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MOODY'S ON NEW JERSEY HOSPITALS -- POTENTIAL MAJOR DISRUPTION OF CHAPTER 83 REIMBURSEMENT SYSTEM

 MOODY'S ON NEW JERSEY HOSPITALS -- POTENTIAL MAJOR DISRUPTION
 OF CHAPTER 83 REIMBURSEMENT SYSTEM
 NEW YORK, June 3 /PRNewswire/ -- Moody's today released the following:
 On Wednesday, May 27, 1992, the U.S. District Court in Newark ruled that self-insured health plans are exempt under federal law from paying certain hospital charges now mandated under the state's Chapter 83 reimbursement system for hospitals. These charges include those related to costs of providing services to patients with no or limited health insurance (uncompensated care), and to costs of providing services to Medicare patients which are not covered by the federal Medicare program. Since self-insured funds represent a significant portion of hospital revenues in New Jersey, this ruling could be a major disruption to the Chapter 83 system and affect hospitals' ability to collect adequate revenue.
 This ruling could have far-reaching ramifications for New Jersey's hospitals and many questions remain unanswered. The largest questions at this time are whether or not the hospitals will begin to bill the self-insured plans at charge levels which, in effect, would cover the hospitals' costs of providing uncovered care, or whether or not the hospitals would be able to shift these costs to other insurance carriers under the existing Chapter 83 legislation. The hospitals which potentially would be most immediately affected by the ruling are those located in urban areas that provide large amounts of uncompensated care or those hospitals which experience large shortfalls from Medicare.
 It is Moody's understanding that the ruling could go into effect on Friday, June 5. It is also Moody's understanding that the ruling will be formally appealed to the Third Circuit Court by the State Department of Health along with a request for a stay of the ruling. If accepted by the court, these actions could provide some time for the various parties to develop a satisfactory solution.
 If no appeal or request for a stay is submitted or if the court does not grant an appeal or a stay, Moody's will place under review all New Jersey hospital revenue bonds. This action would be taken at that time to more completely assess the likely impact of the court ruling on the reimbursement system. Moody's will continue to closely monitor the events as they unfold. If there is a failure to develop a timely and adequate resolution to the problem, or if additional information is received that suggests that these uncovered costs will not be borne by any insurance carriers, it is possible that some rating downgrades could occur.
 -0- 6/3/92
 /CONTACT: John Goetz, 212-553-0930, or Diana Lee, 212-553-4747, both of Moody's/ CO: ST: New Jersey IN: HEA SU: RTG


GK-AH -- NY054 -- 6660 06/03/92 14:52 EDT
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Publication:PR Newswire
Date:Jun 3, 1992
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