ASSEMBLY, No. 1461
STATE OF NEW JERSEY
INTRODUCED FEBRUARY 5, 1996
By Assemblywoman QUIGLEY, Assemblyman COHEN, Assemblywomen Gill, Weinberg, Assemblyman Barnes, Assemblywoman Turner, Assemblymen Greenwald, Stanley, Gusciora, Dalton, Impreveduto, Jones, R. Smith, Assemblywoman Buono, Assemblymen Garcia, Caraballo and Doria
An Act concerning charity care subsidies to hospitals and amending and supplementing P.L.1992, c.160.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. (New section) This act shall be known and may be cited as the "Health Care Protection Act."
2. Section 8 of P.L.1992, c.160 (C.26:2H-18.58) is amended to read as follows:
8. There is established the Health Care Subsidy Fund in the Department of Health.
a. The fund shall be comprised of revenues [from employee and employer contributions made pursuant to section 29 of P.L.1992, c.160 (C.43:21-7b),]appropriated from the General Fund pursuant to section 7 of P.L. , c. (C. )(pending before the Legislature as this bill), revenues from the hospital assessment made pursuant to section 12 of [this act] P.L.1992, c.160 (C.26:2H-18.62), revenues from interest and penalties collected pursuant to [this act] P.L.1992, c.160 (C.26:2H-18.51 et al.) and revenues from such other sources as the Legislature shall determine. Interest earned on the monies in the fund shall be credited to the fund.
The fund shall be a nonlapsing fund dedicated for use by the State to: (1) distribute charity care and other uncompensated care disproportionate share payments to hospitals, and provide subsidies for the Health Access New Jersey program established pursuant to section 15 of [this act] P.L.1992, c.160 (C.26:2H-18.65); and (2) assist hospitals and other health care facilities in the underwriting of innovative and necessary health care services.
b. The fund shall be administered by a person appointed by the commissioner.
The administrator of the fund is responsible for overseeing and coordinating the collection and reimbursement of fund monies. The administrator is responsible for promptly informing the commissioner if monies are not or are not reasonably expected to be collected or disbursed or if the fund's reserve as established in subsection c. of this section falls below the required level.
c. The fund shall maintain a reserve in an amount not to exceed $20 million. The commissioner shall adopt rules and regulations to govern the use of the reserve and to ensure the integrity of the fund, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
d. The administrator shall establish separate accounts for the charity care component of the disproportionate share hospital subsidy, other uncompensated care component of the disproportionate share hospital subsidy, hospital and other health care initiatives funding and the payments for subsidies for insurance premiums to provide care in disproportionate share hospitals, known as the Health Access New Jersey subsidy account, respectively.
e. In the event that the charity care component of the disproportionate share hospital subsidy account has a surplus in a given year after payments are distributed pursuant to the methodology established in section 13 of P.L.1995, c.133 (C.26:2H-18.59b) and section 4 of P.L. , c. (C. )(pending before the Legislature as this bill) and within the limitations provided in subsection e. of section 9 of P.L.1992, c.160 (C.26:2H-18.59), the [commissioner may reallocate the surplus monies to the Health Access New Jersey subsidy account] surplus funds shall lapse to the fund for use in subsequent years to reduce the amount of revenue needed for appropriation from the General Fund pursuant to section 8 of P.L. , c. (C. )(pending before the Legislature as this bill).
(cf: P.L.1995, c.133, s.4)
3. Section 9 of P.L.1992, c.160 (C.26:2H-18.59) is amended to read as follows:
9. a. The commissioner shall allocate such funds as specified in subsection e. of this section to the charity care component of the disproportionate share hospital subsidy account. In a given year, the department shall transfer from the fund to the Division of Medical Assistance and Health Services in the Department of Human Services such funds as may be necessary for the total approved charity care disproportionate share payments to hospitals for that year.
b. For the period January 1, 1993 to December 31, 1993, the commission shall allocate $500 million to the charity care component of the disproportionate share hospital subsidy account. The Department of Health shall recommend the amount that the Division of Medical Assistance and Health Services shall pay to an eligible hospital on a provisional, monthly basis pursuant to paragraphs (1) and (2) of this subsection. The department shall also advise the commission and each eligible hospital of the amount a hospital is entitled to receive.
