Issue: Charity Care

According to State statute, New Jersey hospitals must provide medical care regardless of a patient’s ability to pay. To fully accomplish the State’s mandate, the true costs of Charity Care must be identified, adequate funds to pay for Charity Care must be available and an equitable formula to distribute the funds must be in place. Currently, none of these fundamental requirements have been fully met. Identification of the actual costs of providing services to Charity Care patients would seem to be a relatively simple task; however, the political nature of the issue makes it difficult. The State continues to use the Medicaid definition of costs even though it is widely recognized that the Medicaid definition reflects less than 80% of the actual cost of treating patients. The nationally recognized Medicare formula –which results in approximately 20% more than the Medicaid formula– would quantify the Charity Care costs at $713 million for the latest year available. The State has an obligation to pay for the care rendered, yet it has never fully funded its obligation. In 2001, while the total cost of providing charity care was $713 million, the total amount paid to hospitals was only $381 million, or 53% of the total cost. In addition, the method of distributing the $381 million is based on an outdated formula that pays hospitals varying percentages–many receiving less than 19% of their cost. The current formula does not ensure that hospitals with the highest percentage of Charity Care patients receive the highest percent of payment thereby exacerbating the financial burden for many inner city hospitals. Major teaching hospitals, many of which are located in urban areas, provide a disproportionate share of services to Charity Care patients, further increasing their financial burden. There are also unrecognized costs of Charity Care such as the heavy administrative cost of documenting each patient, Emergency Department bad debts for indigents and certain physician costs.

Current Action by NJCTH:
The NJCTH continues to focus its efforts on correcting the above problems. A copy of the full report and the Council’s advocacy efforts is available using the link below or by contacting NJCTH.

For more information:

From NJCTH :
NJCTH Legislative Highlights - Issue # 2-03
NJCTH Charity Care Report (September 2002)

From Other Organizations:
American Hospital Association Website
MedPac Letter to CMS on Long-term Care Hospitals
MedPac Letter to CMS on the proposed revisions to the minimum data set