Heroes and Villains in Hudson County Hospitals


The state of New Jersey has finally agreed to send people to monitor the hospital situation in Hudson County.

Three hospitals under CarePoint are at risk of closing and local officials are in a panic to do something about it.

Some officials are calling for the state to investigate the hospital finances after the owners syphoned off profits ahead of the pending sale last year.

Almost a decade ago, CarePoint became the model for a new breed of “for-profit” hospitals, seeking to replace what appeared to be the outmoded not for profit model that has existed in New Jersey for more than a century.

CarePoint came into being about a decade ago when the state faced the potential closing of not-for-profit hospitals but appeared helpless to do anything about it.

Under then-Gov. Jon Corzine, the state Department of Health detailed a serious crisis among hospitals. At the time, Bayonne Medical Center was about to close, and the owners of what was to become CarePoint rode in on a silver pony to rescue it, and later recreated the same for profit model to help save what Christ Hospital in Jersey City and what was then called Saint Mary’s Hospital in Hoboken.

Now, with CarePoint calling it quits and the three hospitals again on the verge of closing, state and local officials have finally decided to do something. The question is why it took them so long to do it, and whether there is a political motive behind the current crisis that did not exist a decade ago.

To fully understand the dynamics of the current situation you need to go back to the Corzine Administration when these hospitals were also at risk of closing and there was very little legislative action to rescue them.

Hospitals were on life support and largely kept alive by what was called charity care, meaning – the pre-Obamacare era – hospitals were required to provide medical services to anyone who came into their emergency rooms and the state would reimburse the costs associated with the poorest of the poor.

Not-for-profit hospitals clung to these charity care payments to make up for the disparity in payments they got from insurance companies.

Many hospitals blamed insurance companies for driving hospitals broke (although some believe the traditional hospital model may be to blame since curbside medical clinics also syphoned off tradition business from hospital outpatient services.)

In order to attract patients, hospitals made bad deals with insurance companies, offering discounts that often didn’t cover the actual costs of providing services.

Worse, it became common practice for insurance companies to decline even legitimate claims, forcing hospitals to dispute these cases in court. Then to settle these, insurance companies offered ludicrously low payments the cash-strapped hospitals grasped at just to stay alive.

CarePoint broke the mold and decided to suspend its contracts with insurance companies charging full price for everybody.  In fact, Bayonne Medical Center – according to a report in The Washington Post – was considered the most expensive hospital in the nation for its basic services.

Through deft political donations to then-governor Christopher Christie and insider lobbying by former US senator Robert Torricelli the network of hospitals was able to exploit a loophole in the insurance laws in the state.

If a patient is admitted through the emergency room, then all services have to be paid in full by the insurance company whether it has a contract with the hospital or not.

So, the whole business model for CarePoint was how to steer patients to its ER and thus force insurance companies to pay their exorbitant prices.

This started an ambulance contract war in Jersey City where CarePoint tried to wrestle the long-standing contract away from Jersey City Medical Center and have the Bayonne based McCabe Ambulance Service pick up the traffic.

Ultimately Jersey City Medical Center prevailed but there was a serious consequence.

Jersey City Medical Center decided to open an emergency room of its own in Bayonne directly competing with CarePoint Bayonne Medical Center.

This may well have been the undoing of CarePoint since a huge amount of its business was conducted through Bayonne Medical Center.

Behind the scenes reports last year said that the two principal owners of CarePoint were in conflict and last May they steered their profits out of the hospital network in what may become the center of a current state investigation. But it also became an indication that the owners were about to abandon a sinking ship.

There are several sideshows in this circus of hospitals contributing to the current climate that include behind the scenes deals for land. But the irony is that CarePoint prevented three hospitals in Hudson County from being forced out of business a decade ago and no local official wanted to investigate why.

The only legislator who appeared to have an interest in saving the hospitals was then-Assemblyman Louis Manzo, who proposed having the state regulate the reimbursement rate to hospitals. But since no one wanted to take on the insurance lobby, the legislation went nowhere.

Obamacare, of course, was supposed to save all these hospitals and the fact that they are struggling even now suggests that the fundamental problem has not been resolved.

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