The Ranks Grow Thinner

John Commins, for HealthLeaders Magazine , November 14, 2008
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Scant reimbursements, rising ambulatory surgery center competition, and myriad other factors have shuttered multiple New Jersey hospitals—and still more may fall.

When Muhlenberg Regional Medical Center in Plainfield, NJ, closed in September, it ended a history of community service dating back 131 years. The slow demise of the 355-bed hospital—nearly one year after nonprofit parent company Solaris Health System launched an unsuccessful bid to sell it—came despite the fervent attempts by community leaders to keep it alive. In addition to providing vital healthcare services to Plainfield, advocates argued, Muhlenberg was also the city's largest employer, with more than 1,100 people on the payroll.

But owing to what Solaris says were too-low Medicaid and Medicare reimbursements and dwindling inpatient days, the hospital was a money pit, having lost $16.5 million in 2007 and projected to lose $18 million in 2008. Solaris pulled the plug in September and consolidated services at its sister hospital JFK Medical Center in nearby Edison, NJ. All that remains of Muhlenberg are some outpatient services, a satellite emergency department and a shuttle service to JFK.

Muhlenberg's story is only one example of a broader problem among the Garden State's hospital community. Hospital closings have become an almost bimonthly event in New Jersey, where eight hospitals have shuttered in the past 18 months. And the bleeding may not be overScant reimbursements, rising ambulatory surgery center competition, and myriad other factors have shuttered multiple New Jersey hospitals—and still more may fall. New Jersey Department of Health Commissioner Heather Howard says she expects more facilities to close, most likely in the northeastern part of the state, which has a higher mix of uninsured patients and which Howard says has too many hospital beds.

"Hospitals are treasured community assets, so it's always difficult to see one close," Howard says. "That said, we are learning that in the 21st century there are different ways to deliver healthcare. We want to make sure that people always have access to essential healthcare services, but that might not always mean acute-care hospitals."

Earlier this year, a commission appointed by Gov. Jon Corzine identified six major causes for the poor health of New Jersey's hospitals, including a lack of universal health insurance, with 1.3 million residents uninsured; low reimbursements from public payers; differing financial incentives between physicians and hospitals; a lack of transparency of hospital data; poor governance from hospital boards; and the close geographic proximity of competitors, making it difficult to negotiate favorable insurer payments or physician practice patterns.


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