There are 72 acute care hospitals in New Jersey but fewer than a dozen are community hospitals.
TRENTON -- The dwindling number of community hospitals in New Jersey will have a tough time surviving as the largest hospital chains continue to grow and state funding to pay for uninsured patients's care plummets, according to a report by Moody's Investor Service Monday.
Two major mergers completed this year created the $5 billion behemoth RWJ Barnabas Health consisting of 11 acute care hospitals, and the $3.5 billion Hackensack Meridian Health and its 11 hospitals. Their size grants them enormous negotiating power with insurance companies and self-insured employers, the report by Moody's, the bond rating agency, said.
Add to that the aggressive push by Philadelphia and New York City hospitals to expand their reach in the Garden State. Princeton Healthcare System, a solo hospital, announced this year it will join the University of Pennsylvania Health System, while Mount Sinai Hospital in New York and Valley Health System, a solo hospital in Ridgewood are collaborating on cancer care.
These market forces will put increasing pressure on the roughly dozen community hospitals such as Trinitas Regional Medical Center in Elizabeth with $295 million in annual operating revenue, the report said. Trinitas is a "safety net" hospital, serving a disproportionate number of uninsured and low-income people covered by Medicaid.
At the same time, hospitals like Trinitas saw a 22 percent decline on average in charity care funding from the state - the pool of money that helps pay for uninsured people. Insuring 650,000 more people through the Affordable Care Act's Medicaid program mitigates the loss of charity care to some degree, but pressure on community hospitals will only get worse, the report said.
"Increased competition will remain a credit challenge for independent hospitals and smaller health systems as large systems within the state have formed, increasing in-state competitive pressures," Moody's Associate Analyst Jennifer Barr says. "The ability to adjust quickly to change will be an important determinant of New Jersey hospitals' credit quality."
Trinitas President and CEO Gary S. Horan acknowledged the challenges of the market but noted the hospital has operated in the black for the last seven years."In addition, both Standard & Poor's Rating Services and Moody's Investors Service maintained our recently upgraded debt rating and reaffirmed a stable outlook," Horan added.
Trinitas is open to new partnerships, Horan said, noting the hospital works to bolster its stroke and neurological care with JFK Medical Center, and a pediatrics affiliation with Newark Beth Israel Medical Center, among others.
"Our hope is that the intent of these mergers is not to squeeze out the smaller, safety net hospitals that provide a lifeline to critical services for the community," Horan said.
The mergers and acquisition frenzy is a national trend, but the impact is more significant here, Moody's report said. "New Jersey mergers play a more significant role given systems' statewide presence, extremely competitive environments in neighboring states and state fiscal pressures."
Moody's also identified St. Joseph's Healthcare System as a vulnerable entity. But CEO Kevin J. Slavin emphasized the system's strength.
"We are better positioned than ever to move forward and make programmatic clinical enhancements that will allow us to keep up with the increased needs of the service area population," Slavin said. "We are confident that given the critical role that St. Joseph's hospitals and affiliated facilities play in serving the residents of Northern New Jersey, the State will continue to support our health system in the delivery of care to surrounding communities."
Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio. Find NJ.com Politics on Facebook.