NJHCFFA Final Report

Final Report for:
Greater Newark Healthcare Services Evaluation

Presented to:
New Jersey Health Care Facilities Financing Authority
March 2, 2015
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Table of Contents
Section 1 Introduction............................................................................................................................ 3
Section 2 Planning Area Definition ...................................................................................................... 11
Section 3Planning Area Demographic Profile ..................................................................................... 18
Section 4 Planning Area Patient Migration Patterns ........................................................................... 25
Section 5 Healthcare Resources in the Planning Area: Current and Historical Trends ....................... 32
Section 6 Findings Hospital Physical Plants........................................................................................ 64
Section 7Hospital Bed Need and Emergency Department Demand ................................................... 74
Section 8Conclusions ........................................................................................................................... 84
Section 9Recommendations................................................................................................................ 88
Section 10 Key Implementation Steps ............................................................................................... 110
Section 11 Appendix .......................................................................................................................... 111
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Section 1 Introduction
Background and Objectives
The New Jersey Health Care Facilities Financing Authority (NJHCFFA, or the
Authority) engaged Navigant Consulting, Inc. (Navigant) in July 2014 to evaluate the
current inventory of healthcare services in the Greater Newark area to determine whether
there is duplication of services, unused capacity, or an insufficiency of necessary services
in this area, and if so, propose recommendations to the Commissioner of the New Jersey
Department of Health (the Department) for consolidation or regionalization of services.
This engagement is a logical progression in New Jerseys ongoing effort to ensure the
States supply of hospitals and healthcare services are appropriately configured to
respond to community needs for high-quality, affordable, and accessible care and that
public funding is spent wisely, to help meet New Jerseys healthcare needs in a sustainable
way (i.e., the New Jersey Commission on Rationalizing Health Care Resources from 2008 and
other studies, including the NJHCFFA Hudson County Hospital Services
Consolidation/Regionalization Report from 2011). This engagement also falls within the
Departments responsibility for development and administration of the States policy with
respect to health planning.
Strategic Context
In reading this report and considering the conclusionsand especially the proposed
recommendationsit is important to recognize that the healthcare industry in the United
States is experiencing a period of profound and unprecedented change. These changes
are fundamentally reshaping the industry and reflect a growing consensus among
providers, payers, purchasers, physicians, policy makers, and particularly patientsthat
the current healthcare system is not sustainable and requires not just modest reform but
true transformation. As noted by Susan Dentzer, senior policy advisor at the Robert Wood
Johnson Foundation, who spoke at the American College of Healthcare Executives 57th
Congress on Healthcare Leadership in March of 2014, the U.S. healthcare industry is a $2.8
trillion industry (the size of the gross domestic product of France), an amount far higher
in total and per capita than any other country in the world. Yet life expectancy in the
United States is below that of the worlds 28 richest countries and 80% of adults are
expected to be overweight (if not obese) in six years. And when people get sick, much of
the care they receive (up to one half by some estimates) has no evidence to suggest it
works. Furthermore, one of the top three causes of death is because of adverse events
when patients receive care.
The current transformation of the healthcare system is arguably the most significant in
this country since the publication of the Flexner Report more than 100 years ago. The
Flexner Report was commissioned by the American Medical Association Council on
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Medical Education and conducted under the aegis of the Carnegie Foundation to address
unacceptably high levels of variability in the quality of medical school education in the
United States. Publication of the report in 1910 and the subsequent adoption of its
recommendations to enact higher admission and graduation standards and adhere to the
protocols of mainstream science in teaching and research transformed the medical
education system (and ultimately the entire healthcare system) by creating a single model
of medical education that has largely survived to the present day. Subsequent efforts to
reform the healthcare industry in the United States date back to the Truman
administration and include every administration since then. However, since the Flexner
Report, virtually all of the major reform efforts and changes in healthcare (e.g., the HillBurton Act, Medicare, Medicaid, Diagnostic Related Groups (DRGs), the Balanced
Budget Amendment, the Medicare Prescription Drug Act, the Affordable Care Act) have
dealt with how healthcare is financed. The factors driving the current transformation
have been building steadily for the last half century and are changing not just how
healthcare is financed, but how it is organized and delivered.
In dealing with this transformation of the industry, healthcare organizations must
strategically plan to move from the traditional fee-for-service, volume-based
reimbursement world to the future fee-for-health, value-based reimbursement
environment. This shift, which has become known as the shift from Curve One VolumeBased Reimbursement to Curve Two Value-Based Payment, found its way into
healthcare in Ian Morrisons 1996 bestseller The Second Curve: Radical Strategies for
Managing Change, which posited a theory that after a period of success, organizations hit
a plateau as their environment changes. Some organizations are paralyzed by the
changes; others chart a new coursetheir second curve. The concept of the Curve One
to Curve Two shift in healthcare is illustrated in Exhibit 1 below:
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EXHIBIT 1-1: THE SHIFT FROM CURVE ONE TO CURVE TWO
This shift from Curve One to Curve Two is gaining traction, as evidenced by the
Department of Health and Human Services announcement on January 26, 2015 regarding
performance goals and timelines for the transition of Medicare payments from volume to
value and a public-private partnership to encourage employers, health insurers,
physicians and hospitals to adopt similar goals. The primary focus of HHS is expansion
of programs that enable Medicare payments to shift from fee for service (FFS) to value via
accountable care organizations (Medicare Shared Savings Program), bundled payments
(Bundled Payment for Care Improvement Initiative), primary care medical homes, and
the value-based purchasing programs included in the Affordable Care Act. In its
announcement, HHS noted that 20% of Medicares $417 million FFS payments in 2014
were made through alternative payment models like these. Medicares new goal is to
increase value-based payment models to 30% by 2016 and 50% by 2018. In addition, it
also proposed that by 2016, 85% (vs. 80% today) of all Medicare FFS payments have a
component based upon quality or efficiency of care, increasing to 95% by 2018. In a New
England Journal of Medicine editorial, HHS Secretary Sylvia Burwell wrote: We are
dedicated to using incentives for higher-value care, fostering greater integration and
coordination of care and attention to population health, and providing access to
information that can enable clinicians and patients to make better-informed choices. We
believe that, by working in partnership across the public and private sectors, we can
accelerate these improvements and integrate them into the fabric of the U.S. health
system.
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In order to be successful in the transformed healthcare landscape of the future, healthcare

organizations must recognize that their core business is changing: they are increasingly
in the care coordination (in addition to care delivery) business. Leadership teams and
boards must also understand that critical success factors in a care coordination
paradigm are fundamentally different, as are key performance criteria and measures of
success. It is important to note that the recommendations contained in this report are, in
many respects, designed with the ongoing transformation of the healthcare industry in
mind.
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Scope, Work Plan and Data Sources

The Authoritys Request for Proposal (RFP) specified the facilities included in the scope
of this project. These facilities include the following:
HOSPITALS
Clara Maass Medical Center
(Clara Maass or CMMC)
East Orange General Hospital
(East Orange or EOGH)
Newark Beth Israel Medical
Center (Newark Beth or
NBIMC)
Saint Michaels Medical Center
(Saint Michaels or SMMC)
University Hospital (UH)
HEALTH CENTERS
RECEIVING PUBLIC
FUNDING
Jewish
Renaissance
Medical
Center (JRMC)
Newark Community Health
Centers (NCHC)
Newark Homeless Health Care
(NHHC)
LONG-TERM CARE
FACILITIES
Broadway House
In addition, the RFP delineated a series of analyses and assessments the Authority wished
to have conducted as part of the scope of this engagement, including:
Assessing where patients using the specified facilities in the Greater Newark area
come from and profiling what services these patients use
Analyzing where residents of the Greater Newark area go for their healthcare
services (including assessing where area residents who leave the Newark area go
for care)
Profiling the physicians serving on the medical staffs of the five hospitals in the
study
Identifying and assessing the presence/relevance/importance of any unique
services provided by the hospitals included in the study
Proposing recommendations to address any duplication or excess capacity or
insufficiency of necessary services
Identifying steps that could be taken to encourage area residents to use area
hospitals
Suggesting methods of support for the missions of University Hospital and the
Rutgers-Newark Biomedical and Health Sciences schools
Assessing the impact on regional health planning solutions in both the short and
long term of the potential purchase of an area hospital (or hospitals)
Addressing the impact of the proposed recommendations on population health in
the Greater Newark area
Assessing the financial impact of the proposed recommendations
Outlining key steps for implementing the recommendations
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To address the scope of work requested by the Authority, we developed a multi-step work
plan that included the following activities:
Mobilize and Initiate the Project. The first activity in our work plan entailed
organizing and conducting a kickoff meeting with representatives from the
Authority and the Department to discuss and clarify the goals and objectives for
the project, review our proposed approach, discuss the project work plan and
timeline, review the data needed to conduct the project, develop a data collection
plan, and agree on a process for obtaining feedback from the Authority and the
Department throughout the project.
Define the Planning Area. A key step in the engagement was to define the
relevant study area encompassed in the Greater Newark area. This area, which
we labeled the Planning Area, was defined based, in large part, on the service
areas of each of the hospitals. We reviewed the Planning Area definition with each
of the hospitals, as well as with the Authority and the Department to obtain their
concurrence.
Profile Patient Demographics and Patient Migration Patterns. Once we defined

the Planning Area, we developed a demographic profile of the Planning Area.
This profile includes current and projected population by age group,
socioeconomic indicators, and health status. In addition, we analyzed patient
migration patterns and trends to determine the extent to which residents of the
Planning Area utilize healthcare services outside of the Planning Area and to
identify the number of patients who come into the Planning Area for services.
Assess the Current Inventory of Healthcare Services. In this task, we identified

and profiled the current inventory of healthcare services in the Planning Area,
including a determination of which services are unique vs. duplicative (see the
following bullet). This inventory includes acute inpatient care services, emergency
services, tertiary services, sub-specialty services, ambulatory and outpatient
services, publicly funded primary care services, community services, and longterm care services. In addition, we identified and profiled the physicians serving
on the medical staffs of the study hospitals, including the physician complement
by specialty and age.
Identify Unnecessary Duplication of Services and Unused Capacity. This

activity involved comparing current utilization of healthcare services in the
Planning Area to current capacity to identify excess capacity. We also evaluated
projected demand for healthcare services in the Planning Area, using generally
accepted health planning methodologies, and compared this estimate of projected
demand to existing and planned capacity to determine the extent to which
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duplicative or unused/under-used capacity would exist in the Planning Area in

the future.
Assess the Physical Plants of the Study Hospitals. We toured each of the five
study hospitals and conducted quantitative and qualitative assessments of their
general condition, space adequacy, flows and adjacencies, and capital
expenditures required to address regulatory and/or operational efficiency
imperatives.
Develop Proposed Recommendations and Assess Financial Impact. Based on

the results of the previous activities, we developed a set of recommendations to
address unnecessary duplication of services and excess capacity, as well as to
enhance the efficiency, financial viability, and quality of services available to
residents of the Planning Area. We also prepared a high-level financial impact
assessment of the proposed recommendations.
Outline Implementation Steps. Following development of our proposed

recommendations, we developed a high-level implementation framework for the
recommendations that outlines key steps required to implement the
recommendations.
In conducting the analyses associated with this report, we used a wide variety of data
sources. In addition to the most recent operational and financial data provided to us by
the five study hospitals and other organizations in the study, key data sources include the
following:
American Hospital Association Statistics, 2015 edition

American Medical Association Physicians Characteristics and Distribution in the
United States, 2014 Edition
Claritas (Demographic Projections and Estimates)
The Commonwealth Fund (www.whynotthebest.org)
Community Commons
Dartmouth Atlas of Health Care (www.dartmouthatlas.org)
Medical Group Management Association Physician Compensation and
Production Survey
New Jersey Department of Health Facilities Evaluation and Licensing
The New Jersey Hospital Discharge Data Collection System (NJDDCS, which
collects data through Uniform Bill-Patient Summaries)
New Jersey Medical and Health Sciences Restructuring Act of 2013
New Jersey Primary Care Association FQHC Directory
New York Department of Health State Discharge Database
Newark Agreements of 1968
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Truven Health Care Analytics

United States Department of Health and Human Services, The Organ Procurement
and Transplantation Network
Structure of the Report

The remainder of this document presents the results of our analyses along with our
conclusions and recommendations. The report is structured according to our work plan
as described above, with the next section addressing the definition of the Planning Area.
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Section 2 Planning Area Definition

This section of our report defines the geographic area encompassed by the Greater
Newark area referenced in the Authoritys RFP. Delineation of this geographic area,
which we labeled the Planning Area, was an essential step in the engagement because
the subsequent analyses related to service inventory, unused capacity, duplication of
services, patient migration patterns, and patient demographics were based on the
delineation of this area. Identification of the relevant geographic market is always the
first step in any planning analysis.
Methodology
The Authoritys RFP indicated the area encompassed by this study was to include the
Greater Newark area. In order to perform the analyses requested in the RFP, it was
necessary to define this area more specifically. As a starting point in defining the Greater
Newark area, we reviewed the self-defined service areas of each of the five hospitals in
the study. The hospital service areas were used as a starting point because the areas
served by health centers and long-term care facilities, particularly those in densely
populated urban areas, tend to be more concentrated and less geographically dispersed
than hospital service areas. By using the hospital service areas, we encompassed the
geographic areas served by the health centers (Newark locations) and the long-term care
facility included in this study. Throughout the analyses in this report, observation cases
are excluded from inpatient market share, patient origin, and patient migration data.
These cases are, however, included in the calculation and projection of bed need, which is
important in estimating facility needs for future scenarios.
Hospital service areas are traditionally defined as the geographic region (typically
delineated on a ZIP code level) from which a hospital draws the majority of its patients.
This service area is usually subdivided into a Primary Service Area (PSA), and a
Secondary Service Area (SSA), with the PSA accounting for two-thirds to threequarters of an organizations total patients, while the SSA contributes an additional 1520% of an organizations patients. In addition to the patients who live in the PSA and
SSA, most hospitals experience a modest level (usually less than 20% of total patient
volume) of in-migration of patients from outside the PSA and SSA.
Following our review of each hospitals self-defined service area, we reviewed the Stark
Service Area definition for each hospital. The Stark Service Area is defined as the area
composed of the lowest number of contiguous ZIP codes from which the facility draws
at least 75% of its inpatient discharges. This definition is articulated in the Stark Phase II
Regulations issued by the Centers for Medicare and Medicaid (CMS) in March of 2004
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in conjunction with enactment of Section 1877 of the Social Security Act (the Act) (42
U.S.C. 1395nn), also known as the physician self-referral law and commonly referred to
as the Stark Law.
After reviewing each hospitals self-defined service area and Stark Service Area, Navigant
identified each hospitals Core Service Area (CSA). Our experience has shown that
most hospitalsespecially community hospitalshave a distinct and relatively compact
CSA from which the hospital draws a significant portion of its business (as measured by
patient origin) AND where the hospital is a major provider of healthcare (as measured by
market share).
Based on our review and analysis of the PSAs, SSAs, Stark Service Areas, and CSAs of
each of the five hospitals, we defined a single geographic area to serve as the basis for this
study (the Planning Area). We also compared the Planning Area to both the Newark
Hospital Service Area (HSA) and the Newark Hospital Referral Region (HRR) as
defined by the Dartmouth Atlas. The Dartmouth Atlas analyzes Medicare data to define
existing regional and local markets, as well as to provide other information on utilization
of health care services. Through an examination of Medicare data, the Dartmouth Atlas
defines HSAs and HRRs for every part of the United States, with HSAs being a collection
of ZIP codes whose residents receive most of their hospitalizations from the hospitals in
that local area and HRRs consisting of regional market areas for tertiary medical services.
An HSA is essentially a local healthcare market for hospital care and each HRR contains
at least one hospital that performs major cardiovascular and neurosurgery procedures.
The table below summarizes the various approaches to service area definition we
considered in establishing the Planning Area.
TABLE 2-1: PLANNING AREA DEFINITION METHODOLOGIES
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Results
Based on a comparison of the various service area definitions, we defined a Planning Area
for this study that includes 20 ZIP codes in the Greater Newark area. Most (16) of these
ZIP codes are in Essex County, two are in Hudson County, and there is one each in Bergen
and Union Counties. The five study hospitals together account for 68% of the inpatient
hospital care provided to Planning Area residents. Furthermore, no other acute
medical/surgical hospitals are located in the Planning Area, suggesting that the area
accurately represents the region that depends on the five hospitals for healthcare services.
In addition, the Planning Area accounts for 78% of these five hospitals total discharges
and, as such, the Planning Area captures more of the hospitals collective discharges than
do any of the separate internally defined PSAs or Stark Service Areas.
The Planning Area used in this study is shown in the map that follows, while Table 2-2
provides Planning Area market volume and market share by ZIP code, and Table 2-3
summarizes the Planning Area information for each of the five study hospitals.
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FIGURE 2-1: PLANNING AREA MAP

As the map shows, the
Planning Area is bounded
roughly on the north by
Route 3, the Hackensack
River on the east, I-78 on
the south, and State Road
638 on the west. It is a
densely populated urban
area measuring roughly 10
miles by 10 miles and is
served by and bisected by a
number of major roads and
interstates, including I-95,
I-78, I-280, the Garden
State Parkway, US 1-9, and
SR 21.
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TABLE 2-2: PLANNING AREA MARKET VOLUME AND MARKET SHARE BY ZIP CODE
Source: 2013 New Jersey State Discharge Database; Navigant analysis.

Note: Excludes normal newborns (DRG 795) and observation patients (LOS of 0).
The five study area hospitals recorded a combined total of more than 66,000 discharges in
2013, as noted in the table below. Also, 78% of the total discharges at the five study
hospitals originated in the Planning Area, with the three community hospitals (CMMC,
EOGH, and SMMC) reporting a higher percentage of their discharges coming from the
Planning Area (81%, 91%, and 85%, respectively). NBIMC and UH had a slightly higher
percentage of patients coming from outside the Planning Area, reflecting their more
specialized service complement and their role as referral and/or major teaching
institutions.
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TABLE 2-3: PLANNING AREA SUMMARY PROFILE
2013 Data
NBIMC
Discharges from
Planning Area
Other Discharges from
NJ
CMMC
EOGH
SMMC
UH
5 Hosp
Total
15,192
13,654
5,806
6,925
10,482
52,059
5,289
3,010
519
1,125
3,651
13,594
288
160
48
93
242
831
20,769
16,824
6,373
8,143
14,375
66,484
% from Planning Area
73%
81%
91%
85%
73%
78.3%
% from Other New

Jersey
26%
18%
8%
14%
25%
20.5%
% from All Other
1%
1%
1%
1%
2%
1.2%
All Other Discharges*

Total Discharges
*All Other includes all discharges from non-New Jersey residents.

