Assembly Financial Institutions and Insurance Committee June 1, 2015

JERSEY CITY, N.J., June 1, 2015 /PRNewswire-USNewswire/ -- Chairman Coughlin and members of the committee, thank you for the opportunity to submit this written testimony on behalf of CarePoint Health. I am Dennis Kelly, CEO of CarePoint Health, which includes Bayonne Medical Center, Hoboken University Medical Center and Christ Hospital. CarePoint Health is a fully integrated tax paying health system that cares for 300,000 patients annually, employs 4,500 employees and manages a multispecialty physician practice with 169 primary care and specialty physicians that serve Hudson, Passaic and Bergen County. We also operate, at present, 3 Neighborhood Health Centers that supports our role as a safety net provider for the residents of Hudson County and the surrounding area.   

Over the course of the past several months, the health insurance industry has utilized its substantial financial resources to portray CarePoint Health and physician providers across the state, as "price gougers" that are driving up healthcare costs by going out-of-network with key insurers. This disingenuous portrayal of the provider community disregards the basic facts that insurers control healthcare dollars through premium payments and often delay or deny payments to providers that service patients 24 hours a day, 365 days a year after care has been provided and critical resources utilized during the process. Many in the insurance industry have sought to portray going out-of-network as a business strategy; for us, it is a survival strategy. All three of CarePoint's Hospitals were purchased out of bankruptcy and this bill, if enacted, will put them on the road there again. 

Contrast this with the current state of the health insurance industry, with one of the major carriers recently publically disclosing profits of nearly $777.5 million for the first quarter of this year – a 17 percent increase over the same period last year and many other not far behind.

If these same insurers would offer adequate "in-network" rates that take into consideration the disproportionate burden the urban safety net providers carry to treat the uninsured and those covered by Medicaid, this issue would be solved. Urban safety net providers and their physician partners are at the mercy of insurance companies to raise revenue so they can run their practices, when their sole focus should be on providing quality patient care. This misleading rhetoric has generated interest in the state legislature and the result is before you today in the form of, A-4444 (Coughlin, D-Woodbridge), known as the "Out-of-network Consumer Protection, Transparency, Cost Containment and Accountability Act," a piece of legislation that threatens the very fabric of our healthcare safety net in New Jersey. 

This legislation, would limit the amount of money providers can recoup for out-of-network services, by capping charges and associated payments to providers for services the State and Federal Government mandates be provided regardless of network status. While there has been much discussion about out-of-network healthcare costs, the fact remains that in our State's unregulated healthcare market, going out-of-network is a provider's only option to ensure adequate in-network payment rates. Under existing New Jersey law, patients are shielded from out-of-network healthcare costs in emergency circumstances. The current law appropriately provides that the insurer, for care provided in a hospital emergency room, must pay an adequate amount to hold the patient harmless to their in-network responsibility up to the billed charges that protect the consumer. Thus, the patient is fully protected and has access to care in an emergency situation.  Even for patients who lack insurance, a State law adopted in 2009, (N.J.S.A 26:2H-12.52) already protects their exposure on hospital charges by limiting their charges to 115 percent of Medicare for patients whose gross income is less than 500 percent of the federal poverty level.

By eliminating the only option safety net healthcare providers have to subsidize the grossly inadequate payments of government and commercial payers, this bill stands to threaten jobs and access to healthcare services.  In this regard, I can state without equivocation, that if this bill were to be passed and signed into law in its current form, one, or even all, of CarePoint's three acute care facilities would be forced to close their doors jeopardizing access to care within our communities and the loss of 4,500 jobs.

I do not make this statement lightly and would like to offer a transparent view of CarePoint's financial information to support my assertion. In 2014, CarePoint Health-Christ Hospital in Jersey City statistics show that nearly 60 percent of all patient encounters were either Medicaid, Charity Care, self-pay or uninsured; all of which reimburse hospitals well below cost and in many cases nothing at all. Of the remaining 40 percent, over 20 percent of patient encounters were Medicare (which also pays below cost) and the remaining 20 percent were patients with commercial insurance. Of the commercially insured patient population, only 7 percent were out-of-network. It is this 7 percent that accounts for nearly 30 percent of Christ Hospital's overall revenue and supports the under-reimbursement from the rest of the patients we treat. 

To understand the impact the bill would have by capping the payment rates to this 7 percent of our patient population, we used 150 percent of Medicare as a proxy for the payment range established in section 11 of the bill. Using this proxy, we are able to determine that such a cap on reimbursements would result in a projected net revenue loss of $54.5 million at Christ Hospital.   For this hospital, whose 2014 pre-tax net income was $4.877 million, such a reduction in reimbursement would result in an annual operating loss of $(49.62) million, which is simply unsustainable.  A similar story can be told for the other two acute care hospitals in the CarePoint Health system. 

