26:2H-18.59b. Determination of charity care subsidy; formulation

13. a. For the period January 1, 1995 to December 31, 1995, the charity care subsidy shall be determined according to the following methodology.

The hospital-specific charity care subsidy shall be determined by allocating available charity care funds so as to equalize hospital-specific payer mix factors to the Statewide target payer mix factor. Those hospitals with a payer mix factor greater than the Statewide target payer mix factor shall be eligible to receive a subsidy sufficient to reduce their factor to that Statewide level; those hospitals with a payer mix factor that is equal to or less than the Statewide target payer mix factor shall not be eligible to receive a subsidy.

The commissioner shall adjust the distribution of subsidies to hospitals under this methodology to account for any provisional or interim payments made to hospitals in 1995 prior to the effective date of P.L.1995, c.133 (C.26:2H-18.59a et al.). In no case shall the total amount of payments to any hospital exceed what the hospital would have otherwise received if this methodology had been in effect for the entire year.

As used in this subsection:

(1) The hospital-specific "1993 approved charity care" shall be equal to the hospital's 1993 charity care as audited by the department plus 28.36% of the hospital's bad debt as reported on the hospital's 1993 Actual Cost Reports and valued at 1994 Medicaid reimbursement rates;

(2) The hospital-specific "operating margin" shall be equal to: the hospital's 1993 income from operations minus its 1993 charity care subsidy divided by the hospital's 1993 total operating revenue minus its 1993 charity care subsidy. After calculating each hospital's operating margin, the department shall determine the Statewide median operating margin;

(3) The hospital-specific "profitability factor" shall be determined as follows. Those hospitals that are equal to or below the Statewide median operating margin shall be assigned a profitability factor of "1." For those hospitals that are above the Statewide median operating margin, the profitability factor shall be equal to:

.75 x (hospital specific operating

margin - Statewide median operating margin)

1 - ...................................................................

highest hospital specific operating

margin - Statewide median operating margin

(4) The hospital-specific "adjusted charity care" shall be equal to the hospital-specific 1993 approved charity care times the hospital-specific profitability factor;

(5) The hospital-specific "revenue from private payers" shall be equal to the sum of the gross revenues, as reported to the department in the hospital's 1993 Actual Cost Reports for all non-governmental third party payers including, but not limited to, Blue Cross and Blue Shield plans, commercial insurers and health maintenance organizations;

(6) The hospital-specific "payer mix factor" shall be equal to the hospital's adjusted charity care divided by its revenue from private payers; and

(7) The "Statewide target payer mix factor" is the lowest payer mix factor to which all hospitals receiving charity care subsidies can be reduced by spending all of the $400 million in funding allocated for charity care subsidies for 1995.

b. For the purposes of this section and section 12 of P.L.1995, c.133 (C.26:2H-18.59a), "income from operations" and "total operating revenue" shall be defined by the department in accordance with financial reporting requirements established pursuant to N.J.A.C.8:31B-3.3.

c. Any charity care subsidy funds that are not distributed in a given year pursuant to this section shall lapse to the Health Care Subsidy Fund and may be transferred by the commissioner to the Health Access New Jersey subsidy account in the fund.

L.1995,c.133,s.13.