Despite a slight increase in operating margins, 30 percent of New Jersey’s hospitals posted operating losses for 2010, according to the 2011 Financial Status of New Jersey Hospitals report, released Monday by the New Jersey Hospital Association.
The report was compiled from the financial statements of 48 acute-care hospitals and hospital systems, and five specialized or rehabilitation hospitals. It reflected performance in profitability, liquidity, capital structure and asset efficiency.
The results showed in 2010, the statewide average operating margin was 2.3 percent, compared to 1.7 percent in 2009. Modest gains were attributed largely to cost-reduction measures that included layoffs, service reductions, hiring and wage freezes, and the elimination of unfilled, budgeted positions in 2008 and 2009. Many large capital projects also were put on hold.
“New Jersey hospitals have worked extremely hard to make their operations more efficient and to reduce expenses without compromising quality of care,” said Betsy Ryan, president and CEO of the association.
The improvement in the hospitals’ financial standings may be short-lived, as the facilities face $4.5 billion in Medicare reimbursement cuts over the next 10 years under the Affordable Care Act. The continued struggle in Washington to reduce the nation’s debt load also could bring deep cuts in federal reimbursements to hospitals. The bipartisan “super committee’s” recent failure to reach consensus on debt reduction strategies will result in a 2 percent cut in Medicare payments to providers beginning in 2013. That cut is expected to cost New Jersey’s health care community about $130 million in 2013, and $1.3 billion over the next decade.
“Despite the slight improvement in operating margins, New Jersey hospitals still must contend with poor reimbursement, continued loss of revenue through federal funding cuts, and tremendous uncertainty under health care reform and debt reduction,” said Sean Hopkins, senior vice president of health economics for NJHA.