Exacerbating the problem is the current state of unprecedented change in the healthcare sector where urban providers, like CarePoint Health, are under threat from numerous forces such as significant cuts to hospital providers under the Affordable Care Act ($4.5 billion in Medicare cuts to New Jersey Providers over 10 years), significant cuts in charity care funding proposed in the forthcoming state budget ($148 million reduction) and predatory tactics by insurance companies that refuse to pay for services provided to their enrollees.  

It is important to understand what is at risk, should our hospitals be forced to close their doors as a result of this legislation. In 2014, the CarePoint Health system had 298,457 patient encounters, including 25,611 admissions, 92,741 emergency room visits, 2,375 births and 163,569 charity care, Medicaid or uninsured patient encounters. Additionally, CarePoint Health serves as an economic engine to our local and state economy, providing 3,571 jobs, $750 million in GDP to the county and paying nearly $22.2 million in direct and indirect taxes - all of this will be threatened if you vote in favor of this bill. 

By focusing on only one aspect of a broken healthcare reimbursement system, the bill legislates direct rate setting on out-of-network charges and, as such, will be removing the only aspect of a 'free market' system that providers have to ensure adequate in-network rates.  By capping out-of-network charges without ensuring a reciprocal increase in in-network payment, many hospitals beyond CarePoint's three acute care facilities will not survive.

While the most onerous impact of the bill is assuredly its rate setting provisions, additional flaws exist with many of the other provisions as well.   Specifically, the reporting requirements placed on providers as called for in Sections 4 and 5 of the bill are simply unattainable. There is no way for a provider to know the full breadth of a patient's insurance coverage, in terms how much of a patient's deductible has been met and, as such, how much a patient can be expecting to pay for a procedure.  It is inappropriate to ask providers to do the business of insurers whose responsibility it is to ensure their enrollees understand the product they pay for and who are currently required to provide this type of information under provisions of the Federal Affordable Care Act.  In fact, providers are already required to submit for pre-authorization of most elective procedures and care prior to scheduling or treating the patient. Additionally, requiring a patient to sign off on their receipt of this information may very well create a barrier to care, inhibiting providers from rendering needed services.  

Due to these very serious concerns, we must express our strong opposition to this bill.  Recently, I have provided public commentary identifying a holistic solution to the broken delivery system in an effort to drive true reform.  Under the current market conditions New Jersey healthcare providers face with the recent Medicaid expansion and the increasing number of high deductible health benefit plans, we believe an optimal solution would be to implement comprehensive payment reform. Under this new system, providers would paid a fair equivalent price for services rendered in all settings for all patients, regardless of the neighborhood they live in and the cost of providing care for our State's 1.3 million uninsured will be shared by all. This new system would essentially create a single set of reimbursements for all of New Jersey's residents and would pay providers for healthcare services according to a uniform and fair rate structure. By moving to a regulated, comprehensive payment system, the State would address the entirety of the current dysfunctional healthcare system and not just a single component. 

The rising cost of healthcare has become the number one domestic issue facing our country.  Yet, in New Jersey, the debate has focused only on the provider side of the equation, with little to no discussion about the rising profits of insurance companies, the exorbitant costs of pharmaceuticals and medical devices, and the overutilization of services by the public.  The only way to address this issue is for EVERYONE to accept their share of responsibility and unite behind a reformed payer system.   

The current debate about out-of-network coverage has been shaped by those that stand to gain from putting urban hospitals at a disadvantage and at the expense of protecting the most vulnerable among us.  Any discussion about capping out-of-network payments to health care providers is simply a ruse to protect insurance company profits or tilt the competitive balance in certain parts of our State. This strategy would allow insurers to maintain an already unfair competitive advantage when negotiating their reimbursement agreements with providers, which may result in the closure of many more urban New Jersey hospitals and the loss of physician providers. This potentially would worsen the situation New Jersey already faces with the lowest percentage of our physicians willing to accept new Medicaid patients as compared with the rest of the United States. The legislature should be careful not to undermine the only piece of negotiating leverage that small, safety net community-based urban hospitals have in their effort to bring insurers to the negotiating table: the threat to terminate a contract and go out of network. Ultimately, this is an issue for insurers and the hospital industry and physician providers to resolve between each other in the "competitive", deregulated marketplace the insurers sought to create in 1993.  

Thank you for the opportunity to provide this testimony and CarePoint looks forward to continuing to work with the legislature in fostering an understanding of the difficulties urban hospitals face as they strive to provide quality healthcare to the State's most needy.

CONTACT: Jarrod Bernstein, 201-884-5300, [email protected]

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SOURCE CarePoint Health