JULY2014 2012 JUNE Visit us now online at www.NJPhysician.org
In This Issue: Acquiring A Medical Practice Minors’ Right To Confidential Health Care Report Sees Health Care Spending Rising in 2015 As Healthcare Paradigm Shifts, NJ Hospitals Face Uncertain Future
Publisher’s Letter Dear Readers, Since the first issue of New Jersey Physician was introduced, we have been providing practitioners with the information they need to keep pace with our state’s changing healthcare climate. Without question the new developments have been continuous and for many of you, extremely challenging. In fact, those physicians who are just starting out are choosing among practice models designed to better adapt, some opting not to own their own practice, but rather to become employees of hospitals, ACOs or “super groups.” Many who have been in solo practice or small groups are being forced to reconsider those models, in favor of a “strength in numbers” situation. In order to more accurately inform about and reflect the current trends in healthcare as they relate to practice management in New Jersey today, we, too, are making some changes. Although we have thoroughly enjoyed featuring a clinical cover story each month, having had the opportunity to get to know so many of you and to report on the life-changing work you do, we must now scale back somewhat on that. Our goal, going forward, is to concentrate more on crucial practice management issues of the day, taking into account the varied models that now exist. Clinical cover stories will appear in a few selected issues during the year. Practices or hospital programs will be chosen for their incorporation of cutting edge technology as well as the performance of innovative procedures that dramatically improve health and quality of life. Also, they will exemplify the characteristics of successful practice management. Our non-clinical June cover story focuses on the issues surrounding practice acquisition. John Aiello, Esq. of Giordano, Halleran and Siesla discusses the process from the perspective of both buyer and seller. It is a must-read for anyone contemplating this venture. We hope you continue to choose New Jersey Physician as your guide to the latest healthcare trends statewide and the ways in which to most productively and successfully continue to practice medicine in New Jersey.
Published by Montdor Medical Media, LLC
Co-Publisher and Managing Editors Iris and Michael Goldberg
Contributing Writers Iris Goldberg Michael Goldberg John A. Aiello Beth Fitzgerald Andrew Kitchenman Eric Strauss Melanie Evans Lindy Washburn
Layout and Design - Nick Justus
New Jersey Physician is published monthly by Montdor Medical Media, LLC., PO Box 257 Livingston NJ 07039 Tel: 973.994.0068 F ax: 973.994.2063 For Information on Advertising in New Jersey Physician, please contact Iris Goldberg at 973.994.0068 or at igoldberg@NJPhysician.org Send Press Releases and all other information related to this publication to igoldberg@NJPhysician.org Although every precaution is taken to ensure accuracy of published materials, New Jersey Physician cannot be held responsible for opinions expressed or facts supplied by its authors. All rights reserved, Reproduction in whole or in part without written permission is prohibited. No part of this publication may be reproduced or transmitted in any form or by any means without the written permission from Montdor Medical Media. Copyright 2010.
Subscription rates:
With warm regards,
$48.00 per year
Iris & Michael Goldberg
$6.95 per issue
Iris and Michael Goldberg
publication for the medical community of our state and is
Advertising rates on request New Jersey Physician magazine is an independent not a publication of NJ Physicians Association
Contents
CONTENTS
4
Acquiring A Medical Practice
6
Legal Medicine
9
Healthcare News
11
State Picks Consultant to Analyze Newark Health Services
12
Hospital Rounds
14
Medical News
16
Health System Launches Site Dedicated To Clinical Trials
16
Accept Consolidation Trend and Find Ways to Cope With Rising Prices, Papers Say.
17
$14M Cancer Center Opens in Wayne
18
State Approves Sale of Saint Mary’s Hospital in Passaic To For-Profit Chain
21
RWJ, Somerset Hospitals Complete Merger
21
AtlantiCare to Merge with Pa-Based Geisinger Health System
2 New Jersey Physician
olicies dures
Healthcare Professionals -Spending about Spendingmore moretime timethinking thinking about Spending more time thinking about Spending more tim HIPAA and EHR So you can focus on your pati e nts. HIPAA and EHR HIPAA an HIPAA and EHR Spending more time thinking abou than practicing medicine? thanHIPAA practicing medicine? than practicing than practicing andmedicine? EHR
Technology Security Assessments for HIPAA, We than practicing medicine? provide Technology and Compliance solutions forand We provide Technology We provide Technology and Compliance solutionsforfor We provide Technology and Compliance solutions Healthcare Professionals -Meaningful Use & PCI Healthcare Healthcare Professionals Healthcare Professionals ---- solutionsProf We provide Technology and Compliance for Healthcare Professionals --
SoSoyou you on patients. So can focus o youcan canfocus focusyou your patients. So can focus ononyour your patients.
ArchTech Medical wil perform a comprehensive, multiSo you can focus on your patients. l a yered assessment of your envi r onment. We perform TechnologySecurity Security Assessments for HIPAA,for HIPAA, chnology Assessments Technology Security Assessments for HIPAA, echnology Security Assessments for HIPAA, ogy Security Assessments for HIPAA, Meaningful Use & PCI Meaningful Use & rPCI detailed scanni ng of your enti reUse envi Meaningful & PCI Meaningful &onment PCI using Meaningful Use &Use PCI chTech Medical will perform a ecomprehensive, multiadvanced scanni n g tool s . Your compl ted report wi l ArchTech Medical will perform a comprehensive, multiMedical will perform a comprehensive, multi-multiArchTech Medical willofperform a comprehensive, ArchTech Medical will perform a comprehensive, multiPlease contact us for additional information about your yered assessment of your environment. We perform layered assessment your environment. We perform ssessment of your environment. We perform address: layered assessment ofofof your environment. We We perform layered assessment ofyour your environment. perform using tailed scanning entire environment detailed your entire environment practice’s HIPAA security assessment. Referrals from canning ofscanning your entire environment using using
detailed scanning ofYour your entire environment using detailed scanning of your entire environment dvanced scanning tools. Your completed will d scanning tools. completed report willusing advanced scanning tools. Your completed report will reportPlease Please contact usabout for addition contact us for additional information doctors and practi c e managers gl a dl y provi d ed upon request. Please contact us for additional information about your your advanced scanning tools. Your completed report will ddress: advanced scanning tools. Your completed report will practice’s HIPAA security address: Please contact us for additional information about your practice’s HIPAA assessment. Referrals from Please contact ussecurity for additional information about your as practice’s HIPAA security assessment. Referrals from address: address: doctors and practice managers doctors practice’s and practice managers gladly provided upon HIPAA security assessment. Referrals practice’s HIPAA security assessment. Referrals fromrequest.g doctors and practice managers gladly provided uponfrom request. • Plain-English securityforguidelines for HIPAA compliance -English security guidelines HIPAA compliance andand practice managers gladly provided doctors practice managers gladly providedupon uponrequest. request. • Plain-English security guidelines for HIPAA compliance doctors Amanda Kel l e r -akel l e r@archi m edestech.com nology safeguards and recommendations Amanda Keller -akeller@archimedestech.com • Technology safeguards and recommendations Amanda Keller -akeller@ • Plain-English security guidelines for HIPAA compliance • Plain-English security guidelines for HIPAA compliance • Technology safeguards and recommendations Amanda Keller -akeller@archimedestech.com cal safeguards • Physical safeguards • Technology safeguards andand recommendations Amanda Keller -- akeller@archimedestech.com • Technology safeguards recommendations Amanda Keller -- akeller@archimedestech.com www.archtechmedical.com • Physical safeguards nistrative/Organizational policies www.archtechm • Administrative/Organizational policies • Physical safeguards • Physical safeguards omizable Policies and Procedures www.archtechmedical.com 973-270-2249 • Administrative/Organizational policies • Customizable Policies and Procedures www.archtechmedical.com 973-270 • Administrative/Organizational policies