Source: 2013 New Jersey State Discharge Database; Navigant analysis.
Note: Excludes normal newborns (DRG 795) and observation patients (LOS of 0).
It should be noted that other than the five study hospitals, the only hospital with
significant market share in the Planning Area is Saint Barnabas Medical Center, with
10.8% market share. While Saint Barnabas Medical Center is outside the Planning Area,
it is reasonably proximate (approximately 4.5 miles from the western edge of the Planning
Area) and likely receives referrals from the two hospitals inside the Planning Area that
also are part of Barnabas Health (Clara Maass Medical Center and Newark Beth Israel
Medical Center). No other hospital has greater than 4% market share in the Planning
Area, which further supports our conclusion that the Planning Area as defined accurately
represents the region that depends on the five hospitals for healthcare services.
We conducted a variety of sensitivity analyses to test how robust the Planning Area
definition was by adding ZIP codes that are immediately adjacent to the Planning Area
and reviewing the subsequent results. Each time we added an adjacent ZIP code to the
original 20 ZIP codes, the combined market share of the five study hospitals declined from
68%, suggesting that the residents of the added ZIP code primarily use other hospital
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facilities for their healthcare and the five study hospitals were not major providers of
service to residents of that ZIP code. We also compared the Planning Area definition to
the Dartmouth Atlas HSA and Newark HRR definitions and noted that the Newark HRR
includes the entire Planning Area.
Prior to profiling patient demographic characteristics or developing a detailed inventory
of services, we reviewed the Planning Area definition with representatives of the
Authority and the Department, as well as with executives from each of the five study
hospitals. Based on the results of our analyses and these discussions, we concluded that
the definition of the Planning Area was appropriate and represented a logical geographic
area upon which to base our subsequent analysis. The Appendix contains detailed
information on each of the hospitals self-defined service areas, their Stark Service Area
definitions, their Core Service Areas, as well as the Dartmouth Atlas HSAs and HRRs.
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Section 3Planning Area Demographic Profile

Once we defined the Planning Area, the next step was to develop a current and future
demographic profile of residents of the Planning Area. Gaining a clear understanding of
the population, its age distribution and its expected growth is essential to understanding
both the future health services needs and the potential impact of any reconfiguration of
services. In addition, we profiled the Planning Areas household income levels and
insurance coverage because those socioeconomic indicators impact the types of services
needed and accessed by residents, along with the frequency at which services are
accessed. These considerations are important factors to consider when determining what
services are needed in a defined geographic market area. For example, areas characterized
by higher household incomes typically have greater access to and use primary care and
preventive services more than areas with low household incomes. Similarly, areas with
low household incomes tend to have higher rates of Medicaid versus commercial
insurance, have higher rates of chronic diseases such as diabetes and congestive heart
failure, and use emergency departments more frequently (often for primary care services
versus true emergencies).
The Planning Area has a current population of almost 637,000. This population is not
expected to increase significantly in the next five years, although it will get older and the
population under the age of 45 will actually decrease. In addition, a disproportionately
high percent of Planning Residents are uninsured or have Medicaid and may struggle to
access the healthcare system for primary and preventive care.
Planning Area Population
The population in the 20 ZIP codes comprising the Planning Area was 636,852 in 2014 as
shown in Table 3-1 below. The Planning Area population is projected to grow by only
8,000 residents (1.3%) to 645,000 by 2019 (an overall compound annual growth rate
(CAGR) of 0.3% per year). This growth rate is consistent with New Jersey statewide
growth, but slower than the U.S. overall, which is expected to grow at 0.7% per year over
the same time period.
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TABLE 3-1: POPULATION AND GROWTH

Geography
2014 Pop.
2019 Pop.
%
Change
CAGR
(14-19)
Planning Area
636,852
644,977
1.3%
0.3%
New Jersey
8,906,101
9,052,200
1.6%
0.3%
United States
317,199,353
328,309,478
3.5%
0.7%
Source: Claritas; Navigant analysis
While little population growth is expected in the Planning Area as a whole, there are some
pockets of growth (three ZIP codes in Newark are projected to grow more than 3%
between 2014 and 2019). On the other hand, the Irvington ZIP code (07111), which is the
most populous ZIP code in the Planning Area, is expected to decline by 1.6% during the
2014-2019 period. Table 3-2 presents the population and projected growth for each of the
Planning Area ZIP codes.
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TABLE 3-2: POPULATION AND GROWTH BY ZIP CODE

Zip
2014
2019
CAGR
County
City
% Change
Code
Population Population
(2014-2019)
07003
07017
07018
07029
07031
07032
07050
07102
07103
07104
07105
07106
07107
07108
07109
07110
07111
07112
07114
07205
Essex
Bloomfield
Essex
East Orange
Essex
East Orange
Hudson Harrison
Bergen
North Arlington
Hudson Kearny
Essex
Orange
Essex
Newark
Essex
Newark
Essex
Newark
Essex
Newark
Essex
Newark
Essex
Newark
Essex
Newark
Essex
Belleville
Essex
Nutley
Essex
Irvington
Essex
Newark
Essex
Newark
Union
Hillside
Total
47,570
35,582
27,984
16,349
15,734
41,588
30,478
11,616
33,614
52,002
47,752
31,194
38,448
25,801
35,416
28,808
53,454
26,459
15,136
21,867
636,852
47,531
35,522
28,227
16,755
16,072
42,603
30,057
11,894
34,559
53,636
48,703
31,575
39,073
26,635
35,637
29,251
52,585
26,716
15,612
22,334
644,977
-0.1%
-0.2%
0.9%
2.5%
2.1%
2.4%
-1.4%
2.4%
2.8%
3.1%
2.0%
1.2%
1.6%
3.2%
0.6%
1.5%
-1.6%
1.0%
3.1%
2.1%
1.3%
-0.0%
-0.0%
0.2%
0.5%
0.4%
0.5%
-0.3%
0.5%
0.6%
0.6%
0.4%
0.2%
0.3%
0.6%
0.1%
0.3%
-0.3%
0.2%
0.6%
0.4%
0.3%
Source: Claritas; Navigant analysis
Similar to the U.S. overall, the Planning Areas 65 to 84 age cohort is projected to grow
significantly faster than all other age cohorts, with a 3.5% CAGR between 2014 and 2019,
although growth in this cohort and the 85+ cohort will be slower in the Planning Area
than nationally. Growth is also expected in the Planning Area in the 45 to 64 age cohort,
and at a faster rate than nationally.
Both the population younger than 44 years of age and the female population ages 18 to 44
are projected to decrease between 2014 and 2019 (in contrast to expected growth in these
segments for the U.S. overall). These reductions will result in decreased future demand
for obstetrics and pediatrics services in the Planning Area.
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TABLE 3-3: POPULATION AND GROWTH AND DISTRIBUTION BY AGE COHORT
Age Group
Planning
Area
2014
Population
Planning
Planning
Area
Area
2019
2014-2019 %
Population
Change
Planning
Area
CAGR
(14-19)
U.S. CAGR
(2014-2019)
Under 18
151,679
150,817
-0.6%
-0.1%
0.1%
18 to 44
255,405
247,116
-3.2%
-0.7%
0.3%
45 to 64
158,510
163,847
3.4%
0.7%
0.2%
65 to 84
63,028
74,893
18.8%
3.5%
3.7%
85+
8,230
8,304
0.9%
0.2%
1.2%
Total:
636,852
644,977
1.3%
0.3%
0.7%
Female 18 to 44
126,891
121,820
-4.2%
-0.8%
0.2%
Source: Claritas and Navigant analysis
Planning Area Household Income

The Planning Area is considerably less affluent than both New Jersey and the U.S. At just
over $59,000, the Planning Areas average household income is 37% lower than that of the
state ($94,024) and 17% lower than the U.S. average of $71,319. In fact, every ZIP code in
the planning area except 07110 (Nutley) has a lower average household income than the
New Jersey average, and only five ZIP codes have average household incomes above the
U. S. average, as shown in Table 3-4 below.
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TABLE 3-4: AVERAGE HOUSEHOLD INCOME 2014

Zip
Code
County
City
07003
Essex
Bloomfield
07017
Essex
East Orange
07018
Essex
East Orange
07029
Hudson Harrison
07031
Bergen
07032
Hudson Kearny
07050
Essex
Orange
07102
Essex
Newark
07103
Essex
Newark
07104
Essex
Newark
07105
Essex
Newark
07106
Essex
Newark
07107
Essex
Newark
07108
Essex
Newark
07109
Essex
Belleville
07110
Essex
Nutley
07111
Essex
Irvington
07112
Essex
Newark
07114
Essex
Newark
07205
Union
Hillside
North Arlington
Planning Area Total

New Jersey
United States
Average
Household
Income (2014)
Zip Code's Avg.

Household Income
as % of State's Avg.
Household Income
$83,491
$49,909
$48,409
$70,462
$83,745
$75,055
$54,296
$37,575
$40,961
$48,191
$51,813
$57,747
$45,188
$41,331
$75,916
$96,125
$50,973
$47,518
$37,572
$69,545
$59,074
$94,024
$71,319
89%
53%
51%
75%
89%
80%
58%
40%
44%
51%
55%
61%
48%
44%
81%
102%
54%
51%
40%
74%
Source: Claritas and Navigant analysis
Health Insurance Coverage

Similar to household income, the insurance coverage profile of the Planning Area is
significantly different than that of New Jersey overall. Areas with low household income
typically have high rates of Medicaid and uninsured and low rates of commercially
insured residents. In fact, only 43% of Planning Area residents have commercial
insurance (nearly 20% fewer than the state overall) and 26% of Planning Area residents
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are covered by Medicaid (compared to just 13% for New Jersey). Also, 17% are uninsured,
compared to 9% for the state.
As such, many Planning Area residents likely have difficulty accessing primary and
preventive care services, which impacts health status and results in higher usage of highcost emergency department services.
EXHIBIT 3-1: INSURANCE COVERAGE
Source: Truven Health Care Analytics; Navigant analysis
Health Status
New Jersey counties were ranked by the Robert Wood Johnson Foundation and the University of
Wisconsins Population Health Institute a higher ranking in both health outcomes and health
factors indicates a healthier county population relative to its peers. As shown in Table 3-5 below,
Essex County ranks low relative to other New Jersey counties in terms of health outcomes and
health factors, according to County Health Rankings, a Robert Wood Johnson Foundation
program. In fact, Essex County ranks 20th out of 21 New Jersey state counties in health outcomes
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and 17th in health factors. Furthermore, Essex County adults categorized as obese make up 25.9%
of the population compared to the New Jersey average of 24.5% and Essex County residents with
diabetes make up 9.7% of the population compared to the New Jersey average of 8.9%.
Table 3-5: Health Outcomes & Health Factors Rank by New Jersey County (2014)
Source: Robert Wood Johnson Foundation
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Section 4 Planning Area Patient Migration Patterns

After defining the relevant Planning Area and establishing a profile of its residents, the
next step in the analysis was to understand where Planning Area residents receive their
healthcare services, as well as where study hospital patients come from.
Over two-thirds of Planning Area residents received their inpatient care at one of the five
study hospitals, with 30% of area residents leaving the Planning Area for care at other
New Jersey Hospitals, while 2% of Planning Area residents traveled to New York
hospitals for their care. While out-migration of one-third of Planning Area residents is
somewhat high, it is not completely unexpected given that the Planning Area is in a
densely populated urban area with a well-developed transportation system and nearby
world-class academic medical centers.
Planning Area Patient Migration Patterns
In order to assess where Planning Area residents were going for their healthcare services
and where the people using the Planning Area hospitals were coming from, we conducted
an extensive analysis of patient migration patterns, which included identifying the
number of Planning Area residents who used healthcare facilities outside of the Planning
Area (those who out-migrated from the Planning Area for care), along with identifying
the number of people who were not residents of the Planning Area but who received care
at one of the Planning Area inpatient facilities (in-migration into the Planning Area for
care).
Out-migration
Data for calendar year 2013 from the New Jersey Department of Health discharge
database and the New York State Department of Health Statewide Planning and Research
Cooperative System (SPARCS) database were used to determine healthcare utilization
patterns of Planning Area residents at New Jersey and New York hospitals. The results
of our analyses showed that the number of Planning Area residents who left the Planning
Area for inpatient care (e.g., out-migration) significantly exceeded the number of people
residing outside of the Planning Area who sought inpatient care at one of the study
hospitals (e.g., in-migration).
As shown in Table 4.1 below, nearly 68% of the residents of the Planning Area received
their inpatient care in one of the Planning Area hospitals, while 30% of Planning Area
residents sought inpatient care at a New Jersey hospital outside of the Planning Area and
less than 2% of Planning Area residents traveled to hospitals in New York State for their
inpatient care.
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TABLE 4-1: PLANNING AREA INPATIENT CARE BY SITE OF HOSPITALIZATION

2013
5 Study
Hospitals
Metric
Out-Migration
Out-Migration All New Jersey
to Other
to New York and New York
New Jersey
Hospitals
Hospitals
Hospitals
Total Discharges
Planning Area
Residents
52,059
23,336
1,367
76,762
Percent of Planning
Area Resident
Discharges
67.8%
30.4%
1.8%
100.0%
CMI
1.4
1.9
1.9
1.5
Source: New Jersey and New York Department of Health State discharge databases; Navigant analysis.
Note: Excludes DRG 795 (normal newborns), LOS =0, and invalid DRGs.
Patient migration patterns are influenced by numerous factors, including employment

status and location, insurance coverage status, commuting patterns, patient and physician
preference, service availability and access / convenience. That aside, the percentage of
Planning Area residents leaving the Planning Area for healthcare services (32%) is
perhaps slightly higher than expected, although not necessarily atypical for a densely
populated urban area with a well-developed transportation system and access to many
other nearby hospitals, including brand-name academic medical centers.
In order to gain a better understanding of residents leaving the Planning Area for care,
we analyzed the relative case mix index (CMI) of the patients who remain in the area
for care versus those who left the area for care, as well as the comparative payer mix and
service distribution. CMI is a relative value assigned to a diagnosis-related group of
patients in a hospital based upon the expected allocation of resources to care for and treat
patients in the group. The higher the CMI, the more complex the care required to serve
that patient population. The CMI for Planning Area residents cared for in the five study
hospitals averaged 1.4, whereas the CMI for patients leaving the area for care at other
New Jersey or New York hospitals was higher at 1.9, indicating that Planning Area
residents leave for more complex services. This outmigration may be because of any of a
variety of factors, including but not limited to, patient preference and physician referral
patterns, or because certain services were not available in the Planning Area.
With respect to insurance coverage, Planning Area residents who stayed in the area for
their inpatient care had a different insurance coverage profile than Planning Area
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residents who left the area for inpatient care. Planning Area residents discharged from
hospitals outside the planning area were more than twice as likely to have commercial
insurance (16%) vs. Planning Area residents who stayed local (7%) for their care (i.e., were
discharged from one of the five study hospitals). Conversely, as expected, Medicaid
patients were less likely to out-migrate for care.
This pattern of better insured patients leaving an area for their inpatient care is fairly
typical in urban areas and reflects patient preference and socioeconomic factors such as
type of employment. Table 4-2 below summarizes where Planning Area residents
received inpatient care in 2013, along with the relative CMI of those patients.
TABLE 4-2: INPATIENT PAYER MIX AND CMI FOR PLANNING AREA RESIDENTS
Patient
Category
All Planning Area Residents

Planning Area Residents who
Out-migrated for Inpatient
Care
Planning Area Residents
Discharged From One of the
Five Study Hospitals
Inpatient Payer
Inpatient Payer
Mix:
Mix:
Commercially
Medicaid
Insured
Proportion
Proportion
Case Mix Index
10.2%
9.3%
1.5
16.5%
8.3%
1.9
7.1%
9.7%
1.4
In-migration
In order to determine the need for healthcare services in the Planning Area, residents from
outside of the area receiving care at the study hospitals (in-migration) must also be
understood. As noted in the discussion regarding the Planning Area definition, most
hospitals typically serve a modest percentage of patients from outside their service
areasusually less than 20%. There were 14,425 discharges from the five study hospitals
of residents from outside of the Planning Area in 2013 as shown in Table 4-3 below. Inmigration at CMMC, EOGH, and SMMC represented 19%, 9%, and 15% of the hospitals
activity respectively. Non-Planning Area residents seeking care at CMMC and EOGH
had a relatively low CMI of 1.3 and 1.1, respectively. The in-migration to CMMC and
EOGH is primarily from residents of ZIP codes adjacent to the Planning Area, which
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combined with the relatively low CMI of these patients likely indicates they are migrating
into the area because of geographic proximity more so than seeking out specialized or
complex care. Conversely, non-Planning Area residents discharged from SMMC had an
average CMI of 1.9, which likely reflects the historic draw of SMMCs cardiac service.
NBIMC and UH had a higher proportion of their discharges from non-Planning Area
residents, with 27% each and average CMI of greater than 2. These statistics reflect the
more specialized service offerings at NBIMC and UH: NBIMC offers solid organ
transplant (heart, lung, and kidney) and is home to the Childrens Hospital of New Jersey,
which draw patients from a broader geography than core community hospital services,
and UH is the only Level I trauma center in the Planning Area, with only two other Level
I centers in the state (Robert Wood Johnson in New Brunswick and Cooper University
Hospital in Camden).
TABLE 4-3: PLANNING AREA IN-MIGRATION TO STUDY HOSPITALS 2013
Metrics (2013)
CMMC
EOGH
NBIMC
SMMC
UH
Total 5
Area
Hospitals
Discharges NonPlanning Area

Residents
3,170
567
5,577
1,218
3,893
14,425
Percent of
Hospitals Total
Discharges
19%
9%
27%
15%
27%
22%
CMI
1.3
1.1
2.2
1.9
2.1
1.9
Net Migration
Table 4-4 shows the number and percent of discharges by service line that remain within
vs. leave the planning area (out-migrate) for care. Of the 21 services assessed, 6 had rates
of Planning Area resident out-migration above 40%, including cardiac surgery,
gynecology, rehabilitation, spine, thoracic surgery, and transplant. These services are
those in which patients, physicians, and payers often select providers based on outcomes,
quality, reputation, and cost, even if the providers are further away in terms of distance
and travel time.
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Table 4-5 then shows the combined effect of out-migration and in-migration for the
Planning Area in 2013, both overall and by service line. A total of 24,703 discharges (or
32.2% of total) left the Planning Area, whereas 14,425 discharges in-migrated into the
Planning Area, for a net outflow of 10,278 discharges. While most service lines had a net
outmigration of patients, a few of the smaller, more tertiary services with wider catchment
areas (including cardiac surgery, neurosurgery, transplant and trauma) had a net inmigration of discharges.
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TABLE 4-4: PLANNING AREA OUTMIGRATION BY SERVICE LINE 2013

Discharges in
Discharges
Discharges
Planning Area as
Leaving Planning
Leaving Planning
% of Total
Area as % of
Area Hospitals
Discharges
Total Discharges
Total Planning
Area
Discharges
Discharges in
Planning Area
Hospitals
Cardiac Services
9,478
7,165
75.6%
2313
24.4%
Cardiac Surgery
529
257
48.6%
272
51.4%
ENT
994
699
70.3%
295
29.7%
General Medicine
23,336
17,089
73.2%
6247
26.8%
General Surgery
6,057
3,861
63.7%
2196
36.3%
Gynecology
1,044
595
57.0%
449
43.0%
Neonatology
3,015
1,871
62.1%
1144
37.9%
Neurology
3,769
2,667
70.8%
1102
29.2%
460
285
62.0%
175
38.0%
Obstetrics
9,824
5,984
60.9%
3840
39.1%
Oncology/Hematology
3,306
2,303
69.7%
1003
30.3%
142
106
74.6%
36
25.4%
Orthopedics
2,834
1,746
61.6%
1088
38.4%
Psychiatry
7,443
4,598
61.8%
2845
38.2%
Rehabilitation
51
0.0%
51
100.0%
Spine
861
353
41.0%
508
59.0%
Thoracic Surgery
355
208
58.6%
147
41.4%
50.0%
50.0%
Trauma
494
329
66.6%
165
33.4%
Urology
1,046
691
66.1%
355
33.9%
Vascular Services
1,716
1,248
72.7%
468
27.3%
All Service Lines
76,762
52,059
67.8%
24,703
32.2%
Service Line
Neurosurgery
Ophthalmology
Transplant
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TABLE 4-5: PLANNING AREA NET MIGRATION BY SERVICE LINE 2013

Service Line
Total Planning Area Total Planning Area InOut-migration

migration
Net Outmigration (Inmigration)
Cardiac Services
2,313
1,678
635
Cardiac Surgery
272
615
(343)
ENT
295
335
(40)
General Medicine
6,247
3,261
2986
General Surgery
2,196
1,289
907
Gynecology
449
269
180
Neonatology
1,144
439
705
Neurology
1,102
618
484
175
195
(20)
Obstetrics
3,840
1,000
2840
Oncology/Hematology
1,003
789
214
36
110
(74)
Orthopedics
1,088
913
175
Psychiatry
2,845
1,636
1209
Rehabilitation
51
51
Spine
508
240
268
Thoracic Surgery
147
68
79
25
(21)
Trauma
165
190
(25)
Urology
355
356
(1)
Vascular Services
468
399
69
All Service Lines
24,703
14,425
10,278
Neurosurgery
Ophthalmology
Transplant
Source: New Jersey and New York Department of Health discharge databases; Navigant analysis.
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Section 5 Healthcare Resources in the Planning Area: Current and

Historical Trends
After defining the Planning Area and profiling the populations demographic
characteristics and healthcare utilization patterns, we developed an inventory of
healthcare services available in the Planning Area and assessed trends in both supply and
demand for healthcare services. This section of the report provides an overview of the
healthcare resources in the defined Planning Area, both historical and current, an
assessment of the trend in demand for healthcare services, and summary profiles of the
five study hospitals, the Federally Qualified Health Centers, and Broadway House.
Historical Trends in the Planning Area
Trends in Planning Area healthcare utilization over time provide a context for
understanding current market dynamics, as well as provide a basis for determining likely
future utilization levels. Between 1999 and 2013, the Newark Union Metropolitan
Statistical Area (a broader region than the Planning Area as described in Section 2)
experienced a 30% reduction in staffed beds (from 8,298 to 5,783) and a 28% reduction in
hospital average daily census (from 5,635 to 4,085), despite population growth of
approximately 2%. In response to the steep decline in hospital average daily census and
resulting inpatient overcapacity in the region, a number of hospitals in the region have
closed since 1999, as shown in Table 5-1 below. Specifically, six hospitals in the Planning
Area have closed over the past fifteen years: St. Marys Hospital, West Hudson Hospital,
Hospital Center at Orange, Irvington General Hospital, Columbus Hospital, and St. James
Hospital.
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TABLE 5-1: AREA HOSPITAL CLOSURES SINCE 1999

Hospital Closures in Newark-Union MSA and Planning Area Since 1999
Year
No. of Hospitals
Hospital Name(s)
1999
Montclair Community Hospital1; and St. Marys Hospital

(Orange)2
2000
Elizabeth General1
2003
West Hudson Hospital2
2004
Hospital Center at Orange2
2006
Irvington General Hospital2
2007
Union Hospital 1
2008
Columbus Hospital (Newark)2; Muhlenberg Regional Medical

Center (Plainfield)1; and St. James Hospital (Newark)2
2012
St. Clares Sussex1
Source: Navigant analysis of information provided by State of New Jersey Department of Health
(1): Indicates hospital was located in Newark-Union MSA.
(2): Indicates hospital was located in Planning Area.
Recent Utilization Trends for Inpatient Services

