PRESS RELEASE
N.J. hospitals had narrow operating margins in '03
Stingy insurance reimbursements, rising labor and tech costs
were blamed. This year won't be better.
By Linda A. Johnson
Associated Press
TRENTON - Squeezed by stingy insurance reimbursements and rising labor, technology and other costs, New Jersey hospitals barely broke even for the fourth consecutive year - and it appears they won't do much better this year.
The New Jersey Hospital Association's annual report on hospitals' financial status found that in 2003, they had a combined operating profit of just $78 million, and 24 hospitals lost money.
The report is based on audited 2003 financial data submitted by 95 percent of the state's 120 hospitals: 83 acute-care and 37 specialty hospitals, such as psychiatric, rehabilitation and long-term care facilities.
The report does not show the financial performances of individual hospitals.
Overall, the hospitals had combined operating revenue of $15.36 billion, a little more than their combined expenses of $15.28 billion. That left an operating margin - similar to the profit margin of for-profit companies - of $78 million, or 0.5 percent. All but one acute-care hospital and most specialty hospitals in New Jersey are nonprofit entities.
Operating revenue does not include money that hospitals collect from funds such as grants and endowments.
Gary Carter, president of the West Windsor-based hospital association, said that according to economists and industry experts, nonprofit hospitals need to maintain an operating margin of 4 percent to 6 percent to stay competitive and viable.
"We continue to be far from that mark here in New Jersey," Carter said.
He blamed factors from inadequate reimbursements for care from government and managed-care insurers, to a rise in uninsured patients who do not pay their bills, to mounting costs for emergency preparedness, new technology and payroll.
Sean Hopkins, the association's senior vice president of health economics, said that for the first nine months of 2004, unaudited data from the hospitals give them an operating profit of 0.8 percent, a slight improvement over last year. He said that was due to higher Medicare reimbursements and an increase in the state's funding for charity care the hospitals provided, to $583 million for the fiscal year that started July 1, up from $381 million a year earlier.
In addition, he said, the federal government recently reclassified hospitals in Bergen, Hudson and Passaic Counties to the higher Medicare reimbursement rates paid to New York City hospitals. The Medicare program also set a new reimbursement minimum for many other New Jersey hospitals based on the high labor costs they pay compared with many other states.
That higher government funding needs to be maintained, Hopkins said.
"Any hospitals that have been sustaining multiple years of red ink are going to be hard-pressed to continue to support their mission" otherwise, he said.
Expense Management
Spend Analysis