• Plain-English security guidelines for HIPAA compliance • Technology safeguards and recommendations • Physical safeguards www.archtechmedi cal.com ••Admi nistrative/Organizational polpolicies icies www.archtechmedical.com Administrative/Organizational • Customizable Policies and Procedures 973-270-2249 • Customizable Policies and Procedures • Customizable Policies and Procedures 973-270-2249 • Customi z abl e Pol i c i e s and Procedures ch Medical provided an amazingly detailed audit report with recommendations on973-270-2249 how to become and stay compliant 973-270-2249
ArchTech Medical provided anmany amazingly detailed audit report with how to be PAA security regulations. They provided policy and procedure documents, and recommendations explained everything inon non-technical had the information I needed attest for Meaningful Use. --Valerie, Manager, NJ withallArchTech HIPAA security regulations. They provided many policy and procedure documents, and explaine Medical provided an to amazingly detailed audit report with recommendations on howPractice to become and stay Springfield, compliant
ArchTech Medical provided an amazingly detailed report with recommendations onon how to to become and compliant terms. I had all the information I needed to attest forwith Meaningful Practice ArchTech Medical provided an amazingly detailed audit report recommendations how become andstay stay compliant with HIPAA security regulations. They provided manyaudit policy and procedure documents,Use. and explained everything in--Valerie, non-technical withterms. HIPAA security regulations. They provided many policy andand procedure documents, andand explained everything in innon-technical with IHIPAA regulations. They provided many policy procedure documents, explained everything non-technical had allsecurity the information I needed toy detai attest for Meaningful Use. --Valerie, Practice Manager, Springfield, NJ ArchTech Medi c al provi d ed an amazi n gl l e d audi t report wi t h recommendati o ns on how to become and stay compl i a nt terms.terms. I hadI all the information I needed to attest for Meaningful Use. --Valerie, Practice Manager, Springfield, had all the information I needed to attest for Meaningful Use. --Valerie, Practice Manager, Springfield,NJNJ
with HIPAA security regulations. They provided many policy and procedure documents, and explained everything in non-technical terms. I had all the information I needed to attest for Meaningful Use. --Valerie, Practice Manager, Springfield, NJ
ACQUIRING A MEDICAL PRACTICE Practicing physicians live in a dynamic time, where the professional is confronted with a wide range of choices for providing medical services. Very often the pursuit of those choices involves a sale of an existing medical practice, which is sometimes related to the age of the medical staff; the willingness of the physicians to bear the risk associated with practicing in an uncertain environment; practice costs, such as implementing an electronic health record system; increased competition for talent as well as increasing competition between physicians and hospitals: eroding income; pressures associated with extensive regulatory compliance; and difficult insurance reimbursement issues. Both primary care and specialty practices are often acquired by: •
Larger single specialty or multiple specialty groups practices seeking to grow to attain critical mass;
•
Public companies or private equity firms engaged in the healthcare industry (an acquisition by this type of purchaser can create corporate practice of medicine issues unless the transaction is properly structured); or
•
An affiliate of a non-profit hospital.
As the practice pursues any of those various alternatives, it is important for the participants in the transaction to understand (i) the practice that is being acquired by conducting a comprehensive due diligence examination of that practice; (ii) that the regulated industry in which they operate imposes certain restrictions on the sale/acquisition process that do not apply in an unregulated setting; and (iii) that the failure to comply with applicable regulations in the context of an acquisition and otherwise carries with it significant adverse effects, including fines and penalties. This article will not treat this complex subject of selling and acquiring a medical practice in detail, but instead is intended to highlight certain issues relating to due diligence, deal structure and other miscellaneous matters. Due Diligence Examination of the Practice Being Acquired The purchase of a medical practice is, in many respects, not unlike the purchase of any business. Purchasers in either setting normally want to examine, among other things, general corporate matters, financial information, agreements and arrangements to which the target practice is a party, relationships with employees and contractors, tax matters, environmental matters and overall compliance with the laws governing the organization that is being sold. Even though the sellerís compliance with laws is a due diligence concern for the purchaser of any business, it is of heightened importance to the purchaser of a medical practice. Such heightened importance comes as no surprise given the extensive regulatory scheme within which a medical practice must operate. Whether or not the failure of the seller to comply with applicable laws will result in potential liability to the purchaser is, in part, a function of the deal structure. However, regardless of whether or not the purchaser will succeed to liability, it is important to know whether the seller has complied with the laws applicable to its business. Among other things, it will be an indicator of whether the financial statements of the practice truly reflect its earnings history and the potential of the practice. Certainly, profits obtained by a seller that has not complied with the law are less likely to be achieved on an ongoing basis, particularly where laws are strictly enforced by various governmental bodies having jurisdiction over a medical practice. With that said, due diligence issues of importance to the purchaser of a medical practice include, among others: •
Will the purchaser be able to get properly ìcredentialedî into the third party payor system?
•
Are there complaints against physician members of the selling practice pending with the New Jersey Board of Medical Examiners or comparable body in another state?
•
Has the seller engaged in fraudulent conduct either as it relates to claims for payment or applications for insurance?
•
Is the seller in compliance with the privacy, security and related requirements of the Health Insurance Portability and Accountability Act (ìHIPAAî)?
•
Are the seller’s accounts receivable being purchased and, if so, are the accounts receivable collectable? The seller should make representations in the purchase agreement as to the collectability of accounts receivable and if it turns out that the accounts receivable are not collectable, provision should be included for an adjustment to the purchase price to be paid for the practice.
•
Are the seller’s claims for payment for medical services rendered currently being audited by Medicare, Medicaid or another third party payor?
•
Have the billing practices to all third party payors been true, accurate and complete and in compliance with all applicable laws?
•
Does the seller have any liability for any refund, overpayment, discount or adjustment under any governmental program?
4 New Jersey Physician
•
Is the seller under investigation by any State or Federal governmental agency?
•
Has the seller entered into any consent decree, supervisory agreement, settlement agreement or other agreement with any governmental agency or third party restricting or otherwise affecting the operations of the Company (including any entered into since inception which may have lapsed or terminated or which are pending, proposed or under negotiation?)
•
Does the seller use medical equipment, operate a licensed health care facility, or provide any services for which licensure, registration, accreditation or prior approval of a transfer of ownership is required?