More recently, the number of inpatient hospital discharges of Planning Area residents
declined substantially, dropping 9.2% between 2011 and 2013. Discharges at the five
Planning Area hospitals declined at a faster rate than the overall market, declining 14%
over the same time period. As a result of this faster than market decline in discharges, the
combined market share of the study hospitals in the Planning Area declined from 71.2%
in 2011 to 67.8% in 2013, a decline of 3.4 percentage points. This means that the five study
hospitals are serving a smaller percentage of a shrinking market. Table 5-2 shows
inpatient utilizations trends in the Planning Area for the 2011-2013 period.
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TABLE 5-2: PLANNING AREA INPATIENT HOSPITAL UTILIZATION

Year
Total Planning
Area Discharges
Total Study
Hospital
Discharges
Study Hospitals
Planning Area
Planning Area
Mkt. Shr.
Discharges
2011
84,521
77,294
60,246
71.2%
2012
81,877
73,145
57,275
70.0%
2013
76,762
66,484
52,059
67.8%
% Change
('11-'13)
-9.2%
-14.0%
-13.6%
-3.4%
Note: Excludes DRG 795 (normal newborns)
Although inpatient volume declined in the Planning Area over the past several years, the
inpatient use-rate (defined as the number of inpatient discharges per capita) in the
Planning Area remains 6% higher than the overall New Jersey State rate and 14% higher
than the U.S. rate, as shown in Table 5-3 below. It is important to note that declines in
inpatient use-rates and inpatient discharges are not trends unique to the Planning Area
discharges and use-rates are decreasing in New Jersey as well as nationally. These
declines are the result of a number of factors, including:
The lingering effects of the Great Recession, which suppressed utilization of

health services
Growth in/shift of patients to observation status vs. being admitted as an inpatient
Continued shift of volumes from inpatient to outpatient settings
Growth in high deductible insurance plans, which is reducing utilization
Shift to value-based/population health management and improvements in care
management
These trends are expected to continue to have a major impact on health services utilization
for the foreseeable future both nationally and in the New Jersey market. Therefore, even
though the inpatient use-rate in the Planning Area has declined significantly in the last
few years, it is likely that the Planning Area will continue to see reduced inpatient
utilization rates and inpatient volumes in the future, as the utilization rate in the Planning
Area continues to be impacted by the changing dynamics of the healthcare industry.
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TABLE 5-3: AREA HOSPITAL UTILIZATION RATES
6% higher
than NJ
14% higher
than US
In addition to inpatient utilization rates, a second factor that is critical to determining the
future need for hospital beds is the number of days that each patient stays in the hospital
-- the average length of stay (ALOS). Between 2011 and 2013, the ALOS increased
nominally for the State of New Jersey overall, from 5.15 to 5.20 days, as shown in Table 54. However, the combined length of stay for the five study hospitals (which was already
11.3% higher than the state average in 2011) increased by 0.13 days in 2013, a figure 12.7%
above the state average. The longer length of stay in the study hospitals is likely
attributable to a number of factors, including difficulty in placing patients in post-acute
settings and a more traditional model of physician practice (i.e., predominately small
groups and solo practitioners), which makes clinical integration and coordination of care
more difficult. The combination of continued declines in inpatient use-rates and the
potential for a future decrease in ALOS would result in reduced need for inpatient
hospital beds and generate additional excess, underutilized capacity in the Planning Area.
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TABLE 5-4: LENGTH OF STAY TRENDS
Year
Total
Discharges
Total Days
ALOS
All New Jersey Hospitals

2011
979,835
5,042,604
5.15
2012
955,459
4,911,557
5.14
2013
925,106
4,813,846
5.20
Total Study Hospitals

2011
77,294
442,549
5.73
2012
73,145
424,305
5.80
2013
66,484
389,638
5.86
Overview of Planning Area Healthcare Resources

In this section we provide an overview of healthcare services available in the Planning
Area. While all five hospitals have emergency departments and provide inpatient
medical/surgical care and inpatient behavioral health services, there is some service
differentiation among the Planning Area hospitals. Three hospitals, NBIMC, SMMC, and
UH, provide cardiac surgery services and three hospitals provide obstetrics and inpatient
pediatrics services, CMMC, NBIMC, and UH. There are two Level III neonatal intensive
care units (NICU) in the Planning Area located at NBIMC and UH and one Level II NICU
at CMMC. NBIMC and UH offer transplant services, although there is no overlap in organ
types, with NBIMC providing kidney, heart, and lung transplant and UH providing liver
transplantation. Clearly some ad hoc service rationalization has taken place in the
Planning Area (for example, EOGH and SMMC no longer provide obstetrics or inpatient
pediatric services). Also, UH is the only Level I Trauma Center in the Planning Area.
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TABLE 5-5: DISTRIBUTION OF KEY HOSPITAL SERVICES AT STUDY AREA HOSPITALS

Service
CMMC
EOGH
NBIMC
SMMC
UH
Behavioral Health
Level I Trauma
Neurosurgery
Neonatal Intensive Care Unit
Obstetrics
Cardiac Surgery
Orthopedic Surgery
Pediatric Intensive Care Unit
Inpatient Pediatrics
Kidney Transplant
Liver Transplant
Heart Transplant
Lung Transplant
Post-Acute Care
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Total for Five

Hospitals
5
1
2
3
3
3
4
2
3
1
1
1
1
2
Source: NJDOH Division of Health Facilities Evaluation and Licensing, OPTN

http://optn.transplant.hrsa.gov)
In addition to the acute care services described above, both CMMC and UH offer
transitional care services. Clara Maass has a 20-bed transitional care unit that provides
sub-acute care focused on cardiac recovery, post-surgical recovery, oncology and pain
management, pulmonary management, skin and wound care, and complex medical
management. On the UH campus, Broadway House offers long term post-acute care
focused on the HIV / AIDS patient population. However, given this focus and the
improvements in HIV / AIDS treatments and outcomes, Broadway House has seen a
steady decline in occupancy, which has negatively impacted its financial performance. As
such, Broadway Houses declining census provides an opportunity to repurpose the
facility to serve a broader population, which has been recognized with the recent approval
of a Certificate of Need to convert 16 of Broadway Houses 78 beds to use by patients
requiring general transitional care. Lastly, EOGH operates a forensics unit dedicated to
providing inpatient care to inmates.
In addition to inpatient resources, there are ambulatory or outpatient resources available
in the Planning Area. The State of NJ Department of Health lists 115 ambulatory care
facilities in Essex County excluding hospice and hospitals. Please see the Appendix for
the detailed inventory. However, most of the core, general acute care services are located
on the hospital campuses, and the study hospitals do not offer a distributed network of
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ambulatory locations to improve access and convenience to residents throughout the

Planning Area.
Federally Qualified Health Centers (FQHCs) are community-based organizations that
provide comprehensive primary care and preventive care, including health, oral, and
mental health/substance abuse services to persons of all ages, regardless of their ability to
pay or health insurance status. Thus, FQHCs are a critical component of the healthcare
safety net. FQHCs include all organizations receiving grants under section 330 of the
Public Health Service Act and qualify for enhanced reimbursement from Medicare and
Medicaid, as well as other benefits. FQHCs must:
Serve an underserved area or population

Offer a sliding fee scale
Provide comprehensive services
Have an ongoing quality assurance program
Have a governing board of directors
There are three FQHCs in the Planning Area with 18 locations that serve approximately
160,000 people per year. Each Planning Area hospital is affiliated with at least one FQHC.
Table 5-6 presents an overview of the FQHCs in the Planning Area.
TABLE 5-6
FEDERALLY QUALIFIED HEALTH CENTERS SERVING THE PLANNING AREA
Newark-Area FQHCs
Newark
Community
Jewish
Health
Renaissance
Centers
3
7
8
4,000
120,300
34,000
Newark
Homeless
Healthcare
Number of Locations
Approximate Patients Served Annually
Specialties Provided
Adult & Family Medicine
Dental
ENT
OB/GYN
Optometry
Pediatrics
Podiatry
Endocrinology
Laboratory
Behavioral Health
Planning Area Hospital Affiliations
CMMC
EOGH
NBIMC
SMMC
UH
Other Hospital Affiliations
St. James Hospital
Raritan Bay Medical Center
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Source: FQHC data request; Organizational websites; Navigant analysis.
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Medically Underserved Areas

The federal Medically Underserved Area (MUA) and Medically Underserved Population
(MUP) designations identify areas and populations that have limited access to primary
care services (as measured by a population-to-provider ratio). Medically Underserved
Populations (MUPs) may include groups of persons who face economic, cultural or
linguistic barriers to healthcare. MUA/P designations are used to qualify for state/local
and federal programs aimed at increasing health services to underserved areas and
populations. MUA determinations are based on an Index of Medical Underservice (IMU)
for a defined service area (i.e., group of census tracts that represent a neighborhood with
similar socioeconomic and demographic characteristics). IMU calculations rely on data
on demographic indicators associated with underservice including the ratio of primary
medical care physicians per 1,000 population, infant mortality rate, percentage of the
population with incomes below the poverty level, and percentage of the population age
65 or over.
Several areas in the Planning Area are designated as Medically Underserved Areas or
Medically Underserved Populations. The designation of portions of the Planning Area as
MUA/P is an important indication that there are unique features of an underserved
population that need to be considered when determining future service needs and
exploring potential reconfiguration of services in the area. For example, inadequate access
to primary care may lead to increased use of hospital emergency departments for nonacute medical concerns and/or conditions that could have been avoided with appropriate
primary care.
As seen in Figure 5-1 below, several areas in the Planning Area have been designated as
MUA or MUP areas. Governor-certified shortage areas are designated by state governors
as having shortages of providers.
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FIGURE 5-1: MEDICALLY UNDERSERVED AREAS IN THE PLANNING AREA
Descriptions and Service Complement of Study Area Hospitals

This section of the report builds upon the overview presented in the previous section by
providing additional detail for each of the Planning Area hospitals, including location,
specialty services and programs, current capacity, recent utilization, and recent financial
performance.
Clara Maass Medical Center
Founded in 1868, Clara Maass Medical Center (CMMC) is a general acute care facility in
the northern portion of the Planning Area on Old Short Hills Road close to the Branch
Brook Park. CMMC is part of Barnabas Health. Licensed for 460 beds, CMMC has a
current maintained bed complement of 285 beds. This number will increase to 317 when
the additional 32-bed medical/surgical unit currently under construction is completed. In
addition to general medical and surgical care, CMMCs inpatient service complement
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includes critical care, pediatrics, oncology, obstetrics, and psychiatry. Key centers and
services include:
The Womens Health Center

The Cancer Center at Clara Maass
Diagnostic Cardiac Services including Cardiac Catheterization
The Pain Management Center
The Joint & Spine Institute
Vascular Center
Same Day Surgery
The Wound Center at Clara Maass
The Center for Sleep Disorders
The Bariatric Surgery Center
Clara Maass Medical Center Inpatient Bed Utilization

With an ADC of 230, inpatient bed occupancy at CMMC was 81% in 2013 based upon available
beds, the highest of the study hospitals.
TABLE 5-7: CMMC BED UTILIZATION

Bed Type
Licensed Beds
Available Beds
2013 ADC
2013 Occupancy (Licensed beds)
2013 Occupancy (Available beds)
Med/Surg
391
232
183
47%
79%
Obstetrics
27
13
12
44%
92%
Behavioral
42
40
35
83%
88%
Total
460
285
230
50%
81%
Clara Maass Medical Center Financial Performance

CMMC experienced a 6% decline in operating revenue between 2012 and 2013 from $277
Million to $261 Million, while expenses did not decrease proportionately, as shown in
Table 5-8. While operating performance remained positive in 2013, operating margin
decreased 29% from $20 Million to $14 Million. However, CMMC was one of only two
(along with NBIMC) study hospitals with positive operating performance in 2013.
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TABLE 5-8: CMMC INCOME STATEMENTS

Clara Maass
Income Statements
FY2012
FY2013
$$ in Thousands
Revenue
Combined IP and Outpatient Net
Revenue
Bad Debt
NJ State Subsidy
Net Patient Service Revenue
Other Operating Revenue
Total Operating Revenue
$277,023 $260,671
($20,468) ($19,260)
$8,883
$8,359
$265,438 $249,770
$11,702
$11,092
$277,140 $260,862
Operating Expenses
Salary/Wage
Fringe Benefits
Supplies
Purchased Services
Insurance
Other
Interest
Depreciation and Amortization
Management Fees/Assessment
Total Operating Expense
$110,402
$28,360
$42,413
$22,380
$3,339
$13,597
$3,346
$8,299
$24,981
$257,116
$105,921
$27,209
$40,691
$21,472
$3,203
$13,045
$3,210
$7,962
$23,967
$246,680
$20,024
$14,182
Operating Income
Clara Maass Medical Center Payer Mix

In 2013 CMMC had a higher proportion of discharges from Medicare, HMO, and Blue
Cross than the Planning Area overall as shown in Figure 5-2. CMMC had a lower number
of Medicaid, New Jersey Family Care and self-pay / indigent patients than the overall
area, which likely contributes to its continued stronger financial performance than other
study hospitals. Note that Blue Cross HMO patients are included in the HMO category
in the payer mix figures (this is true of all the payer mix analyses that follow).
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FIGURE 5-2: CMMC PAYER MIX 2013

40%
37%
35%
30%
28%
30%
23%
25%
20%
15%
10%
4%
3% 3%
5%
13%
12%
8%
8%
10%
10%
8%
2% 2%
CMMC
Plannning Area
0%

Founded in 1903 East Orange General Hospital (EOGH) is a general acute care facility in
the western portion of the Planning Area on Central Avenue. EOGH is an independent
hospital licensed for 212 beds, with a maintained bed complement of 207 beds. In addition
to general medical and surgical care, EOGHs inpatient service complement includes:
Critical care
Oncology
Psychiatry
Forensic Unit
East Orange General Hospital Inpatient Bed Utilization
Inpatient bed occupancy based on available beds at EOGH was only 54% in 2013, which
is significantly below industry target occupancy rates. On a service specific basis, EOGH
recorded 53% occupancy in med/surg (compared to generally accepted industry target of
80-85%) and 59% in behavioral health (compared to an industry target of 90%). ADC was
just over 110 (the lowest of the 5 hospitals), with an ADC of 90 in med/surg and 22 in
behavioral health.
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TABLE 5-9: EOGH BED UTILIZATION

Bed Type
Licensed Beds
Available Beds
2013 ADC
Med/Surg Obstetrics Behavioral

175
N/A
37
170
N/A
37
90
N/A
22
51%
N/A
59%
53%
N/A
59%
Total
212
207
112
53%
54%
East Orange General Hospital Financial Performance

EOGH had a negative operating margin in both 2012 and 2013, with the loss increasing to
$10.9 Million in 2013 as shown in the Income Statement in Table 5-10. The acceleration of
the operating loss resulted from a 6.5% reduction in operating revenue and a slight
increase in operating expenses. EOGHs financial position does not appear sustainable
and would require a significant additional ongoing subsidy without fundamental changes
in the organizations operations and/or business model.
TABLE 5-10: EOGH INCOME STATEMENTS

Income Statements
2012
2013
$ in Thousands
Revenue
Combined IP and Outpatient Net Revenue
Bad Debt
NJ State Charity Care Subsidy
Other Subsidy
$91,270
($12,551)
$11,268
$6,897
$96,883
$9,781
$106,665
$82,601
($11,125)
$11,141
$7,864
$90,482
$9,236
$99,718
Operating Expenses
Salary/Wage
Fringe Benefits
$54,097
$11,062
$51,791
$11,142
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Supplies
Purchased Services
Insurance
Interest
Operating Income
$30,623
$6,726
$2,244
$754
$3,995
$109,501
$31,771
$8,523
$2,068
$945
$4,357
$110,598
($2,837)
($10,880)
East Orange General Hospital Payer Mix

In 2013 EOGH had a higher proportion of discharges from Medicare (38% vs. 30%), and
self-pay / indigent care (18% vs. 13%) than the Planning Area overall as shown in Figure
5-3. The proportion of EOGH patients with HMO coverage was the same as the overall
Planning Area at 23%.
FIGURE 5-3: EOGH PAYER MIX 2013

38%
40%
35%
30%
30%
25%
23%
23%
18%
20%
15%
10%
5%
0%
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8%
5%
12%
11%
10%
4%
3%
0%2%
13%
EOGH
Plannning Area
0%
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Newark Beth Israel Medical Center

Founded in 1901, Newark Beth Israel Medical Center (NBIMC) is a general acute care
facility in the southern portion of the Planning Area on Lyons Avenue. NBIMC is a
member of Barnabas Health. Licensed for 596 beds, NBIMC has a maintained bed
complement of 420 beds. In addition to general medical and surgical care, NBIMCs
inpatient service complement includes critical care, cardiac surgery, neonatology,
neurosurgery, obstetrics, oncology, orthopedics, pediatrics, psychiatry and transplant
services. Key centers and services include:
Center for Womens Health

Frederick B. Cohen Comprehensive Cancer and Blood Disorders Center
Center for Geriatric Health Care
Hemophilia Treatment Center
Sleep Disorders Center
Wound Care and Hyperbaric Institute
Childrens Hospital of New Jersey
Newark Beth Israel Medical Center Inpatient Bed Utilization
NBIMCs 2013 ADC was 324, the highest of the five study hospitals. Inpatient bed
occupancy based on available beds at NBIMC was 79% in 2013, nearly at industry targets.
Service specific occupancy rates were 79% for medical/surgical, 94% for obstetrics, and
69% in behavioral health.
TABLE 5-11: NBIMC BED UTILIZATION
Bed Type
Licensed Beds
Available Beds
2013 ADC
Med/Surg
519
332
262
50%
79%
Obstetrics
32
43
31
97%
94%
Behavioral
45
45
31
69%
69%
Total
596
420
324
54%
79%
Newark Beth Israel Medical Center Financial Performance

NBIMC was one of the two study hospitals with positive operating performance in 2012
and 2013 (CMMC was the other). However, like CMMC, NBIMCs operating performance
declined from 2012 to 2013 with a positive operating income of $14.1 Million in FY 2012
decreasing to $3.7 Million in FY 2013. This was due to a 4% decline in total operating
revenue from $583 Million in FY 2012 to $560 Million in FY 2013, while operating expenses
decreased by only 2.2%.
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TABLE 5-12: NBIMC INCOME STATEMENTS

Income Statements
FY2012
FY2013
$ in Thousands
Revenue
Combined IP and Outpatient Net Revenue
Bad Debt
NJ State Subsidy
Other Subsidy
$484,394 $460,676
($19,350) ($18,403)
$50,895
$48,403
$0
$0

$515,939
$67,185
$490,676
$69,364
$583,124
$560,041
Operating Expenses
Salary/Wage
Fringe Benefits
Supplies
Purchased Services
Insurance
Other
Interest
$260,041
$59,804
$95,660
$29,192
$12,440
$43,571
$7,921
$17,618
$42,802
$254,239
$58,470
$93,526
$28,540
$12,162
$42,599
$7,745
$17,225
$41,847
$569,049
$556,353
$14,075
$3,687
Operating Income
Newark Beth Israel Medical Center Payer Mix
NBIMCs 2013 proportion of HMO, Medicaid, Medicare, and self-pay/indigent patients

was similar to those of the overall market. NBIMC had a lower proportion of Blue Cross
patients (2%) compared to the Planning Area (8%). NBIMC has an especially high mix of
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NJ Family Care, New Jerseys publicly funded health insurance program for low income
residents (including children) that may not quality for traditional Medicaid.
FIGURE 5-4: NEWARK BETH ISRAEL MEDICAL CENTER PAYER MIX 2013
35%
30%
25%
25%
30%
27%
25%
23%
20%
15%
10%
5%
8%
2%
12% 13%
10%
10% 10%
3%
1%
0%2%
NBIMC
Planning Area
0%

Founded in 1867, Saint Michaels Medical Center (SMMC) is a general acute care facility
in the central portion of the Planning Area on Central Avenue. SMMC is a member of
Trinity Health (formerly Catholic Health East). Licensed for 358 beds, SMMC has a
maintained bed complement of 248 beds. In addition to general medical and surgical care,
SMMCs inpatient service complement includes cardiac surgery, critical care, oncology,
and psychiatry. Key centers and services include:
Heart and Vascular Institute

Metabolic and Bariatric Center
Liver Center
Sleep Center
Cancer Center
The Connie Dwyer Breast Center
Saint Michaels Medical Center Inpatient Bed Utilization

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SMMC had an ADC similar to EOGH in 2013: 116 patients. Inpatient bed occupancy
based on available beds at SMMC was just 47% in 2013, the lowest of the study hospitals
and significantly below industry targets. Med/surg occupancy of 45% is very low
compared to industry target of 80-85%. Behavioral health occupancy was higher at 62%,
but still low compared to an industry target of 90%.
TABLE 5-13: SMMC BED UTILIZATION
Bed Type
Licensed Beds
Available Beds
2013 ADC
Med/Surg
317
227
103
32%
45%
Obstetrics
N/A
N/A
N/A
N/A
N/A
Behavioral
41
21
13
32%
62%
Total
358
248
116
32%
47%
St. Michaels Medical Center Financial Performance

SMMC had negative operating performance in 2012 and while 2013 showed
improvement, due to significant expense reduction, operating losses in 2013 still exceeded
$14 Million. As with EOGH, SMMCs financial position does not appear sustainable and
would likely require a significant additional ongoing subsidy without fundamental
changes in the organizations operations and/or business model.
TABLE 5-14: SMMC INCOME STATEMENTS

