When a group of physicians in South Orange bought a CT scanner in the 1970s, they couldn’t imagine it was the first step toward a complete transformation of the health care industry.But as hospitals dealt with decreasing margins and technology made procedures less invasive, the resulting ambulatory care explosion in the 1990s shaped the way the Garden State’s health care landscape looks today.
“Over the 25 years, I don’t know what the number-one change is, but clearly near the top is this notion about ambulatory centers owned by interests other than the hospital,” said Barry Ostrowsky, president and CEO of Barnabas Health. He said since that CT scanner was purchased, corporate or physician-owned ambulatory care centers have “syndicated” in the New Jersey market.
“Docs are doing cardiac catheterization in their offices, you’re doing surgery in their offices,” said Amy Mansue, president and CEO of Children’s Specialized Hospital. “Look at Summit Medical Group — they basically have a 23-hour service there where they can do just about everything that you could do in a hospital, except for the really intense things.”
“You took a whole chunk of the ever-expanding outpatient market and basically diversified it away from hospital ownership,” Ostrowsky added. “Many hospital execs will either cite that or confirm that that has changed our collective lives as much as anything.”
The most visible sign of that change has been the closing of 26 hospitals since 1987. Forced to deal with outpatient centers splitting market share, as well as declining reimbursement, many hospitals were forced to consolidate with larger systems or close altogether. Kennedy Memorial Hospital, in Saddle Brook, was the first when it shut its doors in 1992. Kessler Memorial, in Hammonton, which closed in 2009, and Barnert Hospital, of Paterson, which closed in 2008, have both been repurposed into “medical malls,” which is also the fate of Greenville Hospital in Jersey City, which also closed in 2008.
“There was a period of time when people said, ‘Close a hospital? Are you kidding? Never going to happen,'” Ostrowsky said. “We know that’s no longer the case, and I think with greater frequency, those issues are going to crop up over the next couple years.”
Currently, community hospitals like Chilton Hospital and Hackettstown Regional Medical Center are speaking with larger systems to join — like the Robert Wood Johnson system adding hospitals in Hamilton, Rahway and, in the near future, Somerset Medical Center.
Also contributing to those closures was the end of the state setting the rates of reimbursement for all payers at hospitals in 1992, which was “supposed to force consolidation and streamline, and have everybody compete on their own,” Mansue said. Competitive pricing changed not only how hospitals charged their patients, but how they financed their facilities and who owned them.
The first for-profit ownership of a hospital entered the state in 2002 when Memorial Hospital of Salem County was purchased by Community Health Systems. According to CHS representatives, the Tennessee-based company has invested $31 million in Salem since its purchase, as well as built two medical office buildings.
Ostrowsky said the post-rate setting in New Jersey is “obviously changing and will change more dramatically going forward. Because we had rate setting, there was basically an inability for a number of years to accumulate an awful lot of cash capital — and because of that, most of us had to rely on debt when we wanted to build things and incorporate the latest technology.”
That’s left many hospitals forced to renovate, like building new patient rooms with improved amenities, as opposed to new construction. But in some cases, the ability to move more care to the outpatient setting has allowed more space for intense care and research to be developed side-by-side, like on the campus of the Robert Wood Johnson Medical School and Robert Wood Johnson University Hospital, in New Brunswick.
“Building the academic components so close to the clinical component is probably the thing that is most evident over the last 15 to 20 years,” said its dean, Peter S. Amenta, who arrived at the school in 1989.
The campus added the Child Health Institute, the Cancer Institute of New Jersey, the Bristol-Myers Squibb Children’s Hospital, the PSEG Children’s Specialized Hospital and the Clinical Academic Building over that period.
“You have rehab, you have acute care and you have groundbreaking research occurring right within walking distance of each other,” Amenta said.