Deal Structure Affected by Healthcare Regulations The impact of the vast network of healthcare regulations is initially encountered in valuing the medical practice for sale. The practice cannot sell its patients nor can the purchaser pay for patient referrals. In addition, if the purchaser is tax-exempt or has an existing referral relationship with the selling practice physician, a fair market value analysis of the sale must be obtained. Value cannot be attributed to the patient base and instead the going concern value of a medical practice is premised upon such factors as the practiceís staff and relationships in the community. Consistent with this prohibition, payment for the practice must be fixed at the time of sale and paid to the sellers no more than 12 months after the closing of the sale. So called ìearn outî provisions which adjust the purchase price of a selling entity to account for post-closing operating results are prohibited. Any rental of space or equipment or personal service and management contracts entered into between the seller and the purchaser of the practice cannot include payment provisions that are adjusted based upon post-closing patient volume. These prohibitions are derived from a complex set of rules set forth in the Federal anti-kickback laws and regulations, the Federal Stark law and regulations, and the laws and regulations of the New Jersey Board of Medical Examiners. The purchaser will also need to evaluate whether the purchaserís acquisition of the practice will create any issues for the purchaser under New Jerseyís Codey law, which deals with physician self-referrals. Other Issues Requiring Attention A threshold issue to consider in the purchase/sale of a medical practice is whether or not there is a cessation of the practice by virtue of the sale. If a medical practice ceases to operate, the law requires that each patient of the practice be given notice that the practice will no longer operate. An argument can be made that if the practice is being acquired by a third party, the practice continues and there has been no cessation of the medical practice. Because the question of whether or not the medical practice has ceased to operate is somewhat murky, involving subjective factors, the better course of action is to provide patients with notice of the sale transaction. The Board of Medical Examiners has the authority to impose fines on the selling practice and suspend the license of the physicians that own the practice if proper notice is not given to the patients in connection with a sale that is considered a cessation of the practice. Another very significant aspect of the sale of a medical practice is how the parties treat patient medical records. It is absolutely essential that the purchaser of the practice be obliged to fulfill the sellerís obligation to make medical records available to the patient. The purchaser should be contractually obligated to make the medical records available to patients for seven (7) years following the date of the most recent medical record entry, and, in the case of the records of a minor, for a two year period after the minor has reached age 18. The seller should maintain a right of access to the patient records being transferred for the same number of years so as to be in a position to address payment disputes and/or malpractice claims. There are many other issues to be addressed in connection with the sale or acquisition of a medical practice, some of which are complex. The information presented in this article is just a snapshot. With the advice of experienced professionals, the difficult issues can be resolved and a transaction successfully completed. John A. Aiello, Shareholder of Giordano, Halleran & Ciesla, P.C. and Chair of its Corporate & Securities Department
June 2014
5
Legal Medicine
Minors' Right to Confidential Health Care Questions and Answers on Minors' Access to Reproductive Health Services What are the challenges to minors' access to confidential reproductive health services? Many laws exist, and many have been proposed, to limit minors' access to confidential health services such as birth control and abortion. Frequently, restrictive laws impose parental notification or parental consent requirements. Parental notification laws require doctors to notify a minor patient's parents before providing certain reproductive health services. Parental consent laws require minors to obtain written parental consent or a court order before a doctor may provide certain reproductive health services. What's wrong with requiring parental involvement for teenagers' access to abortion or birth control? It just seems like common sense. Parental involvement laws sound benign, but they are not. Fifteen years of experience in other states have demonstrated that parental involvement laws inflict physical and emotional harm on young women, especially the vulnerable teenagers from unhappy homes who most need our protection. National surveys show that most teenagers do consult their parents when faced with unplanned pregnancies. The younger the adolescent, the more likely she is to voluntarily confide in a parent when pregnant. Teenagers who do not reveal pregnancy to parents usually have very good reasons for maintaining their privacy. For example, some parents have rigid views on sex, birth control, and abortion; some families are in crisis from a recent event, such as a job loss or divorce; some parents are alcoholics, drug abusers or mentally ill. In dysfunctional families, parents may respond to the news of a daughter's sexual activity and pregnancy with rejection or violence. Parental consent and notification laws do not convert abusive, dysfunctional families into stable and supportive ones. The laws simply give pregnant adolescents from unhappy homes difficult options at a difficult time in their lives. Some travel alone to other states, some navigate through a stressful and humiliating court process, some bear babies before they are ready to be parents, and some turn in desperation to self-induced or illegal abortions. Minors can't do lots of important things, like get married. A teenager can't obtain a tattoo or have her ears pierced without her parent's permission. Why is this different? We are not talking about a decision that can be delayed until a teenager becomes an adult, like marriage, and we are not talking about something so frivolous as ear piercing or tattoos. We're talking about whether a teenager will be forced to have a baby against her will—a profound, life-altering event. But parental consent is always required for children's medical care, isn't it? The school nurse can't give a teenager an aspirin without her parent's permission. Are you saying that abortion should treated differently from comparable medical care? No. Parental involvement laws actually treat abortion differently from comparable services. All states have “medical emancipation” laws that guarantee teenagers confidential access to health care related to intimate behavior, such as sex and drugs. For example, teenagers may obtain treatment for as sexually transmitted diseases, birth control, pregnancy, drug or alcohol abuse, AIDS, sexual assault and mental illness without parental notification or consent in California. These laws exist because teenagers simply won't obtain vitally needed care if they need to reveal their experience with sex, drugs or alcohol to their parents. A Journal of Pediatrics study found that only 15% of teenagers would seek treatment for sexually transmitted diseases if they were forced to obtain parental consent. The number jumps to 50% when treatment is confidential. In another study, published ion Family Planning Perspectives, 25% of students said that they would simply not obtain health care if there were a chance that their parents would find out. These kinds of barriers create serious health problems, both for young people and for the public. But abortion is surgery; it seems different and more dangerous than those other health care services that teenagers can obtain on their own. Abortion is an extremely safe procedure—safer than receiving a penicillin shot in a doctor's office. Abortion is 10 times safer than continuing a pregnancy and delivering a baby—which the law allows teenagers to do with no parental involvement. The law even allows teenagers to consent to Caesarean section deliveries by themselves. Abortion is less dangerous for teenagers for adult women, while childbearing is more dangerous for teenagers than adult women. And having a baby poses far greater risks to a teenager's emotional well-being, education, and life prospects than ending an unplanned pregnancy.
6 New Jersey Physician
But surely we want teenagers to come to their parents when they are faced with something as important as an unintended pregnancy. Absolutely! When teenagers seek care by themselves, doctors and nurses strongly urge them to involve their parents. The majority of teens do confide in their parents when faced with a problem pregnancy. More than 90% of teens under 14, and 74% of 16-year-olds, tell at least one parent. But some teens just can't talk about sex without endangering themselves and their family relationships. The law can't mandate good family communication. Studies that have compared states with parental involvement laws to states without these laws have shown no statistical difference in the percentage of teenagers who told their parents about their pregnancies and abortions. Parents must talk openly with their children about sex, so that adolescents will feel safe confiding in their parents when they have questions or problems later. Teenagers who cannot safely talk to their parents about sex must be able to obtain health care when they need it. But won't teenagers without parental guidance go to abortion mills, which push teens into abortion so that they can make a profit? First, most teenagers who cannot involve their parents do confide in a trusted adult—an aunt, a grandmother, a clergy official, a teacher, a family friend. They are not all alone. Second, family planning clinics offer sensitive counseling that does not push any client into a decision. Health professionals legally must, and do, describe the risks and benefits of all pregnancy options so that the pregnant woman can make her own decision. There is no evidence that doctors are nurses are acting unethically and illegally in providing reproductive health services. If any clinics were forcing abortions on patients, the State should revoke their licenses—not impose barriers to all teenagers' care. Doctors and nurses at family planning clinics are particularly patient and sensitive when counseling teenagers. The only course of action they do strongly encourage is that teenagers talk to parents; counselors urge teens not to assume that parents will be furious, and even offer to help teenagers approach their parents. Are teenagers capable of making sound decisions about pregnancy, abortion and birth control? Yes. Many studies confirm that teenagers are capable of deciding whether they are ready to have a baby, and of giving informed consent to abortion or prenatal care. Doctors who have worked with teenagers for years say that they almost never see a patient who is unable to understand her options and make sound choices. In the extremely rare case of a developmentally delayed teen (or adult), a doctor would not perform an abortion on a patient incapable of giving informed consent. Won't parental involvement laws decrease teen pregnancy rates? No. Anti-choice politicians make this claim based on a single discredited study from Minnesota, funded by the anti-abortion movement. The study showed pregnancy rates decreasing in Minnesota while the parental involvement law was in effect—at a time that they were decreasing nationwide. But teenagers did not even know of the existence of the law, so it could not have been the reason that pregnancy rates were decreasing. The Minnesota study has never been replicated elsewhere. More recent studies have shown no decrease in pregnancy rates resulting from parental involvement laws. The studies have uniformly shown only negative results in teen health resulting from those laws: because the barriers erected by the laws cause teenagers to delay in obtaining health care, a greater percentage of teens obtain riskier and more complicated second-trimester abortions in states with parental involvement laws. There are many effective ways of reducing teen pregnancy rates, such as comprehensive sex education and access to contraceptives. Erecting barriers to teenagers' access to health is an ineffective, punitive and dangerous way of discouraging teen pregnancy. But don't parents have both legal obligations and legal rights to control their daughters? Parents have many rights—but they cannot force their daughters to have babies, just as they cannot force their daughters to have abortions. June 2014
7
Parental involvement laws do not guarantee that pregnant teenagers will confide in their parents. The laws are unconstitutional unless they contain a “judicial bypass”—a way for teenagers to avoid talking to their parents at all. Teenagers may go to court and get court orders allowing them to have abortions. That is why the numbers of teenagers who tell their parents that they are pregnant is no higher in states with these laws than in states without them. Teenagers who cannot safely confide in their parents will not do so: they will go to court, go out of state, have babies unwillingly, or turn in desperation to illegal or self-induced abortions. Why doesn't this court option take care of the teenagers who come from violent or dysfunctional families? When a teenager needs health care, she should not be embroiled in a legal proceeding. Going to court is time-consuming, complicated and intimidating. Teenagers are understandably fearful of confiding intimate details about pregnancy and abortion with a black-robed stranger. Some teenagers will never make it to court. They tend to be the youngest, less resourceful teens— the ones who are also least ready for parenthood. Judges who have presided over the teenage abortion cases in states with parental involvement laws have said repeatedly that they do not help teenagers make medical decisions; the court is simply a barrier to health care. Doctors and nurses echo these thoughts: they say that teenage patients who need to go to court before getting care are too distracted and fearful to concentrate on their health needs. Judges who faithfully follow the law feel like “rubber stamps”—they approve almost every petition, either because they find that the teenager is sufficiently mature to make her own decision, or that, if she is immature, it is not in her best interest to become a parent. But some judges do not follow the law: they veto teenagers' decisions because of the judges' own ideological views about teen sex or abortion. Government officials should not have the power to force teenagers to bear babies against their will.