St. Michael's Medical Center
Income Statements
2012
$ in Thousands
Revenue
Revenue
Bad Debt
Other Subsidy
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2013
$166,989 $161,686
($9,509) ($11,796)
$24,677
$25,975
$3,152
$0
$185,309 $175,865
$16,430
$16,442
$201,739 $192,307
Operating Expenses
Salary/Wage
Fringe Benefits
Supplies
Purchased Services
Insurance
Interest
$77,881
$25,960
$30,679
$72,157
$1,369
$17,144
$13,095
$238,285
Operating Income
($36,546) ($14,321)
$72,887
$24,296
$27,784
$58,927
$1,141
$15,972
$5,621
$206,628
St. Michaels Medical Center Payer Mix

Of 2013 inpatients at SMMC, 65% were covered by Medicare or Medicaid and an
additional 15% were self-pay / indigent. The high proportion of government payment is
a significant challenge for hospital financial performance given reimbursement reductions
from Medicare and Medicaid.
FIGURE 5-5: ST. MICHAELS MEDICAL CENTER PAYER MIX 2013
60%
52%
50%
40%
30%
30%
23%
20%
10%
0%
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7% 8%
11%
2% 3%
12% 15%13%
13%
10%
0%2% 0%
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SMMC
Planning Area
University Hospital
University Hospital (UH) traces its origins back to the 1880s when it was operated as City
Hospital. Since that time, UH has gone through a number of organizational changes, with
the most recent one occurring in 2013 when UH became a distinct entity with its own
Board through the New Jersey Medical and Health Sciences Education Restructuring Act.
UH is an Academic Medical Center in the central portion of the Planning Area on Bergen
Street and serves as the primary teaching site for the Rutgers New Jersey Medical School.
UH is licensed for 467 beds and has a maintained bed complement of 360 beds. In addition
to general medical and surgical care, UHs inpatient service complement includes cardiac
surgery, critical care, neurosurgery, neonatal intensive care, obstetrics, oncology,
orthopedics, ophthalmology, pediatrics, pediatric intensive care, psychiatry, and
transplant services. Key centers and services include:
Level I Trauma Center

Broadway House (long term care facility for HIV/AIDS patients)
Aortic Surgery Center
The Center for Liver Diseases and Transplantation
Stroke Center
University Hospital Inpatient Bed Utilization
UH had an ADC of 245 patients in 2013. Both overall inpatient bed occupancy and
med/surg occupancy at UH were below industry targets at 68% in 2013 based upon
available beds.
TABLE 5-15: UH BED UTILIZATION
Bed Type
Licensed Beds
Available Beds
2013 ADC
Med/Surg
403
296
201
50%
68%
Obstetrics
30
30
13
43%
43%
Behavioral
34
34
31
91%
91%
Total
467
360
245
52%
68%
University Hospital Financial Performance

UHs operating performance declined between 2012 and 2013 resulting in a loss of over
$24 Million in FY 2013. This downturn in performance was due to a 6% reduction in total
operating revenue from $492 Million to $464 Million, while expenses increased slightly as
shown in the Income Statement in Table 5-16.
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TABLE 5-16: UH INCOME STATEMENTS

University Hospital
Income Statements
FY2012
FY2013
$$ in Thousands
Revenue
Revenue
Bad Debt
$484,870
$468,632
($127,404) ($137,829)
$116,455
$115,098
$473,921
$445,901

Other Subsidy
Fringe Subsidy
Other Revenue
$12,946
$0
$5,326
$492,193
$9,446
$0
$9,036
$464,383
Operating Expenses
Salary/Wage
Fringe Benefits
Supplies
Purchased Services
Insurance
Other
Interest
$263,171
$0
$171,841
$0
$0
$12,266
$5,341
$14,042
$19,991
$486,652
$269,393
$0
$169,091
$0
$0
$8,766
$5,156
$16,179
$20,280
$488,865
$5,541
($24,482)
Operating Income
University Hospital Payer Mix
In 2013, 22% of UHs patients were self-pay / indigent and an additional 16% were covered
by Medicaid. UHs proportion of patients with HMO coverage was 30% compared to 23%
in the Planning Area.
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FIGURE 5-6: UNIVERSITY HOSPITAL PAYER MIX 2013

35%
23%
25%
20%
22%
16%
15%
10%
30%
30%
30%
6% 8%
5%
15%
12%
10%
3%
3%
3%
13%
5%
UH
Planning Area
2%
0%
Overall Study Hospital Inpatient Bed Utilization

In total, the occupancy rate across the five study hospitals was 69% in 2013 (with med/surg
at 68% and obstetrics and behavioral health each higher at 74% and 75% respectively).
These occupancy levels indicate there is currently excess inpatient capacity among study
hospitals. As noted in previous sections, population growth in the Planning Area is
expected to be quite modest and inpatient utilization (and perhaps ALOS) are expected to
decline in the future, which will result in an increase in excess inpatient capacity in the
Planning Area in the future.
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TABLE 5-17: OVERALL PLANNING AREA HOSPITAL BED COMPLEMENT AND

UTILIZATION
Bed Type
Study Hospital Total

Medical/Surgical Obstetrics
Behavioral
Total
Licensed Beds
1,805
89
199
2,093
Available Beds
1,242*
76
177
1,495*
839
56
132
1,027
46%
63%
66%
49%
68%
74%
75%
69%
2013 Average
Daily Census
2013 Occupancy
(Licensed beds)
2013 Occupancy
(Available beds)
Source: Internal client data; Navigant analysis.
*CMMC additional 32 bed med/surg unit under construction will increase total study
hospital available beds to 1,527 (and med/surg beds to 1,274) when complete.
Financial Performance of the Study Hospitals
In aggregate, the study hospitals generated $1.58 Billion in operating revenue in 2013,
down 6.2% from $1.67 Billion in 2012 (which reflects the declines in inpatient utilization
referenced previously in this document). Newark Beth Israel Medical Center and
University Hospital combined represent approximately two thirds of this revenue, with
the other three study hospitals accounting for the remaining third. Operating revenue
was down for all 5 hospitals in 2013 vs. 2012, due primarily to declining inpatient volumes.
As a group, the five hospitals lost nearly $32 Million from operations in 2013. Financial
performance is highly variable, however, as the two Barnabas Health hospitals (Clara
Maass and Newark Beth Israel) reported positive operating income, while Saint Michaels,
East Orange, and University Hospital each had negative operating incomes of ($10
Million) or more for 2013.
Of particular note is the fact that in 2013 the New Jersey Hospital Care Payment Assistance
Program (New Jerseys charity care subsidy program) provided $177 Million (26% of the
state total) to the five study hospitals. The majority of this subsidy was provided to
University Hospital ($101 Million). Without this subsidy, the five hospitals combined for
$209 Million in operating losses in 2013. It is also noteworthy that University Hospitals
operating results are somewhat understated by the fact that the fringe benefits paid to its
employees were absent from the operating expenses in its financial statements. This
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represents an additional $90 Million or more annually that has historically not been
included in the presentation of UHs financials.
This level of negative aggregate operating performance does not appear to be sustainable
in the long term and absent significant changes in the configuration and operation of the
facilities, is unlikely to improve given anticipated trends in market volumes, along with
increased pressure on reimbursement from payers at all levels (commercial, state, and
federal). Financial performance for the five study hospitals in 2013 was, in general, worse
than 2012. Both Clara Maass and Newark Beth Israel have maintained positive operating
margins. However, the other three study hospitals did not have positive operating
margins, and combined, have a negative EBIDA (earnings before interest, depreciation,
and amortization), in addition to negative operating incomes. EBIDA can be an important
indicator of whether a hospitals operations are sustainable. It removes the non-cash
expenses of depreciation and amortization from consideration and as well as the interest
owed for debt. A positive EBIDA for a financially struggling hospital suggests that the
hospital is, at the very least, generating enough cash from its core operations to pay its
bills (excluding interest) and in the event of a debt restructuring or forgiveness, could
realistically be financially sustainable over the near-term without the burden of debt
repayment. A negative EBIDA, on the other hand, suggests that a hospital is not
generating enough financial capacity from its core operations to pay its bills, regardless
of any debt forgiveness. Negative EBIDAs suggest that without substantial changes to
their expense structures (as revenues have been decreasing) these hospitals risk becoming
insolvent.
From a balance sheet perspective, St. Michaels has very high debt levels with a debt to
capitalization ratio of more than 100%. A hospitals ratio of debt to capitalization
measures its degree of financial leverage. One can think of it as the fraction of a hospitals
total assets that has been financed with debt, rather than with the hospitals equity funds
(endowments plus accumulated retained earnings). Other things being equal, the higher
a hospitals debt-to-capitalization ratio, the larger the interest expense in the hospitals
income statement and the larger the total debt-service in its cash flow statement.
Therefore, this ratio is widely used by financial analysts to assess the degree to which a
hospital is leveraged and thus, may be unable to take on additional debt or the extent to
which a hospital may have difficulty meeting its scheduled debt service payments. The
other facilities have debt to capitalization ratios within industry standards.
As might be expected from the ongoing negative operating results at St. Michaels,
University, and East Orange, days cash on hand is generally low. Days cash on hand is
defined as cash and highly liquid assets (e.g., marketable securities or money-market
funds) divided by the hospitals average daily cash outflow to support operations; it
excludes depreciation, which is a non-cash expense. In other words, days cash on hand
measures a hospitals cash reserves in terms of the number of days the hospital could
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continue to meet daily operating expenses even if it were to receive no additional cash
revenues. The lower the number, the more vulnerable a hospital is to disruptions in
revenues (e.g., a slowdown in payment by third-party payers) or expenses (e.g., sharp
increases in supply costs). A very low number may signal that the hospital may not be
able to meet payroll.
Furthermore, the average age of plant at the five facilities combined is over 18 years,
suggesting the hospitals also have deferred capital spending. Average age of plant is a
ratio that is calculated by dividing accumulated depreciation by depreciation expense.
This ratio measures the average age (in years) of an organizations fixed assets. In general,
industry norms are in the 8-12 year range. The lower the value is, the newer a businesss
buildings and equipment. A low average age typically means that the organization is
using current technology and that it will not need to make large capital expenditures in
the near future.
Given the significant challenges these hospitals face declining volumes and revenues
along with continued increases in operating expenses -- recent financial performance
(presented in Table 5-18 below and compared to industry benchmark in Table 5-19)
suggests that minor improvements to operating performance will not be sufficient to
create a sustainable financial future for the Planning Area hospitals.
TABLE 5-18: RECENT FINANCIAL PERFORMANCE OF STUDY HOSPITALS
$$ in millions
Hospital
System
Year
Saint Michaels
Medical Center
Trinity Health
CY12
CY13
University
Hospital
Independent
FY12
FY13
Operating Revenue
Operating Expense
Operating Income
Operating Margin
$201.7
$238.3
($36.5)
-18.1%
$192.3
$206.6
($14.3)
-7.4%
$492.2
$486.7
$5.5
1.1%
$464.4
$488.9
($24.5)
-5.3%
$106.7
$109.5
($2.8)
-2.7%
$99.7
$110.6
($10.9)
-10.9%
$277.1
$257.1
$20.0
7.2%
$260.9
$246.7
$14.2
5.4%
$583.1
$569.0
$14.1
2.4%
$560.0
$556.4
$3.7
0.7%
EBIDA
($19.8)
$7.3
$24.9
($3.1)
$1.9
($5.6)
$31.7
$25.3
$39.6
$28.7
Total Assets
Long Term Debt
$190.8
$232.2
$167.9
$227.8
$207.4
$89.0
$263.4
$77.3
$79.6
$14.0
$78.0
$11.6
$154.5
$75.5
$172.7
$69.3
$376.8
$220.4
$355.9
$208.4
72%
12.2
122%
15.6
43%
0.6
29%
7.1
18%
78.0
15%
77.2
49%
40%
59%
147 (Barnabas System)
59%
Debt to Capitalization
Days Cash on Hand
Source notes/
comments
hospital financial
statements
hospital financial
statements
East Orange
General Hospital
Independent
CY12
CY13
hospital financial
statements
Clara Maass MC
Barnabas
CY12
CY13
hospital internal data,

Medicare cost reports
debt excludes moneys

"due to CHE"
Source: Audited financial statements, internal hospital financials, and Medicare cost reports;
Barnabas System days cash from Fitch, November 2013
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Newark Beth
Israel
Barnabas
CY12
CY13
hospital internal data,

Medicare cost reports
TABLE 5-19: FINANCIAL PERFORMANCE OF STUDY HOSPITALS COMPARED TO

BENCHMARKS
Source: Audited financial statements, internal hospital financials, and Medicare cost reports. Medians from Fitch
and Moodys (FY 2012latest available); Barnabas system days cash from Fitch, November 2013.
TABLE 5-20: CHARITY CARE SUPPORT TO STUDY HOSPITALS

FY13 $$ in Millions

University Hospital
Clara Maass MC
Newark Beth Israel
Study Hospitals Total
Operating
Revenue
$192.3
Operating
Expense
$206.6
Operating
Income
($14.3)
State Charity
Care Subsidy
(FY13)
$26.0
$464.4
$488.9
($24.5)
$100.7
($125.2)
$99.7
$110.6
($10.9)
$11.2
($22.1)
$260.9
$246.7
$14.2
$4.4
$9.8
$560.0
$556.4
$3.7
$34.8
($31.1)
$1,577.3
$1,609.1
($31.8)
$177.1
($208.9)
State Total
$675.0
Source:
http://www.state.nj.us/health/charitycare/documents/sfy2013ccs.pdf
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Operating Income
without Subsidy
($40.3)
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Medical Staff Complement at Study Hospitals

In addition to understanding the operating statistics and trends of the study hospitals, it
is also important to profile the physician resources in the Planning Area. We therefore
compiled and assessed demographic information on the medical staffs of the study
hospitals as part of this engagement. This section of our report provides an overview of
the medical staffs of the study hospitals.
Based on a review of the medical staff rosters of the study hospitals, physicians in the
Newark area appear to have a traditional practice model, meaning predominance of solo
and small independent physicians practices. This is in stark contrast to many other areas
of the U.S. where physicians are organized in large (100+) physicians groups and are more
closely integrated with or employed by hospitals and health systems.
The proportion of hospital-employed physicians on the Planning Area hospitals medical
staff ranges from less than 1% to 28%. By way of comparison, Medical Group
Management Association data indicate that 62% of U.S physicians nationwide were
employed by hospitals and health care systems in 2013.1 Navigant believes the
predominance of independent and small practice physicians in the Planning Area is one
reason why ALOS is high at the study hospitals (as the schedules of solo physicians may
make it more difficult to discharge patients in a timely manner, compared to physicians
in group practices).
As the primary teaching affiliate of Rutgers New Jersey Medical School, University
Hospital has a closed medical staff of ~600 faculty (organized as the Robert Wood
Johnson Medical Group faculty practice), where an appointment in the Rutgers New
Jersey Medical School is required to provide patient care in University Hospital.
However, the faculty can (and does) practice at hospitals other than UH.
Physicians on the medical staff of the Planning Area hospitals have an age profile that is
older than the national average. Approximately 45% of the medical staff members at the
Planning Area hospitals (for which information was available) are age 55 or older,
compared to 46% of physicians in NJ and 34% of physicians nationally. 2 Please note that
the data below for EOGH includes only those physicians who also are on other area
hospital medical staffs, as EOGH was unable to provide age information on its medical
staff.
Medical Group Management Association Physician Compensation and Production Survey, 2014
Report Based on 2013 Data
Physician Characteristics and Distribution in the US 2014 edition (2012 data) published by the
American Medical Association
2
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TABLE 5-21: STUDY HOSPITAL MEDICAL STAFF AGE PROFILE

Hospital
% 55+
CMMC
47%
EOGH (overlap staff only)
62%
NBIMC
44%
SMMC
41%
UH
46%
Combined Total
45%
NJ (all physicians)
46%
U.S. (Patient care physicians)
34%
The comparatively older age profile of the study hospital medical staffs, combined with
the high percentage of physicians in small group and solo practices, has significant
implications for the future delivery of healthcare services in the Planning Area. According
to the 2014 Health Leaders Market Overview for Northern New Jersey, Most physicians
in Northern New Jersey work in small practices, limiting their leverage in negotiations
with managed care organizations. The most notable exception is the Robert Wood
Johnson Medical Group, the multispecialty faculty practice of Rutgers RWJ Medical
School, with ~600 physicians. Physicians finishing their training today overwhelmingly
seek employment opportunities, as opposed to pursuing solo practice or joining small
groups. Several recent studies and surveys have documented this trend, with a recent
Merritt Hawkins survey showing that more than 90% of their searches were for employed
vs. independent physicians. And the Merritt Hawkins 2015 Final Year Medical Residents
Survey indicated that 63% of residents have been approached with job opportunities by
hospitals and medical groups 51 or more times. As such, replenishing aging, solo / small
group physicians in the Planning Area will become increasingly difficult as newly trained
physicians select hospital employment or large group practice settings.
There is only a modest amount of overlap between the medical staffs at NBIMC and
CMMC, reflecting the geographic distance between the facilities. On the other hand, there
is considerable degree of overlap of EOGH and SMMC physicians with other study
hospital medical staffs45% of EOGHs medical staff and 48% of SMMCs medical staff
are on staff at one (or more) of the other study area hospitals. The extent to which
physicians serve on more than one medical staff suggests that most physicians in the
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Planning Area are not reliant on a single facility for their inpatient work and can more
readily transition their inpatient cases between facilities if necessary.
TABLE 5-22: STUDY HOSPITAL MEDICAL STAFF OVERLAP
Percent
CMMC
EOGH
NBIMC
SMMC
Physician Overlap by Hospital

CMMC
EOGH
NBIMC
15%
14%
6%
13%
15%
34%
21%
25%
12%
SMMC
34%
16%
20%
-
Total Overlap
32%
45%
27%
48%
Number
CMMC
EOGH
NBIMC
SMMC
CMMC
EOGH
NBIMC
SMMC
42
106
148
42
94
71
106
94
89
148
71
89
-
Total Overlap
221
125
201
209
Total Staff
700
279
745
439
Comparative Cost, Quality, Patient Satisfaction and Productivity Indicators

We also analyzed data to understand the cost, quality, and patient satisfaction
performance of study area hospitals.
When considering overall cost and quality measures, CMMC is the only study hospital
that performs better than state averages on both dimensions. While SMMC and EOGH
have lower adjusted cost per discharge, they also are below the state average in composite
quality scores. NBIMC and UH have quality scores about equal to the state average but
significantly higher costs per inpatient discharge. In addition, all five Planning Area
hospitals have lower Medicare patient satisfaction scores than the statewide average.
With 60% of patients indicating that they are highly satisfied, NBIMC comes closest to the
state average of 64%, while EOGH is more than ten percentage points below the state
average at 52%.
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FIGURE 5-7: COST AND QUALITY COMPARISON OF STUDY HOSPITALS
Source: Hospital Benchmarks and whynotthebest.org. Note: Cost per discharge based on 2013
data for all facilities except SMMC which is based on 2012 data.
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TABLE 5-23: STUDY HOSPITAL PATIENT SATISFACTION BASED UPON HOSPITAL

CONSUMER ASSESSMENT OF HEALTHCARE PROVIDERS AND SYSTEMS
Hospital
HCAHPS Performance:
% of Patients Highly Satisfied
(Q4/12-Q3/13)
NBIMC
60%
UH
58%
CMMC
57%
SMMC
57%
EOGH
52%
NJ State
Average
64%
Section Summary
Decreased demand for inpatient care is resulting in declining volumes for all five of the
study hospitals. The study hospitals collectively are operating below industry
benchmarks for inpatient occupancy (80-85% for med/surg and 90% for behavioral health)
with overall inpatient occupancy at the five study hospitals at 69% in 2013.
Overall, the five study hospitals are struggling financially and are heavily dependent
upon the State charity care subsidy for ongoing operations. Given negative volume trends
as well as continued downward pressure on reimbursement, financial performance is
expected to be challenged even further moving forward. Three of the five study hospitals
(EOGH, SMMC, and UH) experienced significant operating losses in 2012 and 2013. The
remaining two hospitals, CMMC and NBIMC, both part of Barnabas Health, had positive
financial outcomes in 2013, but experienced an erosion in their financial performance
compared to 2012.
FQHCs play a vital role in access and healthcare delivery in the Planning Area. It does
appear, however, that the coordination of services between the FQHCs and between the
FQHCs and other healthcare providers could be enhanced, as there is, for example, often
very little coordination between the study hospitals and community resources.
Physicians in the Newark area appear to have a traditional practice model (predominately
solo and small practices), which will make addressing population health management
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more of a challenge than in other parts of the country, where physicians are organized in
large (100+) physician groups and are more closely integrated with or employed by health
systems. In addition, the proportion of the study hospitals medical staff over age 55 is
high, indicating that physician succession planning and recruitment will be increasingly
importantand difficultgiven the current predominance of solo and small group
practices in the Planning Area.
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Section 6 Findings Hospital Physical Plants

