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NJ Hospital Fight Foreshadows Health Reform Challenges

Jun 01, 2009

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Competing hospitals unsuccessfully bid $2 million to buy and retire the license of bankrupt Pascack Valley Hospital to keep a new medical center from opening on its site.

Westwood, N.J. — The last thing New Jersey needs is more hospitals, given that there aren't enough patients to fill all the existing beds, a prestigious state commission declared last year. So why is there now a campaign to build a new one just a few miles from others?

Money and popular demand are behind it. Hackensack University Medical Center sees an opportunity to grow by constructing a for-profit facility in this middle-class suburb of about 11,000 people near New York City. Borough leaders covet a big new employer to bolster sagging tax rolls and boost local businesses. And residents like Lee Tremble take solace in the thought that if they took ill, an ambulance could whisk them to a hospital in just a few minutes.

“I’m 58, my blood pressure is high, my cholesterol is out of whack,” said Tremble, a local restaurant owner. “I know if I have a heart attack, I’m not making it” to a hospital farther away. He and many other Westwood residents are championing the 128-bed proposed hospital against opposition from two regional hospitals that fear a new competitor nearby.

Map: Competing Hospitals

 New Jersey Hospitals Map

The campaign is a case study of the formidable obstacles confronting President Barack Obama and Congress as they try to mine savings from the $2.5 trillion health care system.  Tens of billions of dollars must be found to keep health care spending from gobbling up an increasing share of the economy and thwarting  efforts to insure all Americans. But standing in the way are strong financial incentives and public enthusiasm for the latest and often most expensive facilities, technologies and procedures. There’s also powerful resistance to making do with less.

This is especially true in New Jersey, whose residents receive some of the most extensive and costly medical care in the nation. It’s not only that there are too many hospitals scrambling for patients to fill their high-priced beds. Compared to most other states, elderly patients here are more likely to end up in intensive care units and undergo extra testing.

In the last two years of their lives, New Jersey patients on Medicare see specialists an average of 50 times — twice as often as those in Connecticut and more than four times as often as those in  Minnesota, according to the Dartmouth Institute for Health Policy and Clinical Practice.

But there’s no clear benefit to the populace’s overall health: New Jersey ranked 26th among states in a comparison of health care indicators by the Commonwealth Fund, a private foundation. Experts have found other high-cost areas of the country also don’t deliver exceptional care.

“Substantial opportunities appear to exist to reduce health care costs without impairing quality of care or outcomes,” Obama’s budget director, Peter Orszag, told a Senate panel earlier this year.

But sharply cutting back on Medicare payments to high-expense areas, as congressional leaders are considering, could undermine hospitals’ ability to treat the poor and uninsured, pay off their ambitious building upgrades and expansions or compete with stand-alone surgery centers that cherry-pick many of their most lucrative patients.

“If we went into New Jersey and said, ‘New Jersey, you’ve got two years to look like Rochester, Minn., which does perfectly well with less,’ essentially health care systems all across New Jersey would go bankrupt,” said Dr. David Goodman, a professor at the Dartmouth Institute.

Steep cuts to hospitals, among the most powerful political and economic players in any community, also would inflict substantial collateral damage. New Jersey’s hospitals spent more than $18 billion in 2007 and employed more than 145,000 people, according to the New Jersey Hospital Association.

“They have an important role in the economy: they hire lawyers, they hire accountants, they have their events to raise money at the local hotel,” said David Knowlton, president of the New Jersey Health Care Quality Institute. “It creates a big sucking sound as jobs go down the drain when they leave.”

That’s what happened to Westwood in 2007, when Pascack Valley Hospital filed for bankruptcy. The 48-year-old nonprofit hospital suffered from a heavy debt from a new addition it had built, and had been unable to stop a dispersal of patients and doctors to other places. When it closed, Pascack was filling only a third of its beds.

More than 1,000 people were laid off, bruising the local economy. “We experienced the General Motors thing,” said Tremble. “That’s 1,000 of my customers, 1,000 mortgages that are in question.”

The state’s health commissioner authorized the closure, concluding that other hospitals in the area could handle the increased patient load and in fact would be strengthened. Indeed, The Valley Hospital in Ridgewood, at six miles west the closest acute care center, and Englewood Hospital and Medical Center, eight miles to the south, significantly improved their financial health.