Visit us now online at www.NJPhysician.org
8 New Jersey Physician
Healthcare News
Report sees health care spending rising in 2015 By Beth Fitzgerald Spending by the private sector on medical care in the U.S. will rise 6.8 percent in 2015, according to the annual forecast by the consulting firm PricewaterhouseCoopers. The report from PwC’s Health Research Institute, “Medical Cost Trend: Behind the Numbers,” called the 6.8 percent 2015 growth rate modest compared with the double-digit annual increases of the late 1990s and early 2000s. However, the fact that health spending continues to outpace gains in the nation’s gross domestic product “underscores the need for a renewed focus on productivity, efficiency and ultimately delivering better value for health care customers.” Each year, the HRI estimates the growth of private medical costs over the next year. PwC said insurance companies and employers use the medical cost trend data to estimate their costs in the coming years. After accounting for likely changes in health plan benefit design, such as higher deductibles and narrow networks, HRI projects a net growth rate for health care spending of 4.8 percent in 2015. PwC said benefit design changes typically hold down spending growth by shifting financial responsibility to consumers, who often choose less expensive options. “Confident consumers are spending more freely on health care due to the improved economy,” the study found. And more Americans now have health insurance as a result of the Affordable Care Act, leading to more health care spending. PwC predicted that the high costs of specialty drugs will increase the health care spending growth rate: “However, over the long term, these innovative new therapies may improve quality of life and reduce other medical costs.” Kelly Barnes, PwC’s U.S. health industries leader, said, "Due to a demand for value and increased efficiency in the health care industry, medical inflation will be modest this year." However, Barnes said, "It is still too early to tell whether the drive for transparency and better value for each health care dollar – the cornerstone of the new health economy – will be able to temper spending growth once millions of newly insured access the health care system."
The report notes that additional factors are helping to moderate the growth rate, including: • Health care providers gaining efficiencies through streamlining administrative activities and standardizing clinical programs to eliminate redundancies and lower operating costs. • Cost-conscious consumer shopping brought about by employees shouldering more of the financial responsibility for their health care. • Risk-based contracts in which health care providers are held accountable for patient outcomes. A companion PwC report, the 2014 “Health and Well-Being Touchstone Survey,” found: • Employers are continuing to shift financial responsibility for health plan costs to employees through plan design and increased contributions. High-deductible health plans are growing in popularity, with 18 percent of employers surveyed now offering a high-deductible plan as the only insurance option for employees. • Wellness continues to be a major investment for employers, with 71 percent offering programs, up from 68 percent in 2013. • Other than traditional cost savings efforts geared towards cost shifting, employers are considering private exchanges more often than other new and emerging strategies. “Major purchasers such as the federal government and large employers are helping to contain spending growth, in part by demanding greater value and by shifting more financial responsibility to consumers,” said Michael Thompson, principal, PwC’s human resource services practice. “Indeed, 85 percent of the employers we surveyed have implemented or are considering an increase in employee cost sharing, with high-deductible health plans the highest enrolled plan for 26 percent. When you consider that the in-network deductible is $1,000 or more for 40 percent of employers – up from 16 percent in 2010 – it’s no wonder that employers are exploring other cost saving efforts such as private exchanges and wellness initiatives.” June 2014
9
The attorneys in the Health Care Practice Group at Giordano, Halleran & Ciesla, counsel clients on a broad range of issues, integrating traditional legal principles with the special body of federal and state law governing the health care field. Our health care services include: Health
Care Reform Anti-kickback Law/Stark Law/NJ SelfReferral Law Professional Practice Formation and Related Agreements, such as Partnership Operating, and Shareholder Agreements Preparation and Negotiation of Contracts, such as Management, Employment, Physician Recruitment, Vendor, and Managed Care Contracts Purchase and Sale of Professional Practices and Practice Divorces Regulatory Compliance HIPAA and Confidentiality Issues Lease Preparation and Negotiation Joint Venture Formation Acquisition, Mergers and Considerations Physician Practice Management Issues Medicare and Other Reimbursement Issues Licensing Issues Litigation
Visit our Healthcare Blog for updates healthcare news, events, and legislation.
www.njhealthcareblog.com Giordano, Halleran & Ciesla PC | 732.741.3900 | info@ghclaw.com | www.ghclaw.com Follow us on Twitter: @GHCLawFirm
State picks consultant to analyze Newark health services By Beth Fitzgerald Navigant Consulting Inc. was chosen by a state agency Thursday to analyze health care services in the greater Newark area – a study whose scope includes recommending possible consolidation or regionalization of services now provided by the area's five hospitals and four other publicly-funded health facilities. The study also will consider whether health care services in the regional are inadequate and should be strengthened. New Jersey Health Care Facilities Financing Authority awarded a contract for $778,500 to Navigant, which previously did a study of Hudson County’s health care system for the authority that was issued in 2011. Navigant has a Nov. 15 deadline to complete the Newark study. One of the five hospitals, Saint Michael’s Medical Center in Newark, is now seeking state approval to be sold to California-based Prime Healthcare Services. The five hospitals are Newark’s three hospitals: Newark Beth Israel Medical Center, Saint Michael’s Medical Center and University Hospital; Clara Maass Medical Center in Belleville; and East Orange General Hospital. Barnabas Health, the state’s largest hospital system, operates Newark Beth Israel and Clara Maass. The study will also look at three health centers: Jewish Renaissance Medical Center, Newark Community Health Centers and Newark Homeless Health Care, as well as Broadway House, which is a long-term-care facility. The authority’s request for proposals charges Navigant, among other things, with providing “an analysis of where patients in the Newark area are going for health care services and, if a substantial number are going elsewhere, why they are doing so. The consultant should also provide recommendations on steps, if any, that can be taken to keep patients in the Newark area.” The RFP states, “The purpose of the evaluation is to determine whether there is duplication of services, unused capacity or a lack or insufficiency of necessary services in the area and to propose recommendations for consolidation or regionalization of services if there is duplication or overcapacity.” The RFP could lead to a recommendation that health care services in the Newark area should be expanded. It directs the consultant to consider recommending “expansion of services if there is a lack of necessary services.” Joel Cantor, director of the Rutgers Center for State Health Policy, said, "The Newark region has too much inpatient (hospital) bed capacity and needs to build up its primary care infrastructure." Cantor served on the Reinhardt commission, which in 2008 issued a major study of health care in New Jersey. Cantor said Navigant did good work for that commission, "and has the capacity to do what is needed to support what may be tough decisions in Newark."
