Submitted written testimony of Dennis Kelly, CEO, CarePoint Health to the Senate Commerce Committee, June 8, 2015

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Jun 08, 2015, 02:00 ET

JERSEY CITY, N.J., June 8, 2015 /PRNewswire-USNewswire/ -- Chairwoman Gill 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 safety net 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, three 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 treat 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 Health's hospitals had in-network contracts when they 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 publicly disclosing profits of nearly $777.5 million for the first quarter of this year, which equates to a profit of $8.5 million per day – 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 facilities and medical 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, S-20 (Vitale, 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 reducing payments, through a baseball style arbitration system for services the Federal and State government mandates be provided. 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. "Baseball style" arbitration, as called for in section 13 of the bill, is essentially a form of rate setting that will reduce reimbursement rates to providers and in the case of CarePoint Health's three acute care facilities, one or more could 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 CarePoint Health's-Christ Hospital in Jersey City as an example. Data from 2014 shows that nearly sixty percent of all patient encounters at Christ Hospital 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 forty percent, over twenty percent of patient encounters were Medicare (which also pays below cost) and the remaining twenty percent were patients with commercial insurance. Of the commercially insured patient population, only seven percent were out-of-network. It is this seven percent that accounts for nearly thirty percent of Christ Hospital's overall revenue and supports the under-reimbursement from the rest of the patients we treat. Thus, by limiting reimbursements to this seven percent through "baseball style" arbitration, without increasing reimbursement rates to the other ninety-three percent, almost a third of Christ Hospital's revenue stream will be stifled and their will not be enough funding to maintain operations.

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 hospitals 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. Our affiliated medical group saw an additional 120,000 patients. 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 regulating out-of-network charges without ensuring a reciprocal increase in in-network payments many hospitals beyond CarePoint's three acute care facilities, will not survive.

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.

For media inquiries, contact:
Jarrod Bernstein
CarePoint Health
Director of Corporate Communications
Phone: 201-884-5300
Email: [email protected]

About CarePoint Health
CarePoint Health brings quality, patient-focused health care to the Hudson County region. Combining the resources of three area hospitals – Bayonne Medical Center, Christ Hospital in Jersey City, and Hoboken University Medical Center, and the CarePoint Health Medical Group – CarePoint Health provides a new approach to deliver health care that puts the patient front and center. We leverage a network of top doctors, nurses and other medical professionals whose expertise and attentiveness work together to provide complete coordination of care, from the doctor's office to the hospital to the home. Patients benefit from the expertise and capabilities of a broad network of leading specialists and specialized technology. At CarePoint Health, all of our medical professionals emphasize preventive medicine and focus on educating patients to make healthy life choices. For more information on our facilities, partners and services, visit us at www.carepointhealth.org.

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