(1) The department shall determine if a hospital is eligible to receive a charity care subsidy in 1993 based on the following:
Hospital Specific Approved Uncompensated Care-1991
..................................................................
Hospital Specific Preliminary Cost Base-1992
= Hospital Specific % Uncompensated Care (%UC)
A hospital is eligible for a charity care subsidy in 1993 if, upon establishing a rank order of the %UC for all hospitals, the hospital is among the 80% of hospitals with the highest %UC.
(2) The maximum amount of the charity care subsidy an eligible hospital may receive in 1993 shall be based on the following:
Hospital Specific Approved Uncompensated Care-1991
..................................................................
Total approved Uncompensated Care All Eligible Hospitals-1991
X $500 million
= Maximum Amount of Hospital Specific
Charity Care Subsidy for 1993
(3) A hospital shall be required to submit all claims for charity care cost reimbursement, as well as demographic information about the persons who qualify for charity care, to the department in a manner and time frame specified by the Commissioner of Health, in order to continue to be eligible for a charity care subsidy in 1993 and in subsequent years.
The demographic information shall include the recipient's age, sex, marital status, employment status, type of health insurance coverage, if any, and if the recipient is a child under 18 years of age who does not have health insurance coverage or a married person who does not have health insurance coverage, whether the child's parent or the married person's spouse, as the case may be, has health insurance.
(4) A hospital shall be reimbursed for the cost of eligible charity care at the same rate paid to that hospital by the Medicaid program; except that charity care services provided to emergency room patients who do not require those services on an emergency basis shall be reimbursed at a rate appropriate for primary care, according to a schedule of payments developed by the commission.
(5) The department shall provide for an audit of a hospital's charity care for 1993 within a time frame established by the department.
c. For the period January 1, 1994 to December 31, 1994, a hospital shall receive disproportionate share payments from the Division of Medical Assistance and Health Services based on the amount of charity care submitted to the commission or its designated agent, in a form and manner specified by the commission. The commission or its designated agent shall review and price all charity care claims and notify the Division of Medical Assistance and Health Services of the amount it shall pay to each hospital on a monthly basis based on actual services rendered.
(1) (Deleted by amendment, P.L.1995, c.133.)
(2) If the commission is not able to fully implement the charity care claims pricing system by January 1, 1994, the commission shall continue to make provisional disproportionate share payments to eligible hospitals, through the Division of Medical Assistance and Health Services, based on the charity care costs incurred by all hospitals in 1993, until such time as the commission is able to implement the claims pricing system.
If there are additional charity care balances available after the 1994 distribution based on 1993 charity care costs, the department shall transfer these available balances from the fund to the Division of Medical Assistance and Health Services for an approved one-time additional disproportionate share payment to hospitals according to the methodology provided in section 12 of P.L.1995, c.133 (C.26:2H-18.59a). The total payment for all hospitals shall not exceed $75.5 million.
(3) A hospital shall be reimbursed for the cost of eligible charity care at the same rate paid to that hospital by the Medicaid program; except that charity care services provided to emergency room patients who do not require those services on an emergency basis shall be reimbursed at a rate appropriate for primary care, according to a schedule of payments developed by the commission.
(4) (Deleted by amendment, P.L.1995, c.133.)
d. (Deleted by amendment, P.L.1995, c.133.)
e. The total amount allocated for charity care subsidy payments shall be: in 1994, $450 million [and], in 1995, $400 million, in 1996, $350 million and $325 million in 1997 and each year thereafter. Total payments to hospitals shall not exceed the amount allocated for each given year.
f. Beginning January 1, 1995:
(1) The charity care subsidy shall be determined pursuant to section 13 of P.L.1995, c.133 (C.26:2H-18.59b) and section 3 of P.L. , c. (C. )(pending before the Legislature as this bill).
(2) A charity care claim shall be valued at the same rate paid to that hospital by the Medicaid program, except that charity care services provided to emergency room patients who do not require those services on an emergency basis shall be valued at a rate appropriate for primary care according to a schedule of payments adopted by the commissioner.
(3) The department shall provide for an audit of a hospital's charity care within a time frame established by the commissioner.