June 2014
11
Hospital Rounds
HOSPITAL ROUNDS
As Healthcare Paradigm Shifts, NJ Hospitals Face Uncertain Future
Andrew Kitchenman
Experts say survival may depend on ability to refocus on outpatient services, partnerships New Jersey hospitals are in a bind. Some of them may close in the next few years, experts say, unless they find a way to transform themselves into healthcare systems that focus on keeping patients healthy in an outpatient setting, while dealing with the reality that most revenue is still based on in-hospital services they provide. Hospitals must have cash reserves and an operating margin of at least 3 percent or they may face a financial crisis, according to current and recent hospital executives. “If you’re not in a system that has that financial foundation, I don’t know how you manage the next three to five years,” said Judith Persichilli, recently retired president of Catholic Health East-Trinity Health, a national hospital system. The hospitals that survive this transition period will look very different from the hospitals of the recent past. They will have fewer beds, more links with primary-care and medical specialty providers, and more partnerships with other hospitals in which each hospital only provides specific services. That was the verdict of a panel assembled yesterday by the New Jersey Health Care Quality Institute in Ewing. “I think a lot of smaller community hospitals disappear,” predicted Richard Miller, president and CEO of Virtua Health. Miller added that while there may be more mergers of multistate hospital systems, he said the trend of New Jersey systems buying smaller community hospitals has largely ended. “There may be certain markets, even in New Jersey, where there won’t be an acute-care hospital,” Miller said. Virtua now generates half of its revenue from outpatient services, which Miller said he wouldn’t have thought possible a decade ago. “Everyone wants to be part of primary care, whether it’s CVS,” Walgreens or Walmart, Miller added. Princeton University healthcare economist Uwe Reinhardt said doctors have traditionally driven the bulk of healthcare spending by ordering expensive, unnecessary services and threatening to leave for a rival hospital if hospital executives don’t agree. Miller said Virtua is taking a stand against this as part of its effort to make care more efficient. “I don’t want high-cost physicians in my hospital anymore,” Miller said. He said Virtua may need only half as many inpatient beds in 10 years as it has today, so it’s planning to build its outpatient capacity. He added that every hospital CEO must consider partnerships – for example, a hospital may reach an agreement with a neighboring healthcare system to provide neuroscience-related treatment to the hospital’s patients. Persichilli criticized state regulations for making it difficult for hospital systems to make changes. She cited the 15-month process that St. Michael’s Hospital in Newark has been going through as part of her system’s proposed sale of the hospital to for-profit Prime Healthcare of California. She said state officials have indicated it will take at least another year for that to be resolved. “We need to collaborate and only have fierce competition for what’s right for the community,” Persichilli said. Opponents of the sale, including a union representing nurses at other hospitals, have questioned Prime’s business tactics and have called for state monitors for Prime’s acquisitions. Heather Howard served as the state health and senior services commissioner during the last wave of hospital closings that took place late in the last decade. During that time, she said, the state was trying to move from “crisis management to strategic planning,” in part by asking Reinhardt to lead a commission that recommended ways to “rationalize” the state’s healthcare system. Howard recalled receiving phone calls during that time on a Friday afternoon from hospital officials saying they would have close on Monday if it didn’t receive a bailout. Howard’s comment prompted Persichilli to predict that “there are going to be more Friday afternoon phone calls, and we’re not set up as a state in New Jersey” to handle those calls.
12 New Jersey Physician
Howard said the state has made progress, based on the work of the commission, which recommended assessing whether hospitals should receive state aid based on a combination of whether they provide essential services and whether they are financial vulnerable. Howard said the state saw nine hospitals close after the commission completed its work, but the state was able to maintain needed services by analyzing each case. For example, Passaic County went from five hospitals two hospitals, both of which were Catholic-affiliated. But the state was able to maintain reproductive health services that those hospitals wouldn’t provide since Planned Parenthood moved into one of the vacant buildings. Howard pointed out that even with an increase in the number of insured patients as a result of the 2010 Affordable Care Act, government still must provide charity care and other aid for hospitals that serve those who remain uninsured or underinsured.
Friendly, Compassionate Staff to Serve the Urban Patient The Smith Center for Infectious Diseases and Urban Health was developed to address infectious diseases in the inner city. This non-profit center, which is initially focusing on HIV, recognizes that inner city patients face many unique challenges in their daily lives. These challenges interfere with treatment of infectious diseases and foster an environment where infectious diseases are easily spread. When you treat a person with HIV, you greatly reduce the chances of transmission and treat the whole community. In the past 10 years there have been incredible advances in HIV treatment. We at the Smith Center believe that by using novel approaches we can rid New Jersey of HIV. We have designed programs to incentivize patients to continue their medications. We have created a personal atmosphere, where each patient is known by her or his first name. We work with our patients to ensure that we are providing the best service possible.
Dr. Stephen Smith - named a Top Doctor of New Jersey by Castle Connolly 310 Central Avenue, Suite # 307 • East Orange, NJ 07018 Phone: 973-809-4450 Fax: 973-395-4120 • www.smithcenternj.org
June 2014
13
Medical News
MEDICAL NEWS
Bill Would Give Public Workers Greater Access to Cancer Medications Andrew Kitchenman
State plan would cover off-label use of drugs, insurers want to see tougher standards Assembly Health and Senior Services Committee Chairman Herb Conaway Jr. (D-Burlington). Until now, New Jersey public employees have been at a disadvantage compared with those insured by private employers when seeking to use a medication for a treatment that hasn’t been approved by the U.S. Food and Drug Administration. A bill advancing in the Legislature would change that by requiring the state and school health plans to cover these “off-label” prescriptions, which are particularly important for cancer treatments. Assemblyman Herb Conaway Jr., a primary-care doctor, is the sponsor of the bill. A key advocate for the bill has been the American Cancer Society’s Cancer Action Network. Ethan Hasbrouck, the network's advocacy director, said doctors frequently try different combinations of drugs, outpacing the FDA’s ability to approve these uses. “Some drugs are found to work against many different types of tumors,” Hasbrouck said, adding “drug combinations tend to change over time” as doctors try to determine which ones work best. Drugs go through clinical trials before the FDA determines whether they work and are safe. However, this process can take years, and sometimes older, generic drugs are found to be safe for new uses. It’s legal for any drugs other than opioids to be prescribed for off-label uses, but pharmaceutical companies can’t market the drugs for that purpose. A 2008 study of cancer doctors found that eight in 10 had used drugs off-label. An example of a common off-label drug cited by the American Cancer Society is the use of the antianxiety drug lorazepam, which is sold as Ativan, to control nausea during cancer treatments. The roughly 800,000 residents in the State Health Benefits Program and School Employees’ Health Benefits Program weren’t covered under the existing state requirement that insurance plans cover these off-label uses. That’s because the current requirement only applies to those who have insurance through private-sector jobs. That puts patients who are public workers in a position in which their insurance carriers could simply deny payment for these uses, Hasbrouck said. While the state’s insurers frequently are opposed to expanded benefits, the industry didn’t unite in opposition to the bill. New Jersey Association of Health Plans President Wardell Sanders said insurers would agree to treat public employees the same as private-sector workers. But Sanders raised an objection to a provision of the current standards that govern which off-label uses must be approved. Currently, drugs must be approved for off-label use if one peer-reviewed journal article found them to be effective. Sanders noted that other states generally require a larger number of published studies before requiring insurers to cover offlabel uses. “We would urge that that be tightened up in the existing law as you move forward,” Sanders said of raising the standard for published studies. He suggested that having two peer-reviewed journal articles would be a better standard. He also noted that there have been prominent retractions of erroneous studies that were published in only one journal, such as a fraudulent 1998 Lancet article that suggested a link between a vaccine and autism. Conaway said the bill would put doctors in a better position to prescribe the medications that they feel will be best for their patients, without concerns about malpractice lawsuits. The bill was opposed by Express Scripts Inc., which provides prescription-drug benefits under the state plan. The bill received bipartisan support in the Assembly Heath and Senior Services Committee, where it was released by an 11-0 vote, with Assemblyman Erik Peterson (R-Hunterdon, Somerset and Warren) abstaining. A Senate version of the bill hasn’t been introduced.
