudential Healthcare historically have been major indemnity carriers in the Newark region. Many national and regional health plans also do business in Newark.

In contrast, most of Newark’s acute care hospitals have had a local market focus and have only recently begun to develop or align with broader regional networks. The Newark region has substantial excess capacity. The number of staffed hospital beds per 1,000 residents is about 47 percent higher than the national average, and hospital days per 1,000 are more than 50 percent above the national average.⁹ Pressures on the hospital industry to reduce excess capacity have escalated as the state’s hospital rate-setting system has been deregulated and the market for hospital services has become more competitive.

Newark has 34 percent more physicians per 1,000 residents than the U.S. average for large metropolitan areas and 29 percent more primary care physicians per 1,000.¹⁰ Some respondents, however, particularly in the inner city, perceive an undersupply of primary care physicians. They also report that some solo physicians are moving from Newark to the suburbs. An increase in physician organization initiated by suburban hospital systems and physician groups may support this trend.

The Newark metropolitan area has a labor force of more than 800,000 people. About 40 percent work in Essex County, 28 percent in Morris County and 25 percent in Union County. The regional unemployment rate was 6.4 percent in 1996, ranging from 4.2 percent in Morris County to 7.8 percent in Essex and 13.7 percent in the city of Newark.¹¹ Nearly 20 percent of the region’s employment is in manufacturing and more than 34 percent in services. Health care accounts for nearly 11 percent of the region’s jobs.¹²

Employment in the Newark region rose by 0.4 percent between 1995 and 1996. Most of the gains occurred in services, trade and finance. Health care has been a major component of the region’s employment growth, but this growth is expected to slow due to increasing competition, downsizing associated with hospital consolidations and reductions in public funding. Overall, the 1997 economic outlook for Northern New Jersey is for modest growth consistent with state and national averages.¹³

LEADERSHIP AND DECISION MAKING

Many of the major players in the Newark region have a statewide or national perspective rather than a local focus. The lack of a regional identity has resulted in a lack of regional leadership, even though there is distinct leadership in many of Newark’s sub-markets. Furthermore, Newark’s geographic breadth, cultural diversity and socioeconomic heterogeneity create barriers to coordinated regional health care decision making.

Similarly, many of the forces affecting health care, such as state regulation and corporate health benefit decisions, are not local in nature. New Jersey’s Department of Health and Senior Services has been the leading force behind the state’s regulatory efforts, placing the commissioner in an important leadership position. Because the state plays such a large role in public health and health policy, many local governments have not made major investments in public health infrastructure. The state also plays a major role in Newark’s health care system and economy through its investments in the University of Medicine and Dentistry of New Jersey (UMDNJ) and University Hospital, both of which are in downtown Newark.

During the rate-setting era, there was substantial interaction between hospitals and the State Health Department through the annual rate review process, creating a somewhat adversarial culture of give-and-take between hospitals and regulators. Not surprisingly, the regulatory environment gave rise to a strong state hospital association. However, a schism developed in the New Jersey Hospital Association (NJHA) when the 1992 Health Care Reform Act (HCRA) was being negotiated. The state’s suburban hospitals lobbied heavily for deregulation of the state rate-setting system and urban providers opposed it. NJHA supported the HCRA, which caused a splintering of the association’s membership. A number of inner city hospitals subsequently left the association and formed a group called the Hospital Alliance of New Jersey to lobby for charity care funding. Some of the state’s major teaching hospitals also left NJHA and formed the University Health System (UHS) to advocate for state and federal support for graduate medical education. Although there is some overlap in the membership of the three groups, a number of major institutions remain outside the NJHA.

The emergence of several powerful Newark-based hospital systems has resulted in the increased visibility and influence of the systems’ leaders. In particular, the chief executive officer of the St. Barnabas system and the president of UMDNJ have played long-standing roles in New Jersey health care and are thought to be influential in industry and political circles. In contrast, it was more difficult to identify additional key, locally focused health care leaders or influential community-based organizations. The state’s take-over of some local government responsibilities, such as Newark’s school system, and reports of corruption in the city of Newark’s political establishment have created perceptions of a lack of local leadership in that jurisdiction.

The Catholic Church plays an important and complex role in the area. The Archdiocese of Newark has been active in inner city economic development as well as controlling the inner city Cathedral Healthcare System. The Archdiocese reportedly has had a strong influence on the on-going merger discussions between St. Elizabeth Hospital and Elizabeth General Hospital and is involved in continuing efforts to develop Catholic health care networks in New Jersey.

Some respondents believe that the larger businesses located in the Newark metropolitan area could be a source of political and financial capital for local infrastructure development. However, they are perceived by local residents as uninterested in the needs of the community, and some respond- ents complained that virtually none of the white-collar workers in Newark’s downtown actually live in the city.

A final issue affecting perceptions about the Newark landscape is the presence of organized crime and corruption. New Jersey’s Attorney General recently uncovered organized crime involvement in health insurance fraud in the state, which has fueled concerns that the large amount of money flowing through the health care system may be increasingly attractive to organized crime.¹⁴