Second Opinion: Too Many Cooks in the Kitchen
Column
Written by Mike Sharkey   
Thursday, 31 January 2008

Second Opinion: A Healthcare Fairy Tale - Mike Sharkey - Health Executive - RedCoat Publishing
Mike Sharkey, Managing Editor
Some telling statistics were released just before the New Year. First the New Jersey Hospital Association declared a startling 40% of the Garden State’s hospitals are now operating in the red. Then the American Community Survey named New Jersey the most affluent state in the country.

Juxtaposed, those stats beg the question, how could the richest state in America have a hospital system that’s in such dire financial straights?

Half of the answer has to do with New Jersey’s unique healthcare model. In the land of Springsteen, you’ll find one of the nation’s most generous hospital safety nets. In 1991, NJ created a fund that compensates hospitals for the charity care they provide, a now $584 million well that more than 300,000 residents drink from each year to cover a portion or all of their healthcare costs (uninsured residents who don’t qualify for Medicare or Medicaid).

But according to the New Jersey Hospital Association, that safety net has taken on more weight than providers can carry. “Insufficient reimbursement from Medicare, Medicaid, and the state charity care program are some of the major factors contributing to NJ hospitals’ low operating margins and low cash levels,” NJHA president Gary Carter said. “More than 40% of our hospitals are operating in the red, and that number will continue to increase unless some major changes are made in charity care funding, along with adequate payments from other key players.”
The second half of the answer is found in the state’s specialty-oriented approach. More than any other state in the nation, New Jersey has embraced the contemporary healthcare model of specialist care. Go ahead, call a friend or relative living in Jersey and ask who their family physician is. Chances are they’ll tell you, “We don’t have those here.” They won’t be kidding.

With the average family physician making $126,000 a year and the average specialist earning nearly $300,000, it’s a no-brainer why so many young doctors have chosen the specialist path. What those docs didn’t know when they made the choice was the devastating impact the specialist migration would have on the nation’s healthcare system—an impact that’s most evident in NJ.

New Jersey is now among the highest cost states in which to receive care, and paradoxically it’s merely average when it comes to the overall quality of care being delivered (the Agency for Healthcare Research and Quality ranked NJ 26th overall). Tony Soprano does not get more bada-bing for his healthcare buck. In fact, The Commonwealth Fund ranked New Jersey a dismal 46th out of all 50 states when it comes to avoidable hospital use and cost. Ouch.

Why? A big part of the problem is too many cooks in the kitchen. With so many $300,000 salaries to pay, NJ hospitals have to put patients on the healthcare merry-go-round of specialists and tests, specialists and tests. It’s costly extra care that is not generating better outcomes. And when this wasteful model of care is applied to more than 300,000 charity cases each year, it quickly becomes unsustainable. Just ask the 40% of NJ hospitals operating in the red.

Back to my original question: how could the richest state in America have a hospital system that’s in financial dire straights? The answer is that New Jersey provides care to all of its residents, regardless of ability to pay, and it does so through a fragmented, wasteful, inefficient system.

In that answer is an important lesson for America as we consider solutions for our ailing healthcare system. Do we have a moral responsibility to provide affordable healthcare to all of our citizens? Absolutely. And as the richest nation on Earth we should be financially able to do so. But like New Jersey, our entire system is siloed, wasteful, and inefficient. If we were to implement a universal healthcare program in this environment, it would undoubtedly throw thousands of hospitals into financial turmoil.

As New Jersey is proving, we have to extract the errors, defects, and overuse in American healthcare before we can hope to provide affordable care for all.

 
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