In order to understand the capability of the existing physical facilities at each of the study
hospitals to meet current and potential future patient care needs, we conducted a review
of the physical plants of Clara Maass Medical Center, East Orange General Hospital,
Newark Beth Israel Medical Center, St. Michaels Medical Center and University Hospital.
Each of the five hospitals was assessed to understand current conditions, as well as
opportunities and constraints for future use and development. Overall, the average age
of plant of the facilities is high and an estimated $400+ million in capital investment is
required to bring all five hospitals up to an adequate level of operations.
As part of our assessment of the study hospitals physical facilities, a team of facility
planning experts conducted a tour of each hospital campus and performed a quantitative
and qualitative evaluation of the following:
General condition of each facility,

General maintenance requirements,
Planned/approved physical plant renovations/expansion plans,
Space adequacy by function,
Flows and adjacencies,
Needed physical changes to address regulatory and/or operational efficiency
imperatives, and
Potential alternate uses of space.
The team utilized a proprietary facility capacity model to calculate the space sufficiency
of the major departments of each of the hospitals in regard to, first, the number of key
rooms and, second, the amount of overall space required. The facility team also
conducted functional capacity analyses to compare existing capacity with current and
future demand for services. In conjunction with the facility tours, our facility planning
experts met with representatives from each hospital to review and discuss their physical
plant and to ensure a full understanding of any unique circumstances, as well as any plans
for future development/renovation.
Methodology
The facility assessment included the following specific tasks:
Site Tours: Each of the five hospitals was toured in detail with hospital
representatives to understand the current drivers for clinical areas, such as beds,
treatment rooms, operating rooms, procedure rooms, exam rooms and similar
areas. Site tours were also used to confirm departmental boundaries, functionality
of existing departments and physical conditions.
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Base Plans: A diagrammatic plan of each level of the five hospitals was developed
and evaluated to further understand appropriateness of adjacencies, flow of
patient, visitor and support traffic, and zoning of departmental areas.
Area Tabulations: A table of departmental areas, including overall

mechanical/electrical support space, general circulation, building envelope and
total building gross area was generated.
Facility Assessment: Based on the tasks outlined above, a Facility Assessment

table was developed for each hospital. The Facility Assessment tabulated
conditions of each departmental area and was segmented into the following
sections: Diagnostic and Treatment Areas, Nursing Units, Support Areas,
Administrative/Office Areas, Clinics/Physician Suites, Public Areas, Vacant Space,
Mechanical/Electrical Areas, General Circulation and Building Envelope. The
actual areas per driver were then compared to Navigant proprietary benchmarks
to determine if the total area of each departmental was at, above or below that
provided in current best practice facilities. The assessment also evaluated the
functionality of each department, looking at issues such as separation of patient
and public traffic, adequacy of storage and support spaces, patient privacy and
similar considerations. Finally the physical condition of each department was
rated.
Infrastructure Assessment: Site components, building envelope, building

interiors and mechanical/ electrical systems were assessed based on site tours and
an interview of the facility directors at each hospital.
Evaluation Ratings: Evaluation ratings for each department in the Facility

Assessment and each component of the Infrastructure Assessment were assigned
and were based on the following scale:
1.0
2.0
3.0
4.0
5.0
Poor
Marginal
Adequate
Very Good
Optimal
Future Bed Need: Based on demand projections for year 2019 at each hospital,
future bed need for medical/surgical, obstetrics, behavioral health and all other
inpatient services was projected (observation status beds were also included). Bed
need was based on projected average daily census (ADC) at a 90 percent average
occupancy target for behavioral health and an 80 percent target for all other areas.
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Primary Clinical Services Need: Based on demand projections for year 2019 at
each hospital, major clinical service needs were projected. These included
projections of future needs for emergency treatment rooms, ambulatory surgery
operating rooms, inpatient surgery operating rooms and cardiac catheterization
procedure rooms. Needs were based on projected demand divided by Navigant
proprietary utilization benchmarks.
Planning Models: Planning models were identified for each hospital site to meet
projected facility needs for each scenario. In cases where excess capacity still
existed, existing facilities were maintained. In some cases, increased demand
could be accommodated by excess capacity in existing facilities with minor
renovation. In scenarios where insufficient space existed at a site to accommodate
future needs, the area of expansion in square feet was identified.
Capital Expense Projections: Baseline projections included high-level estimates

of construction costs to bring existing facilities and infrastructure up to a 3.0
Adequate level over the next 5 years. In addition, the costs of demolition, site
and building restoration, renovation and expansion at each hospital was projected
for the reconfiguration scenarios described in the Recommendations section of this
report. Total costs were divided by projected baseline expenses to rank hospitals
from worst to best physical condition in terms of capital expense per square foot.
At the completion of this task, we developed a summary of our findings regarding the
physical plants of the five study hospitals, which follows.
Findings and Conclusions
The five study hospitals will operate 4 million square feet upon completion of the CMMC
expansion that is currently underway. Of the total, 463,000 square feet, or 11% of the
space, is currently utilized for clinics or physician offices. A very high level benchmark
to estimate adequacy of size of the hospital physical plant is area per bed with an industry
benchmark of 2,400 to 2,800 square feet depending upon the specific service mix of the
hospital. EOGH and CMMC are significantly undersized compared to the benchmark
while NBIMC and SMMC are within the industry standard. University Hospital has more
physical space than the general industry benchmark would indicate is required. This is
not unusual given the unique nature of a primary teaching hospital.
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TABLE 6-1: BUILDING AREA SUMMARY

Description
(area shown in sq. ft.)
Current Building Area
New Expansion Currently
Underway
Total Area (Including
Clinics/Physician)
Clinic/Physician Office Area
Total Area excluding
Clinic/Physicians
Current Beds
Area per Current Bed
CMMC
NBIMC
SMMC
EOGH
UH
Total
610,040
1,074,086
679,113
403,452
1,222,233
3,988,924
87,460
87,460
697,500
1,074,086
679,113
403,452
1,222,233
4,076,384
48,086
113,911
55,671
71,075
174,268
463,012
649,414
960,175
623,442
332,377
1,047,965
3,613,372
317
395
248
207
360
1,527
2,049
2,431
2,514
1,606
2,911
2,366
Benchmark (Area per Bed)
2,400 sq. ft. to 2,800 sq. ft.
Baseline Capital Expense Projections were made at a high level. This is an estimate of the
level of capital investment required over the next five years to bring each of the five
facilities to an adequate level in terms of size and infrastructure. Baseline projections are
based on square foot estimated construction costs to bring facilities and infrastructure
components with a 1.0 Poor or 2.0 Marginal rating up to a 3.0 Adequate rating. In
addition to construction costs, projections included other project costs based on a
percentage mark-up basis for related expenses such as equipment, furniture, information
technology, professional fees, miscellaneous expenses and contingencies. The costs of
major medical equipment, financing and property acquisition, if any, are unknown and
were not included.
TABLE 6-2: ESTIMATED CAPITAL EXPENDITURE REQUIREMENTS
Baseline
Clara Maass
Newark Beth Israel
$92 Million
$108 Million
St. Michael's
$57 Million
East Orange
University
Total
$58 Million
$96 Million
$411 Million
In total, we estimate that over $400 million in capital expenses are required to bring all of
the facilities to an adequate, or 3.0 rating. This is a considerable sum (approximately 25%
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of the collective $1.6 billion operating revenue of the 5 study hospitals), especially given
that the 5 study hospitals have a cumulative negative operating margin and receive a
substantial subsidy from the state.
A summary of findings and conclusions specific to each of the five study hospitals follows.
Findings and Conclusions Clara Maass Medical Center
The projected baseline capital expense over the next five years to bring the CMMC
facilities to an adequate level is $92 Million based on the cost per square foot estimates
shown in Table 6-3.
TABLE 6-3: CMMC ASSESSMENT AND ESTIMATED CAPITAL REQUIREMENTS
Support Areas
Office Areas
Clinics/ Physician
Offices
Public Areas
Overall
Site
Building Envelope
Building Interiors
Infrastructure
Overall
Facility
Assessment
Infrastructure
Assessment
Overall
Capital Expense
(Cost/Sq. Ft.)
Nursing Units
Infrastructure Assessment
Diagnostic and
Treatment
Facility Assessment
2.8
2.3
3.3
3.0
3.0
3.0
2.9
3.1
2.4
2.8
2.7
2.7
$77
$54
$132
The key findings of the assessment were as follows:

Diagnostic and Treatment: Surgery, Emergency, Lab and Imaging departments
are constrained in space. Emergency capacity is very tight. The Cancer Center
works well.
Nursing Units: Bed towers constructed in 1956, 1990 and 2015 (underway). Unit
sizes are constrained. Even after a new 87,640 sq. ft. new expansion, which is
currently underway, only 33% of staffed beds will be private, while current best
practice is all private beds. The ICU has 15 open bays, but is being replaced. There
is not much excess capacity in existing nursing units.
Infrastructure: Main infrastructure needs include new domestic water piping,
separation of electrical wiring branches, new exterior paving, new roofs and a
second generator.
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FIGURE 6-1: CMMC AERIAL VIEW OF CAMPUS

Kidde Hall
Hospital
Continuing
Care Building
Emergency
Future
Expansion
Parking
Findings and Conclusions East Orange General Hospital

East Orange General Hospital has the most significant challenges of the five hospitals in
terms of quality and adequacy of the current facilities. The projected baseline capital
expense over the next five years to bring the EOGH facilities to an adequate level is $58
Million based upon the costs per square foot estimates shown in Table 6-4, which is fourth
of the five study hospitals. Although the physical plant requires the greatest
infrastructure investment on a per square footage basis, the total expenditure required is
less than several other hospitals due to the small size of EOGH.
TABLE 6-4: EOGH ASSESSMENT AND ESTIMATED CAPITAL REQUIREMENTS
Nursing Units
Support Areas
Office Areas
Clinics/ Physician
Offices
Public Areas
Overall
Site
Building Envelope
Building Interiors
Infrastructure
Overall
Facility
Assessment
Infrastructure
Assessment
Overall
Capital Expense
(Cost/Sq. Ft.)
Diagnostic and
Treatment
Facility Assessment
2.5
1.6
2.9
2.9
2.6
2.1
2.3
3.6
3.1
2.5
3.0
3.1
$107
$37
$144

Diagnostic and Treatment: Emergency and Surgery capacities are adequate but
facilities require upgrade. The Emergency Department has mostly open cubicles,
which is not best practice and the department is significantly undersized.
Nursing Units: Main tower was built in 1971. All units except Behavioral Health
require upgrade. Only 14% of staffed beds are private, which is not best practice.
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There is significant excess capacity. The ICU has open bays and does not provide
privacy or best practice facilities.
Infrastructure: Primary infrastructure needs include 50% new roofs, 50% new
windows, major heating and ventilation upgrades and upgrades for elevators and
fire alarm system.
FIGURE 6-2: EOGH AERIAL VIEW OF CAMPUS

Medical Arts Building
Hope Gardens
Hospital
East Pavilion
1992 Wing
Findings and Conclusions Newark Beth Israel Medical Center

The projected baseline capital expense over the next five years to bring the NBIMC
facilities to an adequate level is $108 Million based on cost per foot estimates shown in
Table 6-5, which is the largest of the five study hospitals due to its large relative size.
TABLE 6-5: NBIMC ASSESSMENT AND ESTIMATED CAPITAL REQUIREMENTS
Support Areas
Office Areas
Clinics/ Physician
Offices
Public Areas
Overall
Site
Building Envelope
Building Interiors
Infrastructure
Overall
Facility
Assessment
Infrastructure
Assessment
Overall
Capital Expense
(Cost/Sq. Ft.)
Nursing Units
Diagnostic and
Treatment
Facility Assessment
3.0
2.2
2.9
2.9
2.7
2.6
2.7
2.7
2.6
3.0
3.1
2.9
$55
$46
$101
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Diagnostic and Treatment: Emergency capacity is adequate but facilities are

fragmented and require upgrade. Surgery facilities are adequate. Cancer Center
access is not optimum but facility is in good condition.
Nursing Units: The main bed tower was constructed in 1975. Most units require
upgrade. Only 41% of staffed beds are private. NICU is congested and lacks
privacy. ICU works well. Overall capacity is adequate.
Infrastructure: Primary infrastructure needs include new exterior paving, new
roofs, ACM abatement, additional fire sprinklers, HVAC upgrades and separation
of electrical wiring branches. The Medical Center has targeted future green energy
upgrades.
FIGURE 6-3: NBIMC AERIAL VIEW OF CAMPUS
Former Apartment Tower
Hospital
Cancer Center
Center for
Ambulatory
182 Lyons
Building
Family Health
Center
Findings and Conclusions St. Michaels Medical Center

The projected baseline capital expense over the next five years to bring the SMMC facilities
to an adequate level is $57 Million based upon the cost per square foot estimates shown
in Table 6-6, which is the lowest of the five study hospitals as significant investments that
have been made in recent years.
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TABLE 6-6: SMMC ASSESSMENT AND ESTIMATED CAPITAL REQUIREMENTS
Support Areas
Office Areas
Clinics/ Physician
Offices
Public Areas
Overall
Site
Building Envelope
Building Interiors
Infrastructure
Overall
Facility
Assessment
Infrastructure
Assessment
Overall
Capital Expense
(Cost/Sq. Ft.)
Nursing Units
Diagnostic and
Treatment
Facility Assessment
3.2
1.5
3.3
3.0
2.7
3.6
2.8
3.8
3.0
3.1
3.5
3.4
$57
$27
$84

Diagnostic and Treatment: Emergency capacity is adequate and Emergency
facilities are new. Surgery capacity and condition is adequate. The catheterization
Lab suite is significantly oversized (i.e., 6 procedure rooms existing vs. 2 procedure
rooms required). The Cancer Center is easily accessible and in very good
condition.
Nursing Units: Main bed tower built 1983. All units except Behavioral Health
require upgrade. Only 21% of staffed beds are private. Significant excess capacity
exists and the facility is oversized for the demand served. Cardiac Care Recovery
unit does not provide privacy.
Infrastructure: Primary infrastructure needs include new cooling towers, air
handlers, chiller and generator. Older wing has been acquired by a developer for
housing and was not included in analysis.
FIGURE 6-4: SMMC AERIAL VIEW OF CAMPUS
Annex Building
Hospital
M Wing
Acquired by
Developer for
Future Housing
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Findings and Conclusions University Hospital

University Hospital appears to be in the best condition of the five hospitals in terms of
quality and adequacy of the current facilities. The projected baseline capital expense over
the next five years to bring the UH facilities to an adequate level is $96 Million based upon
the cost per square foot estimates shown in Table 6-7, which is the second highest of the
five study hospitals in spite of its better condition relative to the other study hospitals.
This is primarily because University is the largest facility.
TABLE 6-7: UH ASSESSMENT AND ESTIMATED CAPITAL REQUIREMENTS
Support Areas
Office Areas
Clinics/ Physician
Offices
Public Areas
Overall
Site
Building Envelope
Building Interiors
Infrastructure
Overall
Facility
Assessment
Infrastructure
Assessment
Overall
Capital Expense
(Cost/Sq. Ft.)
Nursing Units
Diagnostic and
Treatment
Facility Assessment
3.0
2.0
3.0
3.0
3.0
2.9
2.8
4.2
3.4
3.0
3.4
3.5
$54
$25
$79

Diagnostic and Treatment: Emergency and Surgery facilities are in good
condition but capacities are tight in both areas.
Nursing Units: Main bed tower built 1979. All units require upgrade; 63% of
staffed beds are private; some excess capacity exists. Overall building area per bed
is high.
Infrastructure: Primary infrastructure needs include major upgrade of emergency
power system, new roofs, additional fire sprinklers, and upgraded ventilation.
FIGURE 6-5: UH AERIAL VIEW OF CAMPUS

Ambulatory
Care Center
Bergen Building
Administrative
Buildings (owned
by Rutgers)
Hospital
Cancer Center
Building
(owned by
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Expansion
Direction
Section 7Hospital Bed Need and Emergency Department Demand

This step of the project entailed utilizing the results of the preceding tasks to project future
demand for inpatient beds and emergency department services. The future demand was
compared to current supply to identify duplicative services and unused capacity as well
as any lack of sufficiency of necessary healthcare services in the Planning Area.
We analyzed population projections for the Planning Area and Planning Area residents
utilization of inpatient services to project the demand for these services in the future and
then compared the projections with the current supply of beds. The purpose of this
analysis was to quantify the bed need, compare it to the current and planned number of
available beds, and to evaluate the capacity among Planning Area hospitals to
accommodate additional patients. We also projected Planning Area residents demand
for emergency department services.
The initial activity in this task was to calculate current and projected demand for hospital
services in the Planning Area. These projections were developed using generally accepted
health planning methodologies, including age-adjusted population-base use rates. In
addition, we utilized Navigant Consultings proprietary projection model to incorporate
the impact of national trends and the anticipated medical advancements on future
demand and delivery of healthcare services. Navigants model incorporates local
utilization rates and expected changes in those rates due to science and technological
changes and is customized to the particular market and organization. We considered
local, State, and national trends as we projected demand for services that reflect expected
changes in use rates, with the projections extending five years.
After reviewing the projected demand for services with the Authority, we analyzed the
projected demand vis--vis existing capacity as identified in the inventory of services to
determine whether duplicative or unused/under-used capacity exists. This assessment
compared current capacity with both current and projected demand and also
incorporated patient migration patterns (residents of the service area leaving the area to
receive care elsewhere and patients using services in the service area who live outside the
service area) as well as market share trends by hospital and service to determine any
necessary adjustments to the demand projections.
In addition to determining whether duplicative or unused/under-used capacity or
insufficiency of services exists in the Planning Area, our analysis also considered whether
there were any current or projected shortages or unmet needs in the Planning Area.
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Inpatient Bed Projection Methodology

Navigant projected Planning Area residents demand for inpatient hospital services over
the next five years based on 2013 use-rates calculated at the Diagnosis-Related Group
(DRG) level for each of five age groupings: 0 17, 18 44, 45 64, 65 84 and 85 and over.
Critical assumptions in projecting future demand include migration patterns, utilization
rates, market shares, and ALOS.
We initially considered three potential scenarios for future utilization rates:
1. Planning Area hospital admission rate continues to decrease at a rate consistent
with or similar to declines over the previous three years.
2. Planning Area hospital admission rate trends downward, approximately to the
New Jersey State utilization rate in five years (by 2018)
3. Planning Area hospital admission rates trends downward, approximately to the
U.S. average by 2018.
Scenario number 2, New Jersey State utilization rates by 2018 results in the slowest rate of
decline and is therefore the most conservative with regard to ensuring an adequate bed
supply in the Planning Area. Therefore, this scenario was used for the study projections.
The utilization rate for each DRG and age group was projected to decrease to the 2013
New Jersey Statewide average by 2018.
TABLE 7-1: FUTURE UTILIZATION SCENARIOS
Projected Inpatient Utilization Rates in the Planning Area - Discharges per 1,000 Population
2011
Planning Area Historical
133.5
2012
129.1
2013
2014
2015
2016
2017
2018
2019
120.8
Scenario 1: Continue Recent Declines
117.2
113.7
110.3
106.9
103.7
100.6
Scenario 2: Approach NJ State Utilization
119.4
118.0
116.6
115.2
113.8
112.4
Scenario 3: Approach USA National Utilization
118.4
116.1
113.7
111.4
109.0
106.6
Similarly, we reviewed Planning Area, New Jersey, and U.S. trends in average length of
hospital stay. The average time Planning Area residents spend in the hospital is higher
than both the New Jersey and U.S. averages as shown in Table 7-2.
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TABLE 7-2: HISTORICAL LENGTH OF STAY TRENDS

2011
2012
2013
CAGR
(11-13)
Planning Area Residents
5.73
5.80
5.86
0.9%
New Jersey Overall
5.15
5.14
5.20
2.0%
United States
5.20
5.20
5.30
1.0%
Geography
Source: New Jersey Department of Health State discharge databases; American Hospital Association
Statistics Guide 2015.
Note 1: Excludes DRG 795 (normal newborns), LOS =0, and invalid DRGs.
Note 2: ALOS numbers for United States are based on Nongovernment not-for-profit
Given 2011 through 2013 ALOS trends, physician organization in the area, and
community health needs of the Planning Area population, the ALOS is assumed to remain
constant through the 2019 projection period. If length of stay decreases, i.e., moves closer
to the New Jersey Statewide (which is the same as the U.S.) average, the demand for
inpatient beds will decrease beyond the reduction projected in this study.
The projections include Planning Area total bed need and bed need for the five study
hospitals based on 2013 market share, i.e., the individual hospitals respective market
shares remain at 2013 levels through 2019. The bed need assumes a targeted 80 percent
occupancy for medical/surgical (med/surg) and obstetrics patients and a targeted 90
percent occupancy for behavioral services.
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Inpatient Bed Planning Area Projection Results

The analysis indicates that Planning Area residents required 1,481 beds of all types in 2013
and the need will decrease to 1,401 beds in 2019 for medical surgical, obstetrics and
behavioral health services, a 5.4% decline.
TABLE 7-3: TOTAL BED NEED FOR PLANNING AREA RESIDENTS