14 New Jersey Physician
To NJ Hospitals, Healthcare Systems, ACOs and All Other Practice Models
Your Ad Here Will Receive Statewide Exposure to:
• • • • • • •
Promote Advanced Technology Share Innovative Procedures Receive Physician Referrals Create a Prominent Awareness Recruit Physicians Acquire Practices Sell Your Practice
Call (973) 994-0068 for details about placing your ad in upcoming issues of New Jersey Physician
Hospital Rounds
Health system launches site dedicated to clinical trials By Eric Strauss People in New Jersey who want to find information about clinical trials and research studies have a new resource. Atlantic Health System on Wednesday announced it has launched a website dedicated to providing information about open and enrolling trials and studies at its medical centers. The site, atlantichealth.org/research, includes a search tool that will help people find trials based on the disease area, keywords or the names of doctors. "We want to create a platform that helps both patients and doctors identify available clinical trial options at our hospitals," Eric Whitman, medical director of Atlantic Center for Research, Carol G. Simon Cancer Centers and the Atlantic Melanoma Center, said in a statement. "We're proud of our clinical research programs, and this website will help our physicians and the communities we serve take full advantage of everything we have to offer." Atlantic Health System includes Morristown, Overlook, Chilton and Newton medical centers.
Accept consolidation trend and find ways to cope with rising prices, papers say By Melanie Evans Hospital and physician consolidation underway won't end anytime soon—and shouldn't, in some cases—but with concentration comes the risk of rising prices that demands response from policymakers, according to newly published papers from attorneys and economists this week. "There will be more consolidation," said Paul Ginsburg, a health policy and economics professor at the University of Southern California, who authored one of four papers released online by the journal Health Affairs. To expect the trend to stop is unrealistic in light of the capital necessary to adapt to changing markets and public policy. "Rather than fight it, we should just start looking at how to cope with the greater market power from increased consolidation." Consolidation has intensified across healthcare, with megadeals merging hospital giants such as Catholic Health East and Trinity Health and other acquisitions between health plans, medical groups and hospitals. Dealmakers say the transactions allow for greater coordination to reduce unnecessary services and improve outcomes, as well as sufficient scale to manage the financial risks of new payment models, such as accountable care organizations. More coordination among hospitals and doctors is one promising fix for the harmful and costly waste created by healthcare's highly fragmented markets. The nation spends billions of dollars on unnecessary hospital visits, overuse of diagnostic tests and medication errors, which policymakers say can be saved with fewer gaps in patient care. Greater investment in information technology will improve easy access to patients' medical history and eliminate duplication, but closer work between hospitals and may also eliminate gaps in care and bolster prevention, proponents say. That integration, however, also consolidates providers into larger networks that can command higher prices. Health plans risk consumer revolt by excluding large or prominent provider networks, weakening their bargaining power. "We're better off with choices than not as consumers," said Mark Pauly, a professor of economics and healthcare management at the University of Pennsylvania. ACOs, which have expanded under Medicare as part of the Affordable Care Act, have encouraged consolidation to promote more effective care, he said. "That's worrisome," said Pauly, who was not an author on the journal articles. "It's not a foregone conclusion that it will improve the quality of care. That adds to my general apprehension about consolidation." Ginsburg argues that it's up to policymakers to ensure larger networks compete on price and quality and don't exploit market power. For example, Massachusetts law prohibits hospitals and doctors from refusing to contract with insurers that exclude them from top tiers of plans that steer patients to low-cost and high-quality providers, he said. Tiers could be expanded to include more sophisticated options that steer patients toward specific services within hospitals, he said. Policies can also inhibit competition. That might be the result of regulation forcing health plans to expand narrow provider networks. Narrow networks limit patients' choice of providers and offer lower premiums because the participating providers accept lower rates in exchange for the promise of more patients. Where narrow networks fail, governments could consider direct price regulation, he said. Regulators could also influence emerging payment models under reform, such as accountable care organizations, to develop a more competitive marketplace, said William Sage, a professor at the University of Texas School of Law and author of another
16 New Jersey Physician
paper. Accountable care organizations should be encouraged to develop customizable bundles for specific services that carry a warranty based on performance, he said. Warranties should be universal in healthcare, Sage said, just as automakers must fix defective ignition switches. That leaves hospitals and doctors at risk for losses for poor quality. Warrant risk, however, would not put providers at risk for demand for healthcare services, a risk typically borne by insurers. "We have a very sorry history of asking physicians to bear insurance risk," he said. Bundles in an industry as complex as healthcare may be impractical, consultant Bruce Vladeck countered in a separate paper, and options such as tiered networks that rely on consumers to exert influence over prices overestimate consumers' clout. "One effect of changes in health financing in the past two decades is unavoidably clear, if too often overlooked or minimized in importance by the health policy community: The average individual with health insurance is considerably worse off now than 20 years ago," thanks to higher out-of-pocket costs and more aggressive billing and collection practices, he said. More on market power UnitedHealthcare did not enter federally run health insurance exchanges, and that decision increased premiums by an average of 5.4% for the second-lowest priced sliver health plans sold to individuals, researchers estimated in a newly released economics paper. UnitedHealthcare, the largest U.S. insurer, has significant (20%) market share in some states where it operates, such as South Carolina and Arizona. The absence of a major rival potentially reduced price competition, researchers said. Indeed, federal spending on subsidized plans sold on the exchanges would be $1.7 billion lower if every eligible insurer entered the marketplaces. Speaking of the exchanges Deals like one between Presbyterian Healthcare Services in Albuquerque, N.M., and Intel Corp. will likely increase, say Fitch Ratings analysts who cover the not-for-profit healthcare sector. Presbyterian entered into a direct contract to provide health benefits for Intel employees. More such direct contracts are expected thanks to continued pressure to control health spending, analysts said in a new report. "Increasing frustration about rapidly rising healthcare costs have driven employers to search for nontraditional healthcare arrangements that provide financial incentives to more effectively manage annual healthcare spending for their employees," Jennifer Kim, a Fitch associate director, said in a news release.