(cf: P.L.1995, c.133, s.5)
4. (New section) a. For the period January 1, 1996 to December 31, 2000, the charity care subsidy shall be determined according to the following methodology.
If the Statewide total of adjusted charity care is less than available charity care funding, a hospital's charity care subsidy shall equal its adjusted charity care.
If the Statewide total of adjusted charity care is greater than available charity care funding, then the hospital-specific charity care subsidy shall be determined by allocating available charity care funds so as to equalize hospital-specific payer mix factors to the Statewide target payer mix factor. Those hospitals with a payer mix factor greater than the Statewide target payer mix factor shall be eligible to receive a subsidy sufficient to reduce their factor to that Statewide level; those hospitals with a payer mix factor that is equal to or less than the Statewide target payer mix factor shall not be eligible to receive a subsidy.
Charity care subsidy payments shall be based upon actual documented hospital charity care.
As used in this section:
(1) The hospital-specific "documented charity care" shall be equal to the dollar amount of charity care provided by the hospital that is verified in the department's most recent charity care audit conducted under the most recent charity care eligibility rules adopted by the department and valued at the same rate paid to that hospital by the Medicaid program;
For 1996, documented charity care shall equal the audited, Medicaid-priced amounts reported for the first three quarters of 1995. This amount shall be multiplied by 1.33 to determine the annualized 1995 charity care amount. For 1997 and subsequent years, documented charity care shall be equal to the audited Medicaid-priced amounts for the last quarter two years prior to the payment period and the first three quarters of the year prior to the payment period.
(2) In 1996, the hospital-specific "operating margin" shall be equal to: the hospital's 1993 and 1994 income from operations minus its 1993 and 1994 charity care subsidies divided by its 1993 and 1994 total operating revenue minus its 1993 and 1994 charity care subsidies.
In 1997 and each year thereafter, the hospital-specific "operating margin" shall be calculated in the same manner as for 1996, but on the basis of income from operations, total operating revenue and charity care subsidies data from the three most current years;
After calculating each hospital's operating margin, the department shall determine the Statewide median operating margin;
(3) The hospital-specific "profitability factor" shall be determined annually as follows. Those hospitals that are equal to or below the Statewide median operating margin shall be assigned a profitability factor of "1". For those hospitals that are above the Statewide median operating margin, the profitability factor shall be equal to:
.80 x (hospital specific operating
margin - Statewide median operating margin)
1 - ......................................................................................
highest hospital specific operating
margin - Statewide median operating margin
(4) The hospital-specific "adjusted charity care" shall be equal to a hospital's documented charity care times its profitability factor;
(5) The hospital-specific "revenue from private payers" shall be equal to the sum of the gross revenues, as reported to the department in the hospital's most recently available New Jersey Hospital Cost Reports for all non-governmental third party payers including, but not limited to, Blue Cross and Blue Shield plans, commercial insurers and health maintenance organizations;
(6) The hospital-specific "payer mix factor" shall be equal to a hospital's adjusted charity care divided by its revenue from private payers; and
(7) The "Statewide target payer mix factor" is the lowest payer mix factor to which all hospitals receiving charity care subsidies can be reduced by spending all available charity care subsidy funding for that year.
b. For the purposes of this section, "income from operations" and "total operating revenue" shall be defined by the department in accordance with financial reporting requirements established pursuant to N.J.A.C.8:31B-3.3.
c. Any charity care subsidy funds that are not distributed in a given year pursuant to this section shall lapse to the Health Care Subsidy Fund as provided in subsection e. of section 8 of P.L.1992, c.160 (C.26:2H-18.58).
5. Section 7 of P.L.1992, c.160 (C.26:2H-18.57) is amended to read as follows:
7. Effective January 1, 1994, the Department of Health shall assess each hospital a per adjusted admission charge of $10.00.
[Of the] The revenues raised by the assessment[, $5.00 per adjusted admission] shall be [used by the department to carry out its duties pursuant to P.L.1992, c.160 (C.26:2H-18.51 et al.) and $5.00 per adjusted admission shall be used by the department for administrative costs related to health planning] deposited in the Health Care Subsidy Fund and used to fund charity care subsidies in order to reduce the amount of revenue needed for appropriation from the General Fund pursuant to section 7 of P.L. , c. (C. )(pending before the Legislature as this bill).