But last summer, Hackensack University Medical Center, a 775-bed teaching and research hospital that is one of New Jersey’s most prestigious, requested state permission to open a new hospital in Pascack Valley’s empty buildings. Although Hackensack is a nonprofit, it announced that Westwood would be getting a for-profit facility financed by a private equity firm from Texas.

Hackensack is not looking to survive; it’s aiming to grow. One of the busiest hospitals in the country, Hackensack took in over $1.1 billion in 2007, giving it an enviable seven percent operating margin, according to its tax records.  In its application to state regulators, Hackensack said the new hospital would “relieve the bed pressure” at its main campus,” where almost every bed is usually filled.

Hackensack executives said the recent closings of three hospitals in the region have eliminated the region’s surplus of beds, and that the area’s aging population will require more services in coming years. They said Hackensack can bring Westwood and surrounding areas better medical care than can anyone else.

 “To me, this is a no brainer,” said John Ferguson, who until last week was Hackensack’s president and chief executive officer. “We’re not asking for one penny. We’re taking all the risk. It’s just the other institutions are afraid of competition, but in my opinion competition will make them even better.”

But at Valley and Englewood hospitals, executives interpret Hackensack’s plan as a battle for dominance at the expense of their stability. Michael Pietrowicz, Englewood hospital’s vice president for planning, said the hospital fills less than half the number of beds it is licensed to have and would lose $20 million if Westwood gets a new hospital. “If that place were to reopen, we would have to have layoffs, we would have to close services,” Pietrowicz said. “To allow something like this, that flies in the face of rational health care, would be devastating to Englewood Hospital and the communities we serve.”

Ridgefield’s and Englewood’s hospitals have launched petition drives and competing Web sites carrying emotionally laden messages, accusing each other of placing profits over patient care. Two members of the commission appointed by Gov. Jon Corzine, a Democrat, to evaluate the state’s hospital bed glut have written Corzine in opposition to Hackensack’s new venture.

 “It makes no damn sense,” commission member David Hunter, a consultant and former hospital executive, said in an interview. He said adding a hospital was an especially bad idea since Congress and Obama are focused on extracting large savings from the health care system. “When you’re heading into this much uncertainty, it’s not a time to be adding any capacity,” Hunter said.

Bruce Vladeck, a panel member who had been a senior health care official in the Clinton administration, said in an interview, “If there was ever a facility that wasn’t needed in terms of the supply of services relative to the population, this is as clear cut a case as you can get.”

Westwood begs to differ. Many residents and local officials are infuriated by opposition from Ridgewood’s and Englewood’s hospitals, which can be up to a half hour away in heavy traffic. In early May, Mayor John Birkner Jr. organized a four-mile march with 50 supporters to Ridgewood that was stopped at the village border for want of a permit. Westwood residents are particularly livid that the two other hospitals offered $2 million in bankruptcy court to buy and retire Pascack Valley’s old operating license, which Hackensack was awarded in May.

 “This is about money and greediness, not about helping people,” said Vivian Stubbs of Westwood. “If I didn’t know what was going on, I’d think they were talking about cattle, not people.”

Westwood’s elderly say a resurrected hospital would make it easier to get to doctors’ appointments, dialysis, radiation treatments and physical therapy. “I’m supposed to go for lab work every three months,” said Theresa Giannone, 76, a retired housekeeper. “I’ve been stretching it for five months.”

On June 8, the state health department will hear public testimony before deciding whether to approve Hackensack’s plans. That decision is sure to be closely watched by New Jersey’s 59 hospital systems, about half of which lost money last year, as a sign of whether the state is willing to put its regulatory muscle behind the commission’s findings.

Regardless of whether Westwood gets a new hospital, the financial pressures on the entire industry are expected to get worse as more medical procedures migrate outside hospital walls and public and private insurers clamp down on reimbursement. Those strains, experts say, will continue to drive hospitals to pursue more patients with high-end treatments and bigger buildings — keeping the country’s health care costs on their upward trajectory. Even if Congress alters the financial incentives, hospitals may not change course overnight.

“Every hospital board thinks they can out-compete the neighboring hospital,” said Joel Cantor, director of the Rutgers Center for State Health Policy in New Brunswick. “It’ll take some time before hospital boards recognize that expansion is not the only imperative they have.”

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