14M cancer center opens in Wayne By Beth Fitzgerald St. Joseph's Healthcare System has opened a new $14 million cancer center on the campus of its Wayne hospital that it said will make oncology services more convenient for residents of Wayne and the surrounding area. Dr. Dov Gorshein, medical director of the new St. Joseph’s Cancer Center, said the 32,000-square-foot facility enables Paterson-based St. Joseph’s “to provide advanced cancer treatment closer to home for many area residents than was available previously.” The center has a multidisciplinary team of physicians, oncology nurses, clinicians and administrative professionals working collaboratively. “All too often, cancer patients must visit different facilities to receive their care,” said Dr. Kenneth Blank, radiation oncologist. “This center is designed to align with St. Joseph’s Healthcare System’s comprehensive cancer care services, which range from diagnosis to education to treatment and recovery.” Lisa Rouson, administrative director, Cancer Services, St. Joseph’s Healthcare System, called the new center “an important step in our plans to expand services to the northern Passaic County/Wayne community.” She said Wayne is a satellite facility of St. Joseph’s Regional Medical Center in Paterson, which is a nationally accredited Comprehensive Cancer Center offering a full range of oncology service, including participation in The Alliance for Clinical Trials in Oncology, part of a national clinical trials network sponsored by the National Cancer Institute. She said St. Joseph’s Healthcare System has also participated in drug trials with major pharmaceutical corporations. Rouson said St. Joseph’s Healthcare System currently treats approximately 1,200 cancer patients per year. She said that, according to the NJ State Tumor Registry, Passaic County has approximately 2,200 cancer diagnoses per year. “With the opening of the new St. Joseph’s Cancer Center, St. Joseph’s Healthcare System now offers the community a highquality, conveniently accessible local facility for their cancer care and treatment needs.” Rouson said St. Joseph’s Cancer Services also offers community-based programs and clinical patient navigation services, in partnership with the American Cancer Society, to assist patients in identifying and understanding cancer-related resources available to them. She said the radiation oncology system at the St. Joseph’s Cancer Center on the Wayne campus is a state-of-the-art linear accelerator, with technology allowing for more precise dosage delivery. June 2014
17
The center is operating in partnership with Sovereign Oncology, which provides radiation therapy expertise, and with three affiliated imaging centers: St. Joseph’s University Imaging, Wayne; St. Joseph’s Ambulatory Imaging, Clifton; and St. Joseph’s Ambulatory Imaging, Carlstadt. Donald Vardaro, chief operating officer of Sovereign Oncology, said the center offer the Elekta Infinity, which he said is “the world’s most advanced radiation treatment system for cancer that substantially reduces the time required for radiotherapy, while giving clinicians the ability to treat targets more aggressively than ever before.” The new center is at 234 Hamburg Turnpike, on the campus of St. Joseph’s Wayne Hospital. Radiation treatments are now being scheduled and additional cancer treatment services will be added throughout the year. St. Joseph’s Healthcare System includes St. Joseph's Regional Medical Center and St. Joseph's Children's Hospital, both in Paterson; St. Joseph's Wayne Hospital; St. Vincent's Nursing Home, Cedar Grove; Visiting Health Services, Inc., Totowa; and more than two dozen ambulatory sites known collectively as St. Joseph's Healthcare System
State approves sale of St. Mary’s Hospital in Passaic to for-profit chain By LINDY WASHBURN The sale of St. Mary’s Hospital in Passaic to a for-profit chain from California won approval on Friday from two top state officials, setting the stage for the deal — the first of several New Jersey acquisitions proposed by Prime Healthcare Services Inc. — to be finalized by a Superior Court judge. Health Commissioner Mary E. O’Dowd said the financial condition of the 264-bed hospital, the last survivor of three that once served the city of Passaic, is “so precarious that its closure … is a real possibility.” Its sale to Prime, O’Dowd said, was the only option she was presented to avoid a complete disruption of health care service in the city and surrounding towns. The hospital also serves Garfield, Wallington, Carlstadt, Rutherford, East Rutherford and Clifton. The state has spent nearly $40 million to shore up St. Mary’s since it emerged from bankruptcy in 2010. The state’s approval could be revoked, however — and a resale of the hospital ordered — if it becomes clear at any time over the next five years that Prime misrepresented its ability to operate the hospital or other facts in its application, according to a letter from acting Attorney General John J. Hoffman. The Attorney General’s Office “supports the proposed transaction,” Hoffman wrote to Judge Margaret Mary McVeigh, with conditions that include: • Prime must tell the state about “any actions initiated against Prime … by any government entity.” • It must provide quarterly reports about actions in an ongoing federal investigation into allegations that Prime boosted its Medicare payments in California by billing for more complicated conditions and treatments than patients actually received. • The state must approve all compensation arrangements for two years between Prime and any former board members, senior managers or officers of St. Mary’s. Trustees and senior managers also are barred from investing in Prime or its subsidiaries for three years. Prime also must keep St. Mary’s open for a minimum of five years as a full-service hospital, O’Dowd said, and any cuts in services must be approved by the state. Prime is to pay a total of $30 million for the hospital, which includes $5 million in working capital that it provided during the state’s 18-month review and $10 million for employee pensions, documents show. State taxpayers will be responsible for about $22 million in long-term debt that was guaranteed by the state Treasury, once the deal goes through. “This acquisition will allow St. Mary’s to stop struggling financially and instead dedicate all of its resources to providing even better community care,” Edward J. Condit, St. Mary’s president, said in a statement. Luis Leon, Prime’s president of operations, said the company looks “forward to working with the attorney general and Department of Health in a totally transparent and effective manner.” The company will invest $30 million in capital improvements over the next five years, he said. And, he said, it will continue to uphold Catholic guidelines regarding reproductive health care. Prime, which operates 26 hospitals in six states, had hoped that approval of the St. Mary’s purchase would pave the way for its acquisition of St. Michael’s Medical Center in Newark and St. Clare’s Health System, which has two acute-care hospitals and a behavioral-health hospital in Morris and Sussex counties. But earlier this week, the state requested proposals from consultants to do a study of hospital services in the Newark area, delaying action on the St. Michael’s sale until next year. A Prime spokesman said the company “remained committed” to the purchase. Prime also must hire “substantially all” of the 1,200 employees currently working at St. Mary’s, a commitment it already had made, O’Dowd said.
18 New Jersey Physician
“It’s good news,” said Douglas A. Placa, executive director of JNESO, the union representing 500 nurses and others at the hospital. “It’s been a long time coming. Now St. Mary’s can move into the next phase of its existence.” Passaic Mayor Alex Blanco also welcomed the news. “As a doctor, and more importantly as a father of four boys, a son to elderly parents and mayor of Passaic,” he said, he understood the importance of the hospital to give residents access to medical services. But critics of Prime’s track record said the conditions imposed upon the sale give them little confidence. “There’s not a whole lot here that’s going to slow them down if they choose to go in the wrong direction,” said India Hayes-Larrier of New Jersey Citizen Action and the Campaign to Protect Community Healthcare, a coalition of other unions and advocacy groups. She said the Health Department’s enforcement of conditions at other for-profit hospitals in New Jersey has been weak. St. Mary’s, which was founded more than a century ago by the Sisters of Charity of St. Elizabeth, will lose its tax-exempt status with the sale. That conversion — from a non-profit institution to a for-profit one — required the review by the Attorney General’s Office, including an extensive look at Prime’s track record and allegations involving the business practices at some of its California hospitals. The federal investigation of Medicare billing, still under way, is “unlikely to be resolved anytime soon,” the attorney general wrote, calling that “a difficult dilemma.” If the investigation were to result in heavy fines or the exclusion of Dr. Prem Reddy — Prime’s president, chief executive officer and board chairman — from participation in federal programs, that could place the hospital at risk, the letter said. But no violations have been proved at this time, Hoffman wrote, so he asked the judge to give the state the right to force the resale of the hospital if Prime’s ability to operate it is impaired. Prime also paid $95,000 last year to settle alleged violations of federal confidentiality laws. Concerns had been expressed by the New Jersey Association of Health Plans about the cancellation of the hospital’s insurance contracts, a strategy Prime has used in California to charge higher out-of-network prices to its patients. St. Mary’s announced earlier this year that it was renegotiating its contracts with two major insurers, and that, if unsuccessful, it would no longer participate in their managed-care networks. O’Dowd said the hospital will be required to post information on its website about the status of all its insurance contracts and to tell patients about the charges they will face if they receive care on an out-of-network basis. The hospital must keep the state Insurance Department informed about its negotiations with insurers, she said.
NanoKnife
Hayes-Larrier, a critic of the sale, said that condition will not assure the “affordability of health care for the people that St. Mary’s serves. Rather, it simply lets them know publicly that health care is unaffordable.” The fact that Prime is a for-profit company “is of no particular relevance,” O’Dowd said. All of the state’s health care rules and regulations are enforced equally, no matter what the ownership status of a hospital is, she said.