(cf: P.L.1995, c.133, s.3)
6. Section 15 of P.L.1992, c.160 (C.26:2H-18.65) is amended to read as follows:
15. There is established in the Department of Health the Health Access New Jersey program. The purpose of the program is to provide subsidies for health benefits coverage, in order to provide for health care [which shall be delivered in disproportionate share hospitals and by other community-based health care providers] for low-income uninsured children, working people and those temporarily unemployed, based on a sliding income scale with modest copayments as determined by regulations adopted by the department. The program shall include the provision of early preventive and primary care [to help reduce costs for families and individuals].
The commissioner shall contract with health insurance carriers, health maintenance organizations and other appropriate entities in the State to administer the program.
(cf: P.L.1995, c.133, s.10)
7. Section 16 of P.L.1992, c.160 (C.26:2H-18.66) is amended to read as follows:
16. The Health Access New Jersey subsidy account shall be allocated $50 million in 1995[, $100] $75 million in 1996, and[$150] $100 million in 1997 and each year thereafter.
(cf: P.L.1995, c.133, s.11)
8. (New section) The Health Care Subsidy Fund shall be funded through calendar year 2000 with General Fund revenues at an annual level, when combined with revenues deposited pursuant to section 7 of P.L.1992, c.160 (C.26:2H-18.57), that is sufficient to fund charity care subsidies and Health Access New Jersey pursuant to sections 9 and 16 of P.L.1992, c.160 (C.26:2H-18.59 and 26:2H-18-66), respectively.
9. (New section) In Fiscal Year 1997 and each subsequent fiscal year, the Governor shall recommend and the Legislature shall appropriate $71.5 million from the General Fund and such federal funds as may be available to the Hospital Health Care Subsidy account in the Division of Medical Assistance and Health Care Services of the Department of Human Services.
10. This act shall take effect immediately and be retroactive to January 1, 1996.
STATEMENT
This bill establishes a methodology for the distribution of hospital charity care subsidies and provides a funding mechanism for these subsidies and the Health Access New Jersey program for the period from 1996 through 2000.
The bill provides for a charity care subsidy distribution methodology for 1996 and beyond that is similar to that used in 1995. The hospital-specific charity care subsidy is to be determined by allocating available charity care funds so as to equalize hospital-specific payer mix factors (as defined in the bill) to the Statewide target payer mix factor; except that if the Statewide total of adjusted charity care is less than available charity care funding, a hospital's subsidy shall equal its adjusted charity care. The Statewide target payer mix factor is the lowest payer mix factor to which all hospitals receiving charity care subsidies can be reduced by spending all of the amount allocated in each year ($350 million in 1996 and $325 million each year thereafter) for charity care subsidies. Those hospitals with a payer mix factor greater than the Statewide target payer mix factor shall be eligible to receive a subsidy sufficient to bring their factor down to that Statewide level; those hospitals with a payer mix factor that is less than or equal to the Statewide target payer mix factor shall not be eligible to receive a subsidy.
The charity care subsidy distribution methodology is based on documented (actual) charity care as verified by the most recent charity care audit conducted by the Department of Health, and valued at the same rate paid to that hospital by the Medicaid program.
The bill provides that the Health Care Subsidy Fund will be funded at $425 million each year. Of that amount, $350 million will be allocated for charity care subsidies in 1996 and $325 million each year thereafter, and $75 million for the Health Access New Jersey program in 1996 and $100 million each year thereafter. These amounts will be funded by appropriations from the General Fund and the $10 per adjusted admission charge assessed each hospital by the Department of Health pursuant to section 7 of P.L.1992, c.160 (C.26:2H-18.57).
The bill also clarifies that the purpose of the Health Access New Jersey program will be to provide health insurance subsidies for low-income uninsured children, working people and the temporarily unemployed.
Finally, the bill provides for continued annual appropriations in Fiscal Year 1997 and beyond of $71.5 million from the General Fund, and any available matching federal monies, to the Hospital Health Care Subsidy account in the Division of Medical Assistance and Health Care Services (Medicaid) to fund services at disproportionate share hospitals.
Designated the "Health Care Protection Act."