Corzine's Bed Tax Could Spell Problems for Medical Center

Matthew Hersh

A relatively small line item in Gov. Jon Corzine's budget address two weeks ago outlining an effort to capture increased matches in health care from the federal government has prompted health care officials throughout the state, including those from the Princeton HealthCare System, to envision a bleak picture of overly-taxed facilities with little chance of survival, which could prove disastrous to the state's suburban hospitals.

In his March 21 address, Mr. Corzine proposed a $620-per hospital bed tax that would bring the state approximately $430 million per year, with about $215 million used for state expenses with the remainder used to qualify for a Federal match from Medicaid to be funneled back to the state's hospitals.

In short, the governor hopes to raise a certain amount of money, double it with the federal match, keep the general match to help balance the budget and then return what has been collected back to the hospitals, but it has to be returned on the basis of Medicaid cases.

What has caused an uproar from suburban hospitals throughout the state and the New Jersey Hospital Association (NJHA), is that, by and large, only hospitals with a large number of uninsured patients would see any kind of payday, leaving hospitals covering largely insured demographics, like the University Medical Center at Princeton (UMCP), in the dark, and, according to some officials, in danger.

Gary Carter, the president of the NJHA, told the Associated Press after Mr. Corzine's address, that "worst part is the fact that we are going to be taxed to provide something we are mandated to do.

"It's a really bad idea."

In Princeton, with the hospital's parent company, Princeton HealthCare System, seeking to build a $350 million facility in Plainsboro, the prospect is troublesome, and the stakes are high, potentially preventing a move, or worse.

"It could severely jeopardize the future of our hospital," said Pam Hersh, vice president for Government and Community Affairs for PHCS. The state budget proposal would cost the hospital $4.5 million a year, eliminating its entire profit margin, the equivalent of laying off 80 people, and would hamper PHCS's chances of relocation.

"That would leave a big void in the health care of this region," she said, adding that the decimation of the hospital's profit margin would damage the institution's credit rating to the point where it would not be able to borrow money. At the end of the day, Ms. Hersh said, the proposal "takes away an economic tool in central New Jersey."

Hospitals generally operate on less than 1 percent profit, with UMCP working slightly above that number, and PHCS, under the president and CEO Barry Rabner, has worked toward getting above sea level again. "He did what he had to do to get us into the black, and that would be completely wiped out," Ms. Hersh said, also worrying that the governor's proposal would create a dichotomy when it comes to reimbursement per Medicaid patient served, with hospitals treating poorer patients receiving charity care funding where others, like UMCP, would not.

As charity care is only being funded at the 2002 level, the hospital is dealing with a double-edged sword: getting taxed more and not getting the reimbursement for charity care. Right now, PHCS receives about 45 cents per dollar in charity care. Under the budget proposal, that amount could sink to as low as 15 cents.

Ms. Hersh appeared alongside Carol Norris, PHCS vice president for Marketing and Public Affairs, Monday night at a forum sponsored by the Princeton Area League of Women Voters. Both officials, however, remained confident that the hospital's development plan would move forward, with Ms. Norris outlining the hospital's work with outside consultants in creating a strategy of moving to Plainsboro, with the goal of becoming one of the top 10 percent of hospitals in the country.

Concerning the FMC site, Ms. Norris said the completion of purchase is "close, but we're not quite there," adding that ground could still be broken as early as the fall of 2007.

The emerging debate as to whether the hospital should keep some sort of care facility on site has raised calls for a joint municipal task force to look at the issue.

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