2013
2015
2016
2017
2018
2019
56,136
9,745
2,991
7,145
76,017
55,765
9,667
2,967
6,859
75,259
55,408
9,590
2,943
6,585
74,526
55,065
9,513
2,920
6,322
73,820
54,737
9,437
2,896
6,069
73,139
54,528
9,362
2,873
5,826
72,589
893
80
73
156
1,202
889
79
73
150
1,191
884
78
72
144
1,178
879
78
72
138
1,166
874
77
71
133
1,155
870
76
71
127
1,144
867
76
70
122
1,135
Constant ALOS
Constant ALOS
Constant ALOS
Constant ALOS
1,116
99
92
174
1,481
1,111
99
91
167
1,467
1,105
98
90
160
1,453
1,098
97
90
154
1,439
1,093
96
89
147
1,425
1,087
95
88
142
1,412
1,083
95
87
136
1,401
80% Occupancy
80% Occupancy
80% Occupancy
90% Occupancy
Total Planning Area

Discharges - All
Residents
Med/Surg
Obstetrics
Neonatology
Behavioral
Total
56,480
9,824
3,015
7,443
76,762
Total Planning Area

Census - All
Residents
Med/Surg
Obstetrics
Neonatology
Behavioral
Total
Total Planning Area
Bed Need
Med/Surg
Obstetrics
Neonatology
Behavioral
Total
2014
Comment
Note: Excludes Normal Newborn
Study Hospitals Baseline Inpatient Bed Need

We made two adjustments to the population-based total Planning Area projected demand
presented above to determine the number of hospital beds needed in the study hospitals
to meet the projected demand. We adjusted the population-based projected demand for
the level of out-migration by Planning Area residents to other hospitals in New Jersey and
New York observed in 2013. We also adjusted the population-based projected demand
for the level of in-migration to Planning Area hospitals by residents of other parts of New
Jersey and other states observed in 2013.
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Because there is net out-migration of patients from the Planning Area, (i.e., the number of
patients who reside in the Planning Area admitted to hospitals other than the five study
hospitals (out-migration) exceeds the number of patients who reside outside of the
Planning Area admitted to the study hospitals (in-migration)), the inpatient census and
bed need for the five study hospitals combined is lower and is projected to remain lower
than that of the Planning Area overall.
The number of beds needed at the five study hospitals was determined by applying 2013
market share to the Planning Area demand projection, i.e., market share was held constant
and there are no changes in net migration. Given the decline in the study hospitals
market share over the last several years, holding market share constant is an optimistic
assumption. Continued decline in market share would result in a need for fewer beds
than in our projections.
TABLE 7-4: OVERALL BED NEED AT FIVE STUDY HOSPITALS
66,554
2019 Projected
Baseline
62,959
Average Daily Census
1,027
972
Bed Need at Target Occupancy Rates
1,271
1,208
Available Beds
1,495
1,527
2013 Licensed Beds

Bed Need/(Surplus) based on
available beds
2,093
2,093
(224)
(319)
Study Hospital Demand

Inpatient Discharges
2013
Note: Excludes normal newborn and neonatal
As such, there is an overall projected surplus of 319 beds in 2019 including excess capacity
in medical/surgical (med/surg) and behavioral beds. Current supply more closely
matches demand for obstetrics beds. The greatest surplus will be in med/surg with 251
beds more than required in 2019 as shown in Table 7-5 below.
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TABLE 7-5: STUDY HOSPITAL BED NEED BY TYPE

2013
Description
2019
Baseline
Licensed
Available
Beds
Beds
2019
Shortage /
(Surplus)
Available
Beds
ADC
Bed
Need
ADC
Bed
Need
Med/Surg
840
1,051
815
1,023
1,805
1,274
(251)
Obstetrics
56
72
54
68
89
76
(8)
Behavioral
132
148
103
117
199
177
(60)
1,027
1,271
972
1,208
2,093
1,527
(319)
Totals
Figure 7-1 below summarizes information from Tables 7-3 to 7-5, comparing current bed supply
to current and future bed need for Planning Area residents and for the 5 study hospitals. As
indicated in Table 7-4, there is expected to be a surplus of 319 beds at Planning Area hospitals
by 2019 (1,527 available beds minus 1,208 target bed need).
FIGURE 7-1: PLANNING AREA AND STUDY HOSPITAL BED NEED COMPARED TO
CURRENT SUPPLY (EXCLUDES ALL NEWBORNS, INCLUDES OBSERVATION VOLUME)
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This excess capacity, coupled with the challenged financial performance of the study
hospitals in aggregate, indicates that continuation of the current state and configuration
of hospital services in the Planning Area will make efficiently and effectively meeting the
healthcare needs of Planning Area residents increasingly challenging, if not impossible.
Reconfiguration of services in the Planning Area appears warranted in order to reduce
unneeded capacity and improve the ability of the providers to more efficiently and
effectively serve the needs of area residents.
Duplication of Services
In addition to an overall surplus of beds, there is also duplication of services among the
five Planning Area hospitals. As noted previously, some service rationalization has
already occurred as EOGH and SMMC do not provide obstetrics services. NBIMC
currently maintains 57 Level III neonatal intensive care unit (NICU) bassinets and UH
currently maintains 5 Level III NICU bassinets. NICU services are an area where
duplication is very expensive due to the high cost to provide a full range of pediatric
subspecialty services.
Two of the three study hospitals provide cardiac surgery at volume levels that are lower
than recommended to maintain physician and staff competency. St. Michaels and
University Hospital are relatively low volume programs with 127 and 61 discharges
respectively in 2013. Only NBIMC has cardiac surgery volume that would support a
sustainable, high-quality program. The duplication in cardiac surgery is especially
noteworthy because the low (current and projected) volume precludes more than one of
the Planning Area hospitals from achieving critical mass in this service. Industry
standards developed by the Leapfrog Group include a recommended annual hospital
volume of 450 or more coronary artery bypass grafts. 3
Leapfrog Group Evidence-based Hospital Referral (EBHR) Fact Sheet, Evidence Based Hospital Referral, March 21, 2011;
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TABLE 7-6: STUDY HOSPITAL CARDIAC SURGERY VOLUMES

Cardiac Surgery Volumes in 2013
St. Michaels Medical Center
127 discharges
University Hospital
61 discharges
678 discharges
Source: Data received from SMMC, UH, NBIMC
Emergency Department Volume and Demand

The study hospitals each have active emergency departments (ED) with a total of 325,370
ED visits across the five study hospitals in 2013, with individual volumes ranging from a
low of 34,000 to a high of 96,000. Approximately 16% of those visits (52,000) resulted in
an inpatient admission. This is higher than the U.S. average of 12% (according to the
National Hospital Ambulatory Medical Care Survey), which may reflect the lack of
sufficient preventive, primary care and/or the health status of the population in the
Planning Area.
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TABLE 7-7: STUDY HOSPITALS EMERGENCY VISITS

2013 Emergency Department Visits
Hospital
CMMC
Patient admitted as inpatient
Patient discharged as outpatient
Total ED visits
Number
Percent
12,317
63,838
76,155
16%
84%
NBIMC
Total ED visits
12,775
70,384
83,159
15%
85%
SMMC
Total ED visits
6,470
29,474
35,944
18%
82%
EOGH
Total ED visits
6,398
27,644
34,042
19%
81%
13,910
82,160
96,070
14%
86%
UH

Total ED visits
Total
51,870
273,500
Total ED visits
325,370
Source: Data received from study hospitals
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16%
84%
Emergency Department Capacity Needed

Future ED visit projections were developed with a two-pronged approach due to the
distinction between ED visits resulting in an inpatient hospital admission and ED patients
discharged from the Emergency Department. ED visits resulting in an inpatient
admission are projected to follow the downward utilization projected for inpatient
admissions. Outpatient ED visit projections were developed by applying Truven
projected market trends to the projected population. Truven Health Analytics is the
healthcare industry leader in projecting future volumes for outpatient health care services
based on industry trends and the impact of future technology.
Table 7-8 below shows the demand for emergency visits in the study hospitals including
emergency department visits by patients admitted as inpatients and outpatient
emergency department visits to obtain total visits for purposes of estimating the number
of emergency department exam rooms/bays needed for the future. The study hospitals
are projected to serve 339,000 ED visits in 2019 in the baseline scenario, which assumes all
five hospitals remain as full service inpatient facilities.
Assuming an exam room/bay capacity level of 1,700 visits per room or bay per year, the
estimated number of emergency department rooms/bays needed to meet projected
demand is 202 in 2019. Current ED capacity is fairly closely aligned with 2019 demand at
CMMC, EOGH, and UH. NBIMC and SMMC have excess ED capacity. However, no one
hospital has current capacity to fully absorb the ED activity from another of the study
hospitals.
TABLE 7- 8 EMERGENCY DEPARTMENT DEMAND

Hospital
2013
Volume
2019
Annual
2019
Current
Projected
Utilization
Rooms
Variance
Quantity
Demand
Benchmark Required
CMMC
76,155
78,957
48
1,700
47
NBIMC
83,159
86,245
61
1,700
51
10
SMMC
35,944
37,800
40
1,700
23
17
EOGH
34,042
35,200
23
1,700
21
UH
96,070
101,031
61
1,700
60
Total
325,370
339,233
233
1,700
202
31
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Section 8Conclusions
This section of the report includes key conclusions developed based upon the Planning
Areas demographic profile, migration patterns, healthcare resources, recent trends,
current capacity and facility configuration of the study hospitals, as well as expected
future demand in the region. The 10 major conclusions summarized below form the
foundational basis for the recommendations presented later in this report.
1. Current and Growing Excess Inpatient Capacity: Analysis of the need for and
utilization of services in the Planning Area leads us to conclude there is currently
excess inpatient capacity in every inpatient bed type (pediatrics, obstetrics,
psychiatry, and medical/surgical); furthermore, this surplus is expected to increase
in the future. The current supply of available beds (1,495) will increase to 1,527
with the opening of the new 32-bed unit at CMMC. Current ADC of 1,027
(excluding newborn volume, but including observation stays) is projected to
decrease to approximately 970 by 2019 due to the modest population growth in the
Planning Area and continued declines in inpatient use rates, with the result being
that the existing surplus of beds will grow from 224 to almost 320.
2. Significant Historical Trend of Hospital Closures: Since 1999, six hospitals in the
Planning Area have closed. And while those hospital closures (along with others
in the Newark Union Metropolitan Statistical Area) benefited the study hospitals
by generating some additional volume, those added volumes have not been
sufficient to significantly reduce the excess capacity or duplication of services in
the Planning Area. Given the extent of overcapacity in the Planning Area, it is
almost certain that individual attempts to right-size by each of the five study
hospitals would be insufficient to fully align area capacity with demand, especially
in the future, as inpatient demand is expected to continue to decline.
3. Significant Duplication and Few Unique Services: In addition to the significant
surplus of inpatient beds, there appears to be substantial duplication of services
and relatively few unique services in the Planning Area. All five study hospitals
provide inpatient medical/surgical, behavioral health, and emergency services.
Three of the study hospitals offer cardiac surgery and 3 operate obstetrics and
inpatient pediatrics programs. Two of the hospitals perform organ transplants. In
addition, the Planning Area is home to 3 FQHCs, each of which provides a
generally similar set of services. EOGH does have the only forensic unit in the
Planning Area. The unit contains 17 beds, but maintained an ADC of only 5.2 in
2013 (an average occupancy of 31%).
4. Large and Growing Financial Challenges, Even with Significant State Subsidy:
It is clear that continuation of the status quo will require continued significant (and
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likely increased) ongoing financial subsidy from the State of New Jersey. As a
group, the five hospitals lost nearly $32 Million from operations in 2013. However,
the New Jersey Hospital Care Payment Assistance Program (New Jerseys charity
care subsidy program) provided $177 Million (26% of the state total) to the study
hospitals. Without this subsidy, the five study hospitals generated $209 Million in
operating losses on a combined basis in 2013. Both EOGH and UH saw a further
deterioration in their financial performance between 2012 and 2013. While the two
Barnabas Health hospitals (CMMC and NBIMC) achieved a positive operating
margin in 2013, they saw significant degradation from 2012 operating levels.
There was some progress at SMMC between 2012 and 2013, however, it has not
succeeded in turning the corner in terms of financial performance. Therefore, it
is clear that continuation of the status quo is not a viable or appropriate option in
terms of financial performance, clinical efficacy, or positioning the study
organizations to effectively manage and improve the health of Planning Area
residents.
5. Low Volumes Impede Clinical Quality and Efficiency in Certain Services:
Continuation of the status quo will significantly impede the hospitals ability to
generate the critical mass of patient volumes necessary to achieve clinical
efficacy in key specialized services. For example, industry standards developed
by the Leapfrog Group recommend an annual hospital volume of 450 or more
coronary artery bypass grafts. And many state certificate of need regulations
require at least 300 coronary artery bypass crafts as the minimum threshold to
have an economically viable and clinically efficacious program. Yet two of the
three cardiac programs in the Planning Area (SMMC and UH) performed less than
200 procedures combined.
6. Aging Facilities with Significant Capital Needs:
While recent capital
expenditures at the five hospitals in aggregate appear to have kept pace with
depreciation, the average age of plant at the five facilities suggests this has not
been the case historically. The study hospitals average age of plant is over 18
years, compared to the Fitch median of 10.6 years. And in fact, analysis of the
study hospital facilities indicates that all five study hospitals require substantial
capital investment to address pressing needs, with an estimated total of $411
Million in capital required for upgrades and renovations to get all five facilities to
a rating of adequate. While an investment of that magnitude would likely have
a positive short-term economic impact on Newark in terms of construction jobs,
the ability of the study hospitals to afford this level of investment is highly
questionable. In addition, because the expenditures would be undertaken by the
individual entities (or their sponsoring organizations) with little to no
coordination, a combined expenditure of this amount would almost certainly
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perpetuate and potentially exacerbate the existing excess capacity and duplication
of services in the Planning Area.
7. Aging, Unorganized Physician Sector: Physicians on staff at the Planning Area
hospitals have a higher average age than nationally and their practice model
(excluding the Rutgers faculty) is predominately solo and small group practices.
This combination of an older age profile and a traditional practice mode will make
replacing Planning Area physicians who retire or otherwise leave practice
increasingly difficult, given that newly trained physicians are choosing hospital
employment or large group practice settings. Furthermore, the traditional practice
mode of Planning Area physicians will make addressing population health
management more of a challenge than in other parts of the country, where
physicians are organized in large (100+) physician groups and are more closely
integrated with or employed by hospitals and health systems, which facilitates
tackling the challenges of population health management.
8. Few Off-Campus Ambulatory Services, Other than FQHCs: There appears to be
a high degree of fragmentation in the organization and delivery of healthcare
services in the Planning Area as evidenced by the significant and increasing excess
inpatient bed capacity and the comparative paucity of accessible, appropriately
distributed ambulatory care facilities in the Planning Area. And while the three
FQHCs in the Planning Area play a vital role in providing residents with access to
affordable healthcare services, it appears a higher level of service coordination and
integration between the FQHCs themselves and between the FQHCs and other
healthcare service providers will be necessary to position Planning Area
healthcare providers to effectively manageand improvethe health of Planning
Area residents.
9. Mostly Informal Connectivity with Post-Acute Providers: The relationships of
the study hospitals with post-acute care providers in the area appear to be largely
informal rather than part of a formalized, coordinated network of care. While indepth analysis of those relationships was beyond the scope of this study,
development of more integrated, coordinated networks spanning the continuum
of care could help enhance discharge transitions from acute care facilities. This
could, in turn, help acute care providers better manage length of stay. In this
regard, conversion of excess capacity at Broadway House to general post-acute
care would provide an opportunity for Broadway House to work closely with the
study hospitals to enhance discharge transitions from acute care and is a positive
development.
10. Potential Change in Ownership Not a Solution to Regional Challenges: Two of
the study hospitals (EOGH and SMMC) are currently pursuing potential change
of ownership transactions. Based on our analysis of the Planning Area, it is unclear
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how the transfer of the assets of any of the study hospitals through a sale to another
party would resolve the underlying overcapacity and unnecessary service
duplication in the Planning Area. Rather, any such transaction would seem more
likely to perpetuate the status quo than to facilitate the redeployment /
transformation of resources to align capacity with need in the Planning Area.
Transferring the assets of one or both of these hospitals would perpetuateand
probably intensifythe competition for the decreasing number of inpatients in the
Planning Area. Nor would transferring the assets through a sale help address the
current degree of fragmentation of the healthcare delivery system in the market.
And a sale of one or both of the facilities would be unlikely to facilitate the
organization of physicians. In effect, sale of one or both hospitals would appear
to continue the status quo, which would not address the excess capacity and
unnecessary duplication of services.
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Section 9Recommendations
This section of our report presents the recommendations we developed to address the
duplication of services and the unused capacity identified in the Planning Area. These
recommendations are based on the conclusions summarized in the previous section and
a set of Guiding Principles we developed as touchstones to frame the recommendations,
which appear in this section. In addition, we identified several initiatives that we believe
would be appropriate to implement regardless of other circumstances or conditions.
These no regret initiatives are summarized in this section, as are the various options or
scenarios we evaluated as part of the development of the recommendations.
As noted in the Introduction (Section 1) to this report, it is vitally important to recognize
the strategic context in which this study was conducted: the healthcare delivery system
in the U.S. is experiencing a period of unprecedented change that is transforming not just
how healthcare is financed, but how it is organized and delivered. Success in the future
healthcare environment will require fundamentally different approaches, skills, and
strategies than in previous periods. As a result of this ongoing transformation, we
developed the recommendations for the Planning Area to address the emerging
healthcare environment rather than the environment of the past.
Guiding Principles
Based upon the direction provided by the Authority, as well as our analysis of the
Planning Areas healthcare requirements, healthcare trends, the populations needs, and
current financial and physical condition of the five study hospitals, we developed (and
reviewed with the Authority) a series of Guiding Principles to frame the
recommendations. We used these Guiding Principles to help assess potential options for
addressing the duplication of services and unused capacity in the Planning Area. While
the Guiding Principles relate specifically to the Planning Area, they also take into
consideration the context of overall healthcare trends in New Jersey as well as nationally.
The Guiding Principles address both the public policy issues of providing Planning Area
residents with adequate access to high-quality, affordable healthcare services and the
need to mitigate the significant expenditure by the State of New Jersey in subsidizing the
hospital organizations delivering those services. The Guiding Principles include the
following:
1. Align the supply of beds with the current and future need of the Planning Area
population for beds.
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2. Improve the clinical quality, operational efficiency, and financial performance of

services provided.
3. Enhance the ability to recruit and retain an appropriate complement of highquality physicians, clinical staff, and support personnel.
4. Invest in initiatives that represent the optimal use of capital over the longer term
(i.e., five years and beyond).
5. Minimize dependence on State operating subsidies.
6. Enhance the area healthcare providers ability to manage population health.
In addition to the above Guiding Principles, our recommendations on how to address the
healthcare delivery configuration in the Planning Area also took into consideration the
States commitment to healthcare and medical education as outlined in the Newark
Agreements of 1968 and the New Jersey Medical and Health Sciences Restructuring Act
of 2013. This includes establishing methods of support for the mission of University
Hospital and Rutgers-Newark Biomedical and Health Sciences schools that will minimize
need for subsidization.
The Newark Agreements of 1968 included commitments to the City of Newark to retain
a University Hospital in downtown Newark. The agreement included development of 58
acres for the health campus including a comprehensive community health services
program and additional land committed to development. The University of Medicine and
Dentistry of New Jersey (UMDNJ) and the Newark Community Health Council were
tasked with developing comprehensive health and mental health plans for the lowincome community and expanding the training and recruitment of minority students,
faculty and staff.
The New Jersey Medical and Health Sciences Education Restructuring Act (NJMHSERA),
which became effective on July 1, 2013, reshaped the landscape of medical education and
teaching hospitals in Newark. NJMHSERA established Rowan University as the State's
newest comprehensive research university, and integrated the UMDNJ School of
Osteopathic Medicine with Rowan. The remainder of UMDNJ, with the exception of
University Hospital in Newark, was integrated with Rutgers University. University
Hospital continues to be the primary teaching hospital for the Rutgers New Jersey Medical
School, the New Jersey Dental School (Rutgers School of Dental Medicine) and any other
Newark-based medical education programs.
University Hospital became a separate public, non-profit, legal entity governed by an 11member Board of Directors. The Board of Directors includes four ex officio members (the
Deans of the Rutgers New Jersey Medical School, and the New Jersey Dental School, the
President of Rutgers University and the Chancellor of Rutgers Biomedical and Health
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Sciences) and seven members appointed by the Governor. The Board of Directors has the
power to enter into a contract with a nonprofit hospital corporation to manage or assist in
the management of University Hospital
Money previously allotted to UMDNJ for University Hospital continues to go to
University Hospital. The Act stipulates that the State must provide funding for University
Hospital to maintain the current level of community services and its status as an acute
care hospital and trauma center.
No Regret Initiatives
Based on our analysis of the current state and trajectory of healthcare services in the
Planning Area, as well as the trends impacting healthcare delivery in the State of New
Jersey and nationally, we identified several market imperatives or overarching initiatives
that should be a central focus of healthcare delivery in the Planning Area in the future.
These imperatives represent a series of what could be referred to as no regrets
initiatives, namely ones that would be appropriate to implement regardless of other
circumstances or conditions. In effect, they are initiatives that will have a positive impact
on healthcare in the Planning Area no matter what. These no regrets market
imperatives include the following:
1. Develop a more robust ambulatory/outpatient network of access points that
would enable Planning Area residents to more conveniently access healthcare
services in cost-effective settings. As noted previously in this report, while there
is excess inpatient hospital capacity in the Planning Area, there is limited
availability and less than ideal distribution of ambulatory care services. This
limited ambulatory capability almost certainly contributes to access and
affordability challenges for Planning Area residents. Over the last thirty years, the
healthcare industry has seen a profound shift in the site of care from the inpatient
setting to the outpatient/ambulatory arena. In fact, statistics show that since 1993,
the number of outpatient visits in the U.S. has increased by 85% while inpatient
days have declined by 15% (See Figure 9-1 below).
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FIGURE 9-1: SHIFTING SITE OF CARE
In light of the relatively limited ambulatory/outpatient capability in the Planning

