The “Tax Paying” Hospital Experience
- All hospitals are “for profit” in that they must maintain a sufficient operating margin to deliver vital healthcare services to their communities.
- However, some hospitals do not enjoy tax exempt status and pay taxes to their host municipalities and state
Nearly 20% of all hospitals in the country are tax paying hospitals CarePoint Health System pays approximately $20 Million in taxes each year and employs over 3,600 individuals.
- The tax paying hospital business model is relatively new in New Jersey, but with the pending purchase of several hospitals in our state, it is expected that one and six hospitals in our state will be tax paying within the next year
CarePoint is unique as a tax paying hospital system in an urban setting – according to a Health Affairs study, two-thirds of all U.S. urban hospitals are nonprofit, with the remainder split between for-profit and government ownership.
- Tax paying hospitals retain certain qualities that allow them flexibility and resources not always enjoyed by “tax exempt” hospitals
As a tax paying healthcare system, CarePoint does not have the same governance structure as a tax-exempt healthcare system, which is often encumbered with large boards with bureaucratic administrative processes that create barriers and delays in delivering efficient healthcare services Access to capital to invest in infrastructure and driven to operational efficiency with limited bureaucratic redundancy that eliminates waste The ability to be creative in aligning with physicians and expanding/adding, clinical service lines to address community needs.
The CarePoint Experience
- CarePoint began its history of healthcare delivery for our state’s most needy when it purchased Bayonne hospital from bankruptcy in 2008
No other buyer was willing to salvage the hospital operation that saw only 66% of its Medicaid business costs reimbursed and 29% of its charity care costs (compared to neighboring Jersey City Medical Center which gets 88% and 99% of its costs covered, respectively).
- After purchasing Bayonne hospital, CarePoint purchased Hoboken Univesity Medical Center and Christ hospital to make the system the largest provider of acute care hospital services in Hudson County
By purchasing these three hospitals, CarePoint has saved the state an average of $22 million a year in state funding no longer needed and prevented an estimated loss of $750 million annually to the regional economy by preventing the closure of the three CarePoint hospitals.
- The three acute care hospitals of the CarePoint Health System provide care for the citizens of Hudson County, which has the highest rate of uninsured, underinsured and Medicaid patients in the state of New Jersey.
44% of all patients seen in CarePoint’s ERs are either uninsured, charity care, or Medicaid
- Despite its struggle to push back against predatory insurance companies that provide inadequate levels of reimbursement, CarePoint Health’s hospitals maintain the highest level of quality in healthcare delivery
Inside New Jersey magazine and Castle Connolly Medical ranked Bayonne Medical Center as the number 2 hospital in the state (fewer than 350 beds) The Leapfrog Group recently honored Hoboken University Medical Center and Christ Hospital both with a “A” grades and Bayonne Medical Center with a grade of “B” for patient safety.
- CarePoint Health System is also transforming the way healthcare is delivered in its communities by providing primary/preventive healthcare services through its Neighborhood Health Centers
These Neighborhood Health Centers provide free medications and free diagnostic services as well (which is unheard of in NJ for a Health Center) Annualized data shows that services provided at CarePoint’s Neighborhood Health Centers have led to a nearly 40% reduction in emergency department visits and almost a 70% reduction in hospital admissions.
Out of Network
- Prior to 1993, the New Jersey Department of Health set hospital payment rates for all payers other than Medicare.
- Inherent in this process was cost shifting of uncompensated care (which included not only documented charity care but any uncollectible self pay) and any Medicare shortfalls to the other payers by doing an add-on to the cost-based rates otherwise developed. This regulated approach made it very hard for a hospital to go bankrupt.
- The insurance industry and suburban hospitals lobbied successfully to end rate setting in the mid-1990’s and move to a more “competitive, deregulated system”.
- This new system created a dysfunctional system for urban hospitals:
Uncompensated care reimbursement was cut from 100% of costs to a smaller percentage and only for those “documented charity care” patients Medicare shortfalls were no longer covered and Medicaid payments were cut As a result of this uneven playing field, nearly 26 acute care hospitals have closed since deregulation in 1992.
- Much of the financial pressure that led to the ultimate closure of these hospitals was the result of predatory insurance companies paying inadequate reimbursement rates to hospitals.
- As a result, hospitals only recourse at times is to walk away from the negotiating table with these predatory insurance companies and go “out of network”
CarePoint hospitals are currently in-network with most major payers
The Truth About Charges
- Charges are like the sticker price of a car, in that they are the starting point for negotiations with insurance companies, but not what a patient pays
- New Jersey law protects patients by ensuring they bare no responsibility for paying a charge based payment in emergency situation
Every ER visit is treated as an “in-network” encounter.
- According to the New Jersey Hospital Association, based on state insurance laws and income eligibility standards for insurance, only about 5% of all patients are even eligible to be billed charges
- Furthermore, N.J.S.A. 26:2H-12.52 states that any uninsured patient whose gross income is less than 500% of the federal poverty level shall not be billed any greater than 115% of the applicable payment for that service under the federal Medicare program.
- In terms of average revenue generated for each patient encounter (using the standard industry metric of “net revenue per adjusted admission”), CarePoint Health hospitals in aggregate are comparable to other hospitals in the state and lower than urban catchment area hospitals. Additionally, CarePoint Health hospitals in aggregate are comparable to several large national for-profit and not-for-profit hospital chains on this same metric.