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HOSPITAL ASSOCIATION TO APPEAL FEDERAL JUDGE'S RULING EXEMPTING SELF- FUNDED HEALTH PLANS FROM PAYING STATE-MANDATED HOSPITAL SURCHARGES

HOSPITAL ASSOCIATION TO APPEAL FEDERAL JUDGE'S RULING EXEMPTING SELF-
 FUNDED HEALTH PLANS FROM PAYING STATE-MANDATED HOSPITAL SURCHARGES
 PRINCETON, N.J., May 29 /PRNewswire/ -- A federal court judge ruled Wednesday in a lawsuit initiated by 14 New Jersey labor unions against 70 hospitals.
 The decision holds the unions are exempt, under the federal Employee Retirement Income Security Act (ERISA), from participating in the state- mandated Diagnosis Related Group (DRG) system of paying hospital bills. The DRG system, based on the averaged cost of care, not actual charges, may add as much as 30 percent to a patient's bill. DRG add-ons include a 19 percent surcharge that covers the indigent and uninsured; Medicare cost-shift; and a payer discount. According to Judge Alfred M. Wolin's 46-page decision, "New Jersey's hospital rate setting scheme is unenforceable" as to benefit plans under ERISA.
 The New Jersey Hospital Association (NJHA) has long called for scrapping the DRG system of billing as well as for implementation of a broad-based method for paying for the poor and uninsured.
 However, NJHA President Louis P. Scibetta expressed concern that the ruling could leave only 10 percent of hospital patients to share the $737 million a year uncompensated burden. According to state officials, self-funded health plans pay 40 percent of all hospital bills. Federal insurance programs, which pay 40 to 50 percent of the hospital bills, do not pay markups.
 "We see this as a key opportunity for reforming and improving New Jersey's hospital payment system. At the same time we need to protect the solvency of our hospitals, particularly high uncompensated care hospitals which may be hardest hit by this decision," said Scibetta. "The New Jersey Hospital Association will appeal this ruling and ask that it be stayed pending a decision by the Third Circuit Court of Appeals. This will allow for sufficient time to work out a transition plan for the hospital payment system.
 "The time is now for all parties -- hospitals, government, legislators, regulators, payers -- to come to the table to work toward ensuring a fair, affordable and acceptable solution to the problems of paying for the indigent and uninsured, the erosion of the all-payer system and containing costs."
 The Princeton-based New Jersey Hospital Association is the advocate for 112 New Jersey hospitals and the patients they serve.
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 Following is the text of a statement by Scibetta:
 The New Jersey Hospital Association will appeal this ruling and ask that the decision be stayed pending judgment by the Third Circuit Court of Appeals. This will allow for sufficient time to work out some sort of contingency plan for the hospital payment system.
 We are meeting early this evening (May 28) with representatives from the Governor's office and the Department of Health to assess the matter and move toward a joint strategy. We see this as a key opportunity for reforming and improving New Jersey's hospital payment system.
 Judge Wolin's ruling triggers a groundswell on complex changes and consequences for our hospital payment and regulatory system as well as the 1.3 million patients admitted to New Jersey hospitals yearly. Some of these changes are compatible with NJHA positions, others are not.
 First, one outcome of the decision is the deregulation of insurance plans subject to ERISA. To date, NJHA has always supported regulation of the hospital payment system.
 Second, one outcome of this ruling will allow hospitals to bill patients at charges. NJHA supports billing patients at actual charges.
 Third, this decision puts the current funding of the Uncompensated Care Trust Fund in jeopardy. NJHA supports a broad-based approach to paying for uncompensated care and its full funding.
 Fourth, the impact of this ruling could cause great concern regarding the financial health of New Jersey's hospitals and the status of their bond ratings.
 NJHA supports orderly and well-thought out change of the current hospital reimbursement system. Judge Wolin's June 5 timeline makes the prospect of orderly change virtually impossible.
 -0- 3/29/92
 /CONTACT: Ron Czajkowski of the NJHA, 609-275-4069/ CO: New Jersey Hospital Association ST: New Jersey IN: HEA SU:


MK-MP -- PH008 -- 5090 05/29/92 09:33 EDT
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Publication:PR Newswire
Date:May 29, 1992
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