Area and the historical and ongoing shift from inpatient to outpatient care settings,
it would appear essential that there should be a specific focus on developing a
more robust ambulatory/outpatient network of access points that would enable
Planning Area residents to more conveniently access healthcare services in costeffective settings.
2. Increase the coordination among the FQHCs in the Planning Area, as well as
between the FQHCs and other service providers to optimize the allocation of
scarce resources to areas of greatest need/maximum impact. Affordable, timely
access to primary care is a significant concern for many Planning Area residents,
as evidenced by the designation of portions of the Planning Area as MUA/P.
While the Planning Area is served by three FQHCs, all of which play important
roles in addressing access to care, there is strong evidence that there is a lack of
sufficient coordination among the FQHCs as well as between the FQHCs and other
service providers to optimize the allocation of scarce resources to areas of greatest
need/maximum impact. In addition, it would also appear that there is a
substantial need to enhance and improve the coordination and linkages between
the FQHCs and policy makers to ensure better alignment of resources with needs
in the Planning Area.
3. Increase organization of physicians to effectively move to (and succeed in) a
Curve Two world characterized by valued-based reimbursement and
population health management. The predominance of aging and solo and small
group practices in the Planning Area poses a major challenge to achieving the
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degree of coordination and organization necessary among physicians to address

the requirements of a changing healthcare marketplace. The predominance of solo
and small group practices in the Planning Area also represents a business model
that is rapidly disappearing in other areas of the United States, as physicians face
increasing costs and regulatory pressures that can often be better addressed
through the economies of scale associated with larger practices. In addition,
generational and gender changes are transforming the practice of medicine in the
U.S. As shown in Table 9-1 below, approximately 40% of physicians in practice
today are under the age of 45 and thus are part of the gen X and millennials
generations.
TABLE 9-1: PHYSICIANS BY AGE GROUP

Age Category
< 35
35-44
45-54
55-64
65
55 +
Total
NJ
(All Physicians)
12%
20%
22%
22%
24%
46%
US
(All Physicians)
15%
21%
21%
20%
22%
43%
US
(Patient Care
Physicians)
17%
24%
25%
23%
11%
34%
Note: All Physicians include physicians in administrative, teaching and other non-patient care
roles in addition to physicians listing patient care as their primary role.
Source: Physician Characteristics and Distribution in the US 2014 edition (2012 data) published
by the AMA.
And as has been well documented in the press, the gen X and millennial
generations have a very different approach to work, with a more significant focus
on work-life balance than predecessor generations, particularly the baby
boomers. From a gender standpoint, the field of medicine is rapidly moving
away from a field dominated by men (approximately 70% of physicians in practice
today are male) to one that is much more balanced, as more than 50% of the
physicians graduating from medical school today are female. These generational
and gender shifts are major contributing factors to the decline in solo and small
group practices and the corresponding growth in physician employment by
hospitals and large physician groups, as younger physicians and female
physicians seek work environments that offer a better work-life balance and
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financial security than offered by solo and small group practice. As a result, there
is a clear imperative to foster greater alignment, coordination, and integration of
physicians with each other and with area providers.
4. Coordinate and integrate care across the full continuum to ensure Planning Area
residents have access to the right care in the right place at the right time at the
right price. As is the case in many areas of the United States, the healthcare
system in the Planning Area consists of a group of independent entities, with
each organization striving on its own to do what it does to the best of its ability.
In spite of these good intentions, there is a pronounced lack of coordination and
communication among the various parts of the system, which leads to highly
fragmented, more expensive care. Going forward, there should be a concerted
effort to coordinate and integrate care across the full continuum. Doing so would
help address the Planning Areas comparatively high utilization levels, longer
lengths of stay, and higher costs.
Reconfiguration Options
Part of our engagement involved identifying and assessing the strategic, operational, and
financial implications of a range of potential options (or scenarios) to better align the
healthcare resources in the Planning Area with the current and future healthcare needs of
Planning Area residents. We should note that in identifying and analyzing these options
we did not attempt to identify every possible scenario; rather we focused on identifying
and analyzing those options that appeared the most practical and viable.
As a starting point, we assessed what would happen if the status quo were maintained.
In other words, what would the situation be in the future if each of the five study hospitals
continued to operate as they currently do, offering all services currently provided with no
changes. This is, in essence, the do nothing scenario. Based on projected utilization in
the Planning Area (as discussed in Section 7 of this report) and using a set of reasonable
revenue and expense assumptions (see the Appendix for additional details on the
assumptions used), the combined projected financial performance of the five study
hospitals would go from an operating loss (excluding the State charity care subsidy) of
$32 Million in 2013 to more than $190 Million in 2019. This level of operating loss is clearly
unsustainable and leads us to conclude that continuation of the status quo is not a
financially viable or prudent option. Furthermore, this option would do nothing to
address the substantial excess capacity and unnecessary duplication of services.
Given that the status quo is not a viable option and the Planning Area has unnecessary
duplication of services, along with a current and projected excess bed capacity, we
identified several options to align the supply of healthcare services with the Planning
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Areas need for healthcare services both now and in the future. As noted above, we
focused on identifying a defined set of practical and viable options rather than trying to
identify as many potential options as we could. This focused process resulted in the
identification of two types of options:
1. Service line rationalization. As noted in the report and summarized in the
conclusions, there is unnecessary duplication of services in the Planning Area.
This unnecessary duplication results in suboptimal occupancy levels and financial
performance as well as creates challenges in terms of maintaining clinical efficacy.
In this type of option, selected, unnecessarily duplicated inpatient services would
be consolidated into a single site (or fewer sites) that could generate sufficient
volume to achieve clinical and financial viability.
2. Reposition/repurpose/transform. The second type of option we identified
encompasses a series of options, each of which involved changing the role of one
(or more) of the study facilities to align service capabilities and capacities more
closely with current and anticipated future healthcare needs in the Planning Area.
In developing these options we identified and assessed separate scenarios that
involved transforming each of the study hospital facilities into a state-of-the-art
ambulatory care campus providing a comprehensive array of outpatient services
designed to meet community needs, including freestanding ED, ambulatory
surgery, imaging, select outpatient services, and physician offices. Because the
extent of the excess bed capacity in the Planning Area (approximately 320 beds by
2019) is greater than the current average daily census of each of the study hospitals
with the exception of NBIMC, we also considered more transformational
reposition/repurpose/transform scenarios that included more than one facility. In
addition, we also evaluated repurposing Broadway House to serve a broader
population than HIV and AIDS patients. This role expansion would facilitate a
higher level of occupancy at Broadway House, while also creating the opportunity
to improve hospital acute care length of stay management.
The scenarios we evaluated are summarized in Figure 9-2 below.
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FIGURE 9-2: REPOSITION/REPURPOSE/TRANSFORM SCENARIOS

1.
Baseline: Status Quo/No Change
2.
Service line rationalization; inpatient pediatrics and cardiac surgery both consolidated at NBIMC
campus
3.
Reposition/transform CMMC into a state-of-the-art ambulatory care facility that offers a

comprehensive array of outpatient services designed to meet community needs. Inpatient volume
would be redistributed to other hospitals in and near the Planning Area.
4.
Reposition/transform EOGH into a state-of-the-art ambulatory care facility that offers a

would be redistributed to other hospitals in and near the Planning Area, including the forensic unit
(potentially to Clara Maass).
5.
Reposition/transform SMMC into a state-of-the-art ambulatory care facility that offers a

6.
Reposition/transform NBIMC into a state-of-the-art ambulatory care facility that offers a

7.
EOGH and SMMC are both repositioned as state-of-the-art ambulatory care facilities as outlined in
Scenarios 3 and 4.
8.
Reposition/transform UH into a state-of-the-art ambulatory care facility that offers a comprehensive

array of outpatient services designed to meet community needs. Inpatient volume would be
redistributed to other hospitals in and near the Planning Area.
9.
EOGH, SMMC, NBIMC are all repositioned as state-of-the-art ambulatory care facilities and an
appropriately sized world-class regional medical center is developed on the University Hospital
site to address the healthcare needs of the Planning Area residents in a clinically appropriate,
operationally efficient, and financially viable manner.
It is worth noting that all reconfiguration scenarios described above result in improved
aggregate financial performance compared to the status quo scenario as shown in Table
9-2 below. This is a clear indication that virtually any of the optionsother than no
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actionwill better position the Planning Area healthcare resources to be more aligned
with area needs in the future.
TABLE 9-2: SUMMARY OF SCENARIO ANALYSIS
Scenario 9:
Scenario 3:
Scenario 7:
Scenario 4: Scenario 5: Scenario 6:
Scenario 8: SMMC+ EOGH
Scenario 1: Scenario 2: Clara
SMMC +
NBIMC
EOGH
SMMC
UH
TransforBaseline/ RationalMaass
EOGH
Transfor- Transfor- TransforTransfor- mations +
Status Quo ization
TransforTransforNBIMC/UH
mation
mation
mation
mation
mation
mation
Consolidation
Indicator
Available Beds (2019)
1,527
1,550
1,251
1,326
1,317
1,203
1,137
1,267
998
Bed Need (2019)
1,208
1,208
1,070
1,154
1,157
1,036
1,095
1,080
996
$411M
$415M
$380M
$408M
$386M
$405M
$433M
$464M
$1,017M
($191M)
($177M)
($142M)
($144M)
($134M)
($99M)
($93M)
($68M)
$64M
-11%
-10%
-9%
-8%
-8%
-6%
-6%
-4%
4%
0%
3%
9%
9%
12%
18%
18%
22%
24%
Required Capital Investment

(including all Baseline Needs)
2019 Aggregate Operating Income
(Loss)
2019 Aggregate Operating Margin %
Improvement over baseline
Improvement calculation
*Scenarios 1-8, 2015-2019 avg, Scenario 9, 2018-2019 avg
Annual Improvement over Baseline Operating Income

Capital Investment
Recommendations
Based on the study analytics and the conclusions outlined previously, we developed a
series of recommendations to align the healthcare resources in the Planning Area with
current and future needs. These recommendations take into consideration the Guiding
Principles and the assessment of options referenced previously.
The analysis of current and projected need for services in the Planning Area indicates
quite clearly that there is significant excess inpatient capacity in medical/surgical,
pediatric, and behavioral health and unnecessary duplication of services. The study
hospitals have not made significant progress in reducing the excess bed capacity and
duplication of services that exist in the area on their own, and it is unlikely they will be
able to do so with all five hospitals continuing to operate in their current configuration.
Similarly, maintaining the status quo (even with modest individual rightsizing
initiatives) would be highly unlikely to do anything to mitigate the need for significant,
ongoing financial support from the State. As a result, we believe maintaining the status
quo is not a practical or appropriate scenario and should be avoided if at all possible.
We believe the study hospitals should reduce excess/unused bed capacity and seek to
achieve the level of patient volumes necessary to enhance clinical quality, operational
efficiency, and financial performance by consolidating under-utilized services. We
recommend the study hospitals work collaboratively with one another and the State to
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explore and pursue potential service consolidation opportunities in the near-term. We

believe there are significant consolidation opportunities that would help align bed supply
with need; improve the clinical quality, operational efficiency, and financial performance
of services and facilities; and enhance the ability to recruit and retain an appropriate
complement of high-quality physicians, clinical staff, and support personnel. However,
while we strongly believe implementation of the service consolidation opportunities
would improve the situation in the Planning Area, service consolidation would not be
sufficient in and of itself to address the multitude of issues confronting the Planning Area.
There is currently an excess of approximately 224 beds in the study hospitals, which is
expected to increase to a projected 319 beds in 2019. In addition, all five hospitals require
significant capital expenditures to address major facility and infrastructure needs over the
next five years in order to extend their useful lives. These facts create a compelling
rationale for repositioning/repurposing/transforming some of the study hospitals.
Based on our analyses and the conclusions presented previously, we have formulated the
following recommendations, which we believe should be seen as additive and sequential
rather than as separate or discrete. In effect, we believe the recommendations represent a
way forward to reduce unnecessary duplication of services in the Planning Area in an
orderly manner to better align resources with needs. While the recommendations can be
seen as a series of initiatives that build on and complement each other, they can be
implemented sequentially, concurrently, or in combination. Regardless of the order in
which they are implemented, each of them will enhance the financial performance of the
study organizations, better align capacity with demand, and position the study
organizations for the healthcare industrys accelerating transformation to value-based
care. The recommendations include the following:
Recommendation #1: Consolidate Inpatient Pediatrics and Cardiovascular Surgery

Services at Newark Beth Israel Medical Center.
Although the study hospitals have made relatively little progress in aligning their overall
inpatient bed capacity with the steadily declining demand, there has been some ad hoc
service rationalization and reduction in duplication of services in the Planning Area over
the years as evidenced by the elimination of inpatient pediatrics and obstetrics at EOGH
and SMMC and neurosurgery is performed primarily at UH. Please note however that
while only 3 of the 5 hospitals maintain dedicated inpatient pediatric units, all of them
provide some level of inpatient services to children. This recommendation builds on that
ad hoc service rationalization through a more formalized consolidation of inpatient
pediatrics and cardiovascular surgical services.
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Pediatric Consolidation Rationale:

The study hospitals have a combined total of 120 maintained pediatric beds and a
combined average daily census of 52.0 in 2013, which is slightly higher than the pediatric
ADC of 50.8 for Planning Area residents. Its important to note that NBIMC contains the
Childrens Hospital of New Jersey, which serves as a destination for pediatric inpatient
care. Maintained pediatric beds, occupancy rates, and ADCs at each of the study hospitals
are shown in Table 9-3 below.
TABLE 9-3: DEDICATED PEDIATRIC BEDS AND PEDIATRIC ADC BY HOSPITAL
Dedicated,
Maintained
Pediatric Beds
2013 Pediatric
Med/Surg ADC
Occupancy
Rate
CMMC
22
5.2
24%
EOGH
2.5
n/a
NBIMC
56
24.0
43%
SMMC
4.8
n/a
UH
42
15.5
37%
Total
120
52.0
43%
Hospital
Source: New Jersey Department of Health State discharge databases; internal data submitted by study hospitals; and
Navigant analysis.
Note 1: Pediatric ADC defined as inpatients age 0-17 in a medical or surgical service line
Note 2: Because EOGH and SMMC do not have dedicated pediatric units, the occupancy rate has been identified as
n/a.
Inpatient pediatric utilization in the Planning Area has declined significantly since 2011,
as shown in Table 9-4 below.
TABLE 9-4: TOTAL INPATIENT PEDIATRIC UTILIZATION IN PLANNING AREA
Operational Metric
2011
2012
2013
% Change
from 11-13
Discharges
5,617
5,061
4,708
-16.2%
Days
21,122
19,655
18,551
-12.2%
ADC
57.9
53.8
50.8
-12.3%
Source: New Jersey Department of Health State discharge databases; Pediatric Utilization
limited to Med/Surg discharges age 0-17.
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The pediatric ADC at the individual study area hospitals in 2013 was 5.2 at CMMC, 2.5 at
EOGH, 24.0 at NIMC, 4.8 at SMMC, and 15.5 at UH. At an ADC of less than 10 patients,
maintaining staff proficiency becomes very challenging and financial viability is almost
impossible. As noted in Section 3 of this report, the pediatric age population in the
Planning Area is projected to decrease between 2014 and 2019, as is the population of
women of child-bearing age. The combination of declining utilization and a shrinking
pediatric population will result in a pediatric average daily census in the study hospitals
of 48.0 in 2019, down from its 2013 level of 52.0. Note that table 9-2 is the total pediatric
census at the study hospitals, including volume at NBIMC, which has a large proportion
of its pediatric volume from outside the planning area. Table 9.3 is the pediatric volume
of the planning area population. Given the supply of maintained pediatric beds in the
Planning Area (120), the projected combined pediatric ADC of 48 in 2019 would represent
substantial excess capacity and unnecessary duplication of service, particularly in the
hospitals with smaller pediatric units.
Nationally, the trend in pediatrics is toward dedicated childrens facilities with enough
scale to provide 24 hour, 7 day per week specialty coverage. The traditional community
hospitals with the prototypical 21-bed inpatient pediatric unit face daunting if not
insurmountable challenges in maintaining clinical quality and achieving economic
viability with low (and declining) pediatric ADCs. NBIMC is the home of Childrens
Hospital of New Jersey, a 56-bed facility with approximately 30 pediatric subspecialties
on staff and a comprehensive array of inpatient and outpatient pediatric services
including:
Children's Heart Center,

State-designated regional perinatal center,
Pediatric intensive care unit,
Pediatric emergency department,
Neonatal Sudden Infant Death Syndrome (SIDS)/Apnea Center,
Valerie Fund Children's Center for Cancer and Blood Disorders,
Neonatal ICU with New Jersey's only ECMO unit,
HIV/AIDS treatment for children as well as a sexual and child abuse program.
The consolidation of inpatient pediatrics services at Childrens Hospital of New Jersey at

Newark Beth Israel Medical Center moves the small inpatient pediatric volumes at the
other study hospitals to the largest existing provider in the Planning Area and one with
specialized services and coverage. Analysis of the facilities at NBIMC indicated that
NBIMC could accommodate the incremental volume with limited capital investment of
~$4 Million. In addition, consolidation of inpatient pediatrics at NBIMC should reduce
fixed expenses as well as improve coordination of physician capacity in the area.
It should be noted that this recommendation does not anticipate discontinuation of
pediatric services at either CMMC or UH. Rather, we strongly recommend maintaining
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a robust ambulatory pediatric service at both facilities. In addition, we suggest that both
CMMC and UH explore the possibility of developing a small (e.g., 4-6 bed) area adjacent
to the ED (staffed by the ED) to accommodate pediatric patients needing
assessment/observation and prepare for transfer to the Childrens Hospital of New Jersey
as appropriate. This is a model of providing pediatric service without having a dedicated
inpatient unit that many hospitals are adopting, in that it allows physician coverage of the
ED and the pediatrics area with a single physician, and to a lesser extent nursing as well.
By doing this, a hospital is able to provide enough volume for the staff to keep up their
skill set and have a more stable work expectation in low volume seasons.
Consolidation of inpatient pediatrics at NBIMC would, therefore help reduce excess
capacity and unnecessary duplication of services, improve the combined financial
performance of the study hospitals, better align the Planning Areas healthcare resources
with current and future needs, and would therefore be entirely consistent with the
Guiding Principles delineated previously.
Cardiac Surgery Consolidation Rationale:

Recommended annual hospital volumes for select cardiac procedures include a minimum
of 450 Coronary artery bypass graft patients and a minimum of 120 aortic valve
replacements patients. SMMC and UH are low volume programs with 127 and 81
discharges, respectively in 2013; NBIMC performed approximately 678 cardiac surgeries
in 2013. Table 9-5 below provides the cardiac surgery volume and ADC for the three
Planning Area hospitals performing cardiac surgery.
TABLE 9-5: CARDIAC SURGERY VOLUME BY HOSPITAL 2013
Hospital
Discharges
Days
ADC
NBIMC
678
9,535
26.1
SMMC
127
1,045
2.9
UH
81
698
1.9
Source: New Jersey Department of Health State discharge databases; internal data submitted by study hospitals; and
Navigant analysis.
National cardiac surgery volumes have declined steadily in the last few years. According
to the Department of Health and Human Services, national cardiac surgery volumes from
2009 to 2012 declined by 9.5%, and use rates have declined by 11.3% during this same
period. These declines reflect the impact of several trends in cardiac surgery, including:
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Increase in prevalence of minimally invasive cardiac procedures, which decreases

the length of hospital stays and increases the likelihood of a faster recovery;
Increase in outpatient cardiac procedures;
Focus on improving population health management, emphasizing activities that
improve heart health; and
Increase in management of cardiac conditions through medication.
These national shifts have yet to be felt significantly in the Planning Area as total market
cardiac surgery volumes were essentially unchanged from 2011 to 2013 ( 522 total cases in
2011 vs. 529 cases in 2013). Given national trends, however, it is very likely the Planning
Area will see a decrease in the demand for cardiac surgery over the next few years. Note
that as is the case with pediatric volume, in-migration to the service area for cardiac
surgery means the volume at the study hospitals in total is larger than that of the Planning
Area residents.
Given the national trends in cardiac surgery, the limited population growth projected in
the Planning Area, and the presence of a large number of major cardiac centers in the New
Jersey and New York region (i.e., 7 of the Top 50 Cardiac Hospitals according to U.S. News
and World Reports 2014-2015 rankings) the prospect of seeing sufficient growth in
cardiac procedures to enable all three hospitals to achieve recommended minimum
volumes is highly unlikely. In looking at the existing cardiac surgery programs in the
Planning Area, NBIMCs is by far the largest, performing over three times as many
procedures in 2013 than SMMC and UH combined and its program is recognized by U.S.
News and World Report as one of the highest performing programs in cardiology and
heart surgery in the region and the U.S. NBIMC is also one of the top three centers in the
United States in terms of heart transplants. An analysis of the NBIMC facility identified
5 catheterization labs. Our assessment of the existing capacities of NBIMC indicated that
the cardiac surgery volumes from SMMC and UH could be accommodated at NBIMC
without additional capital investment. In addition, the facility analysis also showed that
neither SMMCs or UHs facility could handle the consolidated volume without
significant capital investment. Consolidation of the cardiac surgery volumes at NBIMC
should not preclude the other two facilities from providing a strong non-invasive
cardiology service and in fact, they will have an opportunity to develop a high quality
ambulatory cardiac service.
As was the case with the recommendation to consolidate inpatient pediatrics to a single
site, consolidation of cardiac surgery at NBIMC should reduce fixed expenses as well as
improve coordination of physician capacity in the area. We believe therefore that
consolidation of cardiac surgery to a single site (NBIMC) would help reduce excess
capacity and unnecessary duplication of services, improve the combined financial
performance of the study hospitals, and better align the Planning Areas healthcare
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resources with current and future needs, and would therefore be entirely consistent with
the Guiding Principles delineated previously.
We do need to note, however, that analysis of the financial impact of these two service
line rationalizations indicate that while the combined financial performance of the five
study hospitals would be better than in the status quo scenario, it would still represent a
substantial aggregate five hospital annual operating loss of approximately $177 Million in
2019 (versus a baseline aggregate operating loss of $191 Million). This service line
rationalization option therefore represents an improvement over the status quo from a
financial perspective and will help the consolidated programs achieve sufficient volumes
to enhance operational efficiency and clinical efficacy. However, the significant combined
operating loss would appear to indicate that while this option may be appropriate and
necessary, it is clearly not sufficient to address the excess capacity and financial
performance issues of the Planning Area hospital facilities
Recommendation #2: Expand Broadway Houses role to include post-acute care.