June 2014
19
Montdor Medical Media, LLC
Promote a new ground breaking procedure
.
Document injuries for legal issues
.
and more
Experienced surgical and medical photographer available for hospitals, medical practices, lawyers, insurance companies, and others who need high quality photography. Portfolio of work available for viewing
973-994-0068
mgoldberg@njphysician.org
Available for photography during surgical procedures, with clearance in most NJ hospitals. Familiarity with most procedures • 24/7 emergency availability if necessary.
RWJ, Somerset hospitals complete merger By Beth Fitzgerald Robert Wood Johnson University Hospital and Somerset Medical Center on Sunday officially completed the merger they announced a year ago, creating a 965-bed hospital with campuses in New Brunswick and Somerville. Somerset Medical Center's new name is Robert Wood Johnson University Hospital Somerset. “For more than a century, Robert Wood Johnson University Hospital has been committed to improving the health of Central New Jersey. Our expansion into Somerset County will provide direct access to the highest quality medical services and a wider array of health care opportunities, allowing us to better serve our communities and neighbors,” said Stephen K. Jones, chief executive of Robert Wood Johnson University Hospital and the Robert Wood Johnson Health System. The RWJ system is among the largest in the state, with annual revenue of more than $1 billion and hospitals in Rahway and Hamilton as well as the flagship academic medical center in New Brunswick. “While we've expanded, our mission remains the same – to improve the health and well-being of the patients and communities we serve,” Jones said. In a statement, RWJ said existing inpatient and outpatient services will be expanded, community programs maintained and health care services strengthened. RWJ said cardiology, orthopedics, neurology, cancer and surgical services will be enhanced at RWJUH Somerset, offering the community advanced care close to home. The alliance will give patients more access to clinical services not generally available at community hospitals: trauma care, cardiac surgery, organ transplants and neonatal care for premature babies with serious health issues. “Our organizations have had longstanding partnerships in many areas of clinical care and share many of the same physicians,” said Paul Stahlin, former chair of Somerset's trustee board, and now a member of the boards of both the RWJ hospital and health system. “This alliance enables us to offer expanded access to high-quality medical care close to home and strengthens our ability to serve our community for generations to come.” Somerset Medical Center Foundation is not part of the merger. The foundation will function independently under a new name – Somerset Health Care Foundation – and continue raising money for health care needs in the community. Robert Wood Johnson University Hospital has pledged to give the foundation $1 million per year for three years. Jim Burns and Celia Bosco, partners in the law firm Genova Burns Giantomasi & Webster, represented Somerset in the transaction.
AtlantiCare to merge with Pa.-based Geisinger Health System The Atlantic City-based AtlantiCare health system will join Pennsylvania's Geisinger Health System, whose model calls for marrying the financing of care through a health plan with a hospital and doctor network, the two organizations announced Tuesday. The systems signed a letter of intent last November and are now moving forward to a merger that they estimated will take nine to 12 months for state regulatory review. AtlantiCare will continue to use its name, a well-established brand in the southern New Jersey marketplace. Geisinger’s health plan has 467,000 members who receive medical care from a physician-led system with a 1,100-member multispecialty group practice, eight hospital campuses and two research centers. AtlantiCare is an integrated system of health care services that includes the three-location AtlantiCare Regional Medical Center and the AtlantiCare Physician Group. Its 700 physicians deliver health care to southern New Jersey communities at nearly 70 locations. “The main thing to take away from this is we are both looking at the future the same way and recognizing that health care in the United States is changing to the value-based model,” AtlantiCare Chief Executive David P. Tilton said. “We went looking for a partner that saw the world the way we did and had the same point of view and found Geisinger. “They expressed a willingness to help us continue our transformation,” Tilton said. “We’ve done a lot of work already in these value-based models but they will bring their tools, their capabilities, their competencies and intellectual capital to South Jersey to help us transform. It will help AtlantiCare continue to grow and be more innovative.” He said both are nonprofit hospital systems, and the merger will not involve a financial payment to AtlantiCare. Tilton said Geisinger is already licensed as a health insurance company in New Jersey. “That is a key element of their model,” he said. “They are able to drive a lot of innovation in care through having access to June 2014
21
premium dollars and providing support to physicians and hospitals to change the way they provide care and the way they serve populations of people.” Tilton said the fact that Geisinger is based in Danville, Pa., will not be an obstacle to working with the AtlantiCare population base. He noted Geisinger has already expanded into Maine and West Virginia. “They have been able to share and transfer what they have learned in Pennsylvania to other locations,” he said. “They have been able to achieve the same kinds of cost, quality and patient experience outcomes in those locations as they have in (Danville) and the surrounding community.” He said AtlantiCare physicians will go to Pennsylvania to study Geisinger’s best practices, and Geisinger will send people to New Jersey. AtlantiCare already has been adopting some of Geisinger’s tools and approaches, he said, “and I see no reason why we can’t accelerate it.” He said AtlantiCare has a lot to offer Geisinger: “We are a nationally recognized organization ourselves for the work we have done and I think there is an opportunity for both of us to benefit from the relationship.” AtlanticCare has spent a half-dozen years preparing to move away from the “fee-for-service (model), where the more you do, the more you get paid,” Tilton said. The organization believes that model is “obsolete and not adding any great value to the consumer any longer.” He said AtlantiCare has been building its primary care network and transforming those practices, adding new IT tools to help physicians manage patient health. But he added that Geisinger has more “practice management tools” that are very advanced. He also said AtlantiCare’s IT system is “pretty good, but I will tell you theirs is more advanced than ours. They’ve been at it a lot longer than we have.” The key now is to accelerate the ongoing transformation of AtlantiCare, Tilton said: “Speed is very important as you transform an organization like ours. It is inevitable that America is moving into these new value-based models and we want to lead that work. We want to reshape health care, particularly in southern New Jersey.” Kevin Brennan, chief financial officer of Geisinger, said the organization has been building an integrated health network with hospitals, physicians and health plans since the 1970s and now has clients all across the country, including New Jersey, as well as Maine, West Virginia and Delaware. “The idea of taking some of our models of care delivery and organizing the financing of care through a health plan is something that we have a lot of experience with.” While AtlantiCare is “doing some of this, they wanted to ramp that up faster and broader.” He said Geisinger believes “the market is ripe for the introduction of successful care redesign on a population-wide basis. We know that the current payment models in the United States is the fee-for-service model is waning and the interest in treating populations smarter is in all of our data resources and all of our evidence-based programs.” He said Geisinger has about $4 billion in annual revenue, while AtlantiCare has about $800 million. “It is an especially challenging time in health care; however, we stand at the brink of making significant enhancements that will benefit patients for generations to come,” said Dr. Glenn Steele Jr., Geisinger’s chief executive. “Today’s announcement is good news for the people we serve, and we look forward to making a positive difference in southern New Jersey.” In a joint announcement, they said their emphasis is on implementation of evidence-based medicine programs, enhancing capabilities and clinical services, optimizing the use of the electronic health records and clinical informatics, along with implementing population health management and value-based payment models. “Over time, we will improve the patient experience and health status of the community, reduce the total cost of care while improving quality and efficiency, transform care from episodic to value-focused, and provide meaningful coordination across all of health care,” Steele said. Annette Catino, chief executive of the managed health care company QualCare, said it wasn't clear that the merger would benefit New Jersey. She said of Geisinger, "Their model works great where they are in their geography. I'm not sure that it's a model that is easily transferable to this part of New Jersey." Mark Manigan, health care attorney with Brach Eichler said, "The Geisinger/AtlanticCare transaction is interesting because Geisinger has a robust provider sponsored health plan in Pennsylvania, which is the natural extension of the population management and risk bearing business models that many New Jersey health care systems are spending lots of time and resources positioning themselves for. Geisinger is already there."
Visit us now online at www.NJPhysician.org 22 New Jersey Physician