LEGISLATIVE FISCAL ESTIMATE

ASSEMBLY, No. 5185

STATE OF NEW JERSEY

222nd LEGISLATURE

 

DATED: JUNE 25, 2026

 

 

SUMMARY

 

Synopsis:

Revises regulation of certain health care facilities.

Type of Impact:

Annual increase in State costs and revenues; potential increase in annual costs for University Hospital and Bergen New Bridge Medical Center.

Agencies Affected:

Department of Health, University Hospital, Bergen New Bridge Medical Center.

 

 

Office of Legislative Services Estimate

Fiscal Impact

Annual

 