Broadway House is New Jerseys only specialized facility for people living with
HIV/AIDS. As a result of the progress that has been made in HIV/AIDS care both locally
and around the country, Broadway House has experienced a steady decline in occupancy:
from 75% in 2012 to 62% in 2014, based upon annualized results from first six months of
FY 2014. Given this drop in occupancy, Broadway House has the ability to serve an
additional 20 (or possibly more) patients per day. This capacity could be repurposed to
serve a population in addition to Broadway Houses core base of HIV and AIDS patients.
As noted in Section 5 of this report, the study hospitals had a higher ALOS than hospitals
in New Jersey and the national overall, as shown in Table 9-6 below.
TABLE 9-6: AVERAGE LENGTH OF STAY BY GEOGRAPHY
Geography
2011
2012
2013
Study Hospitals
5.73
5.80
5.86
New Jersey
5.15
5.14
5.20
United States
5.20
5.20
5.30
Source: New Jersey Department of Health State discharge databases; American Hospital Association Statistics
Guide 2015.
Note 1: Excludes DRG 795 (normal newborns), LOS =0, and invalid DRGs.
Note 2: ALOS numbers for United States are based on Nongovernment not-for-profit
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One of the causes of a higher ALOS in acute care hospitals across the U.S. and throughout
New Jersey is the lack of sufficient post-acute capacity to accommodate patients who need
to be discharged from the hospital but who are not ready to go home. Repurposing some
of Broadway Houses capacity to care for post-acute care patients in addition to HIV/AIDS
patients would almost certainly help the study hospitals to improve length of stay
management by making additional post-acute capacity available.
In addition to helping improve length of stay management, repurposing Broadway House
would also address one of the issues noted in the conclusions presented previously,
namely that there is a pronounced lack of coordination and communication among the
various parts of the healthcare system in the Planning Area, which leads to highly
fragmented, more expensive care. Nationally, healthcare systems are strengthening their
alignment with post-acute care providers to enhance continuity and collective population
health management capabilities. Repurposing Broadway House in accord with this
recommendation would help with the effort to coordinate and integrate care across the
full continuum and therefore would help better align the Planning Areas healthcare
resources with current and future needs, and would be consistent with the Guiding
Principles delineated previously.
Recommendation #3: Transform East Orange General Hospital and St. Michaels
Medical Center into state-of-the-art ambulatory care facilities.
Rationale:
As noted elsewhere in this report, the Planning Area has a substantial surplus of inpatient
hospital beds, and this surplus is projected to increase steadily over at least the next five
years. Excluding all newborn beds, but including the need for observation beds, in 2013,
the Planning Area hospitals had 1,495 available beds compared to a need for 1,271 beds,
resulting in an excess supply of 224 beds. With the addition of 32 available beds under
construction at CMMC and expected continuation of declines in demand, this excess
capacity is projected to increase to 319 beds by 2019. Furthermore, the Planning Area
lacks a well-developed network of easily accessible and affordable ambulatory care
facilities. And while we believe the recommendations to consolidate inpatient pediatrics
and cardiac surgery and to expand Broadway Houses role are necessary and appropriate,
they are clearly not sufficient to fully address the challenges facing the Planning Area.
The facts of the situation in the Planning Area dictate that a more significant and proactive
course of action is needed (in addition to the service consolidation and expansion of
Broadway Houses role): namely, the repositioning/repurposing/transformation of
EOGH and SMMC from their current position as small, struggling community hospitals
into state-of-the-art ambulatory facilities.
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We assessed a number of scenarios that involved repositioning/repurposing/

transforming every one of the five study hospitals to address the surplus capacity,
unnecessary duplication of services, and the combined financial performance of the study
hospitals and the scenario that appeared to represent one of the best of those options was
one that called for the transformation of both EOGH and SMMC. There were a number
of compelling reasons this scenario represented a viable option, including the following:
EOGH and SMMC have the lowest inpatient average daily census of the study
hospitals, with ADCs of 112 and 116 patients, respectively. The other three
hospitals had ADCs that were at least twice as large (CMMC 230, NBIMC 324, and
UH 246). As a result, the transformation of EOGH and SMMC would impact the
fewest number of inpatients of any of the scenarios. In addition, EOGH and
SMMC are the two facilities with the shortest driving distances to another
Planning Area inpatient facility1.8 miles from EOGH to UH and 1.3 miles from
SMC to UH.
Based on an analysis of where the inpatients cared for at EOGH and SMMC reside,
it appears that approximately 60% of those patients would be cared for at the other
Planning Area hospitals while the other 40% would likely seek care at other
facilities in northern New Jersey that are closer to their homes than the remaining
Planning Area inpatient facilities. Given this redistribution of inpatients, CMMC
would need to add an additional 29 beds and NBIMC would require an additional
36 beds. Review of the facilities at CMMC and NBIMC showed that additional
nursing unit rooms currently exist that could accommodate the additional
inpatient volumes with minimal renovation expense. The resulting supply of
available beds in this scenario (1,137) closely matches the bed need in the Planning
Area (1,095).
There is a considerable degree of overlap of the medical staffs at EOGH and SMMC
with other study hospital medical staffs, with 45% of EOGHs medical staff and
48% of SMMCs medical staff on staff at one (or more) of the other study area
hospitals. As a result, most physicians have the ability to transition their inpatient
cases between facilities if necessary. In light of the physician shortages in the area
as evidenced by the presence of MUA/Ps and documented in the New Jersey
Council of Teaching Hospitals 2008 Physician Workforce Study, along with the
aging of the physicians on staff at the study hospitals, it is likely that the hospitals
would welcome additional physicians to their medical staffs.
EOGH and SMMC are the most challenged of the study hospitals from a financial
performance perspective, as they had the lowest operating margins of the five
study hospitals and their operating margins were negative in both 2012 and 2013.
In addition, the operating expense per adjusted discharges (CMI and Wage-Index
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Adjusted) at EOGH and SMMC was substantially higher than the Truven Median
National Benchmark for medium-sized community hospitals at $7,996 and $8,025
respectively compared to the benchmark of $7,203. On the other hand, CMMCs
operating expense per adjusted discharge ($6,182) was significantly below the
Truven benchmark for medium-sized community hospitals and NBIMCs was
well below the Truven benchmark for major teaching hospitals.
EOGH and SMMC both perform below the NJ state average, as well as the other 3
study hospitals, on publicly available measures of Quality and Patient Satisfaction
(as indicated in Section 5)
As shown in Table 9-6 below, the reposition/repurpose/transform scenarios we

identified all resulted in improved combined financial performance versus the
status quo, and the transformation of EOGH and SMMC produced the third best
financial result of the various scenarios we evaluated.
It is important to note that this scenario involves repositioning/repurposing/

transformation of EOGH and SMMC, not their closure. In looking at the needs of the
community and taking into consideration the excess inpatient capacity and the relative
lack of ambulatory facilities as well as the physical condition of the existing facilities, we
developed a high-level conceptual transformation scheme that calls for EOGH and SMMC
to continue to function as vibrant healthcare resources for their respective communities
and the Greater Newark area, providing a comprehensive array of ambulatory and
outpatient services.
For EOGH, the transformation would entail providing emergency services, ambulatory
surgery, outpatient services, and physician offices in the two-story 1990s era building with
existing surgery on the lower level and adapting the upper level to serve as a freestanding
emergency center. The Medical Arts Building, Hope Gardens, and the East Pavilion
would also be retained. This transformation would result in an ambulatory center of
approximately 248,000 square feet. The existing Forensic Unit would need to be
relocated to a unit that would need to be hardened in another facility (possibly the
South Annex at CMMC).
At SMMC, the transformation would involve maintaining the six-story M wing adjacent
to the new Cancer Center and converting it into an ambulatory pavilion of approximately
130,000 square feet that provides emergency services in the recently renovated Emergency
Department, ambulatory surgery, imaging, outpatient services, and physician offices. The
outpatient Cancer Center would remain as a key service offering.
While the high-level conceptual plan outlined above will need to be more fully developed,
this scenario will benefit the community by aligning capacity and demand, increasing
clinical efficacy, and improving financial performance to increase the study organizations
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ability to effectively manage and improve the health of Planning Area residents. It is clear
that this scenario represents a substantial move toward better aligning the Planning
Areas healthcare resources with current and future needs and addressing the need for
improved financial performance of Planning Area facilities.
Recommendation #4: Develop a state-of-the-art regional medical center in Newark.

This recommendation is intended to build on Recommendation #3 and would take
place following the transformation of EOGH and SMMC. There are a number of
components to this recommendation, including the following:
Functional and operational integration of NBIMC and UH. NBIMC and UH are
the two facilities in the Planning Area providing tertiary and quaternary level care.
They currently have a cooperative working relationship and in fact, NBIMCs
parent organization (Barnabas Health) provides UH with management assistance
as UH works to improve its financial and operating performance. As such, there
is an opportunity to further and more formally develop the collaborative
relationship between these providers through functional and operational
integration. Integration of NBIMC and UH would facilitate achievement of the
critical mass of patients needed to enhance clinical efficacy and improve
financial performance in key programs and services and would help address the
unnecessary duplication of services in the Planning Area.
Expansion of the UH campus to accommodate NBIMCs inpatient services.

Neither NBIMC nor UH currently have the inpatient capacity to absorb the patient
volumes of the other, along with the portions of EOGHs and SMMCs inpatient
volumes that would likely be redirected to them. As part of this scenario we did
consider development of a completely new regional medical center in the Greater
Newark area that would replace both NBIMC and UH. While a completely new
replacement medical center has a number of significant advantages, it would be a
very expensive alternative. However, in reviewing the facilities and campuses of
NBIMC and UH, the UH campus appears to have sufficient expansion potential
with relocation of the temporary Rutgers metal office buildings and the
relocation of the DOC parking garage to accommodate the projected patient
volumes. The NBIMC campus, on the other hand, has less in the way of potential
expansion zones and any consolidation there would likely be far more expensive.
Transformation of the NBIMC campus into a comprehensive ambulatory

campus. Once the expansion of the UH campus is completed, this scenario calls
for the NBIMC campus to be transformed into a state-of-the-art ambulatory
campus. This transformation would entail providing emergency services,
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ambulatory surgery, imaging, outpatient services, and physician offices. The

Cancer Center would remain. The Ambulatory Building (including the bridge to
the Outpatient wing), the Outpatient wing, and the 182 Lyons building would be
retained along with the apartment tower of the main hospital. This configuration
would create a major ambulatory campus consisting of approximately 260,000
square feet.
Formation of a public-private partnership. The recommendation to develop a

state-of-the-art regional medical center on the UH campus represents an enormous
undertaking. And we believe it is an undertaking that can best be accomplished
through a public-private partnership that is able to access and leverage the
capabilities and resources of the State, the County, and the City along with those
of private entities and stakeholders in the region. There are a number of successful
examples of public-private partnerships in healthcare including Seton
Brackenridge University Hospital in Austin, Texas and Boston Medical Center in
Boston, Massachusetts. Brackenridge Hospital is the oldest public hospital in
Texas and is the regional level 1 trauma center and main clinical setting for UTAustin medical students and residents. Owned by the city of Austin, Brackenridge
provided a tremendous amount of charity care, in part because of the high number
of uninsured residents in Texas. This high level of charity care contributed to
Brackenridges financial struggles and resulted in the city of Austin reaching out
to potential financial partners. In 1995, Seton Health (a member of the Catholic
Ascension Health system) signed a 30-year lease agreement with the city and took
over operations of the facility. Subsequently Seton and Austin agreed on plans to
construct a $250 Million replacement hospital to be paid for by Seton. In July 1996,
Boston University Hospital and Boston City Hospital merged to form Boston
Medical Center. BMC is a not-for-profit organization and is the principal teaching
affiliate of the Boston University School of Medicine. BMC has retained its
character as the primary charity care provider in Boston and operates an
ambulatory network with Boston HealthNet, a network of 15 modern FQHCs,
some of which are owned directly by BMC. This ambulatory network provides
the majority of BMCs patient volume. As an aide to then mayor Thomas Menino
said about the public-private partnership, The merger is not about saving hospital
buildings, beds, or even a medical school. It is about saving an urban health system.
Rationale:
The underlying rationale for this recommendation to develop a state-of-the-art regional
medical center in Newark includes the following key points:
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As noted in the discussion of the Guiding Principles section of this report, the New
Jersey Medical and Health Sciences Restructuring Act of 2013 stipulates that the
State must provide funding for University Hospital to maintain the current level
of community services and its status as an acute care hospital and trauma center.
Therefore, even though we evaluated a scenario that called for transforming UH
into an ambulatory center, that scenario does not appear viable from a legal or
regulatory perspective. The statue clearly indicates that UH must remain as an
acute care hospital, thereby precluding its repositioning /repurposing
/transformation as an ambulatory campus.
This scenario is the one that best balances future bed supply (998 beds, which
reflects the transformation of EOGH, SMMC, and NBIMC) with future bed need
(996 beds needed to accommodate projected inpatient volumes).
This scenario is the only one we assessed that resulted in a positive operating
margin on a combined basis for the Planning Area providers as shown in the Table
9-2 previously.
While the capital investment required in this scenario is substantial, it results in a

combined positive operating margin because the transformation of EOGH and
SMMC, combined with the merger of NBIMC and UH into a more modern facility,
substantially decreases the operating expenses associated with caring for the
patient population in the Planning Area. The fixed expenses associated with
keeping the five Planning Area hospitals open independently as full-service, acute
care hospitals are reduced as facilities are transformed, better matching acute care
demand and supply.
As noted above in the description of the recommendation, the UH facility

infrastructure appears to be in the best condition of the five study hospitals and its
campus has some potential expansion options. NBIMC, on the other hand,
appears to require the most capital investment of the study hospitals to address
necessary upgrades.
Implementation of this recommendation would redirect dollars currently spent to

subsidize the study hospitals and support excess capacity and duplication of
services to invest in the transformation of healthcare in the area and better prepare
the study organizations for Curve Two.
The development of a state-of-the-art regional medical center should be part of a larger

initiative which involves preparing a comprehensive urban healthcare redevelopment
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plan to address the healthcare needs of the Planning Area residents in a clinically
appropriate, operationally efficient, and financially viable manner. A comprehensive and
coordinated approach to healthcare redevelopment would serve the Newark area through
alignment of capacity with need, improved coordination of services across the continuum,
and economic development. Consideration should also be given to establishing a regional
healthcare consortium to manage and operate the healthcare resources in the study area.
One of the factors that likely has contributed to the current situation is the fragmented
nature of the delivery system in the Planning Area and designating a single entity to
oversee the development and deployment of resources would lead to greater coordination
and less unnecessary duplication of services as well as generate savings through
economies of scale and skill.
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Section 10 Key Implementation Steps

The recommendations outlined in this report represent a major transformation of the healthcare
delivery system in the Greater Newark area. As such, they will play out over a several year
period. And as noted previously, they are intended to complement and build on each other. We
have outlined a high-level implementation framework for the recommendations, recognizing
there will need to be a significant degree of discussion regarding the recommendations as well as
a great deal of coordination among all of the key stakeholders. Given those caveats, we believe
the following represents a potential framework for implementing the recommendations:
Consolidate Inpatient Pediatrics and CV Surgery Services at NBIMC.
The detailed plans and approvals for this recommendation should be targeted for completion in
2015, with the transfer of services taking place in 2016 and the recommendation being fully
implemented by 2017.
Expand Broadway Houses Role to Include Post-Acute Care
Implementation of this recommendation should be initiated in 2015 and fully implemented by
2016.
Transform EOGH and SMMMC into State-of-the-Art Ambulatory Care Facilities
This recommendation will entail more planning and approvals than the first two
recommendations and as a result, it is likely that 2015 and 2016 will be required for these
activities, with full implementation of the recommendations targeted for late 2017.
Develop a state-of-the-art Regional Medical Center in Newark
As noted in the report, this recommendation is intended to build on Recommendation #3 and
would take place following the transformation of EOGH and SMMC. Furthermore, this
recommendation will require significant lead time for planning, financing, and construction.
Therefore, initial planning should begin in 2015 and will likely take at least until 2017 with full
implementation of the recommendation being completed no earlier than 2019.
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Section 11 Appendix
(See separate document)
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Final Report for:

Greater Newark Healthcare Services Evaluation

New Jersey Health Care Facilities Financing Authority

EXHIBIT 1-1: THE SHIFT FROM CURVE ONE TO CURVE TWO

In order to be successful in the transformed healthcare landscape of the future, healthcare

Scope, Work Plan and Data Sources

Profile Patient Demographics and Patient Migration Patterns. Once we defined

Assess the Current Inventory of Healthcare Services. In this task, we identified

Identify Unnecessary Duplication of Services and Unused Capacity. This

duplicative or unused/under-used capacity would exist in the Planning Area in

Develop Proposed Recommendations and Assess Financial Impact. Based on

Outline Implementation Steps. Following development of our proposed

American Hospital Association Statistics, 2015 edition

Truven Health Care Analytics

Structure of the Report

Section 2 Planning Area Definition

FIGURE 2-1: PLANNING AREA MAP

Source: 2013 New Jersey State Discharge Database; Navigant analysis.

TABLE 2-3: PLANNING AREA SUMMARY PROFILE

% from Planning Area

% from Other New

% from All Other

All Other Discharges*

*All Other includes all discharges from non-New Jersey residents.

Section 3Planning Area Demographic Profile

TABLE 3-1: POPULATION AND GROWTH

Source: Claritas; Navigant analysis

TABLE 3-2: POPULATION AND GROWTH BY ZIP CODE

Source: Claritas; Navigant analysis

TABLE 3-3: POPULATION AND GROWTH AND DISTRIBUTION BY AGE COHORT

Source: Claritas and Navigant analysis

Planning Area Household Income

TABLE 3-4: AVERAGE HOUSEHOLD INCOME 2014

Planning Area Total

Zip Code's Avg.

Source: Claritas and Navigant analysis

Health Insurance Coverage

Source: Truven Health Care Analytics; Navigant analysis

Source: Robert Wood Johnson Foundation

Section 4 Planning Area Patient Migration Patterns

TABLE 4-1: PLANNING AREA INPATIENT CARE BY SITE OF HOSPITALIZATION

Patient migration patterns are influenced by numerous factors, including employment

All Planning Area Residents

Case Mix Index

Discharges NonPlanning Area

TABLE 4-4: PLANNING AREA OUTMIGRATION BY SERVICE LINE 2013

All Service Lines

TABLE 4-5: PLANNING AREA NET MIGRATION BY SERVICE LINE 2013

Total Planning Area Total Planning Area InOut-migration

Net Outmigration (Inmigration)

All Service Lines

Section 5 Healthcare Resources in the Planning Area: Current and

TABLE 5-1: AREA HOSPITAL CLOSURES SINCE 1999

Montclair Community Hospital1; and St. Marys Hospital

West Hudson Hospital2

Hospital Center at Orange2

Irvington General Hospital2

Columbus Hospital (Newark)2; Muhlenberg Regional Medical

St. Clares Sussex1