New Jersey hospitals put brakes on plans for managing care of state’s uninsured Doubtful that a new state plan will control charity care costs, New Jersey hospitals are pushing legislation that would make it voluntary rather than mandatory for them to develop managed care networks for uninsured residents. Recently approved by the Health Care Financing Administration (HCFA), the innovative plan would be the first attempt by a state to have hospitals manage the care of uninsured residents. Hospitals would be required to develop networks if they wanted to collect uncompensated care subsidies from the state . "There’s overwhelming support for this legislation because it’s not wise to implement something statewide when you don’t know what the effects will be," said Suzanne Ianni, executive director of the Hospital Alliance of New Jersey, a group representing 18 mostly urban hospitals. "Seventy–five percent of the members of the Assembly and Senate are sponsoring this legislation," said Peter Lillo, vice-president for government relations of the New Jersey Hospital Association, "and we expect that it will pass and that Gov. Whitman will sign it." Legislators are expected to vote by the end of March on an amendment that would turn the mandatory and statewide program into a voluntary regional demonstration project. State officials likely would designate a region or county for the demonstration project, based on interest by local providers, said Anne Weiss, senior assistant commissioner for the New Jersey Department of Health and Senior Services. HCFA approved the state’s Medicaid 1115 waiver for the Managed Charity Care Demonstration last month. New Jersey legislators, struggling with the issue of how to finance charity care in the state, passed legislation calling for hospital-centered managed care for charity patients two years ago. But, federal approval was needed before the plan could be implemented. Mr. Lillo said hospital and state officials alike were wary of the plan when it was first proposed because they were not sure how to accomplish the intent of the bill. Working poor "Most of our charity patients are actually the working poor who do not have health insurance coverage," Mr. Lillo said. "It’s hard to figure out how to manage their care when we may only see them once a year." Hospitals also have been concerned that setting up networks of providers to serve charity patients potentially could result in higher costs, Mr. Lillo said. "Hospitals have been underpaid historically (for charity care)," he said, "and this proposal could end up costing more." "The legislature doubled the cigarette tax to provide more money for charity care and we don’t want to see more spent than necessary," the hospital association official said. "Last year, the state documented $463 million in charity care provided by hospitals," Ms. Ianni said, "but only $320 million has been appropriated." The problem with the original legislation and the waiver on managing care for the uninsured, Ms. Ianni said, is that hospitals are viewed as the appropriate financial entities to be responsible for bills of charity care patients. "This proposal really isn’t managed care because the only rules apply to providers. The beneficiaries have no rules they must follow," she said. Under terms of the state’s waiver, 75% of the state’s hospitals would be required to develop networks of physicians, substance abuse treatment centers, community clinics, laboratories, pharmacies, and other providers to manage the care of those whose conditions could benefit from a coordinated approach. Hospitals would be required to provide care for those with substance abuse problems and with a dual diagnosis of substance abuse and mental illness. They also were to identify other sub-groups of the uninsured that would benefit from managed care. In plans submitted for state approval last fall, hospitals often targeted populations that needed respiratory, cardiovascular or prenatal services. Under proposed regulations published in the New Jersey Register in January 1998, only hospitals that receive less than $500,000 a year in charity care subsidies and do not serve as the only acute-care facility in their county would be allowed to opt out of the program. Hospitals that opt out would be ineligible for charity care funding, but still would be required to care for charity patients and submit demographic and audit data to the state as they do now. Ms. Weiss said department staff established a task force of hospitals, physicians, HMOs, community representatives, and others to find a way to implement 1996 legislation on financing care for the uninsured. The task force recognized that no HMO in the state would be willing to manage all the care needed by one million uninsured people and so we "came up with the idea of asking hospitals to identify subpopulations of the uninsured that could benefit from managed care. Substance abuse She said a continuing point of contention between hospitals and the department is over the financial burden of providing services to those with substance abuse problems or a dual diagnosis of substance abuse and mental illness. While the regulations say hospitals would be financially liable for up to 45 behavioral health visits a year, Ms. Weiss said the department has indicated that hospitals could set criteria for the managed care services and accept financial responsibility only for patients who meet the criteria. For instance, hospitals could limit the program to patients who come to the emergency room for detox three times in a year. She notes that a task force on hospital-centered managed care found that the majority of charity care services do not involve substance abuse. Currently, uninsured individuals with family incomes up to 200% of the federal poverty level qualify for fully subsidized inpatient and outpatient care and those with incomes between 200-300% of the poverty level qualify for partial subsidies. For New Jersey residents, participation in hospital-centered managed care would be voluntary. Caution urged Because this is the first state proposal of this nature in the country, Ms. Ianni said, it makes sense to "use a little caution before taking it statewide." Mr. Lillo agreed, saying, "We are not opposed to the concept of managed care, but want to try this proposal voluntarily first to see if it can work. If it works, then it can be expanded. If it doesn’t work, we’ve learned something without a lot of problems being created." He expects that some of the larger health care systems in the state would volunteer to participate in a demonstration. However, there may be a problem with a provision in the draft regulations that appears to require a system to submit a separate plan for each of its hospitals and not allow movement of charity patients from one hospital in the system to another. Besides provider networks, hospitals participating in the program also must have an appropriate information system to track charity care patients and services, quality assurance programs, and utilization management programs. Ms. Weiss said the department has taken no stand on the amendment in the legislature. The department has worked hard to fulfill the 1996 legislative mandate, she said, but will conduct a demonstration program if that is what the legislature now wants. The effective date of the regulations has been delayed until April. Hospital representatives believe implementation was delayed because state officials wanted to wait to see if the legislature amended the program to make it a demonstration. —John Hope Contact Ms. Ianni at (609) 989-8200; Mr. Lillo at (609) 275-4201; and Ms. Weiss at (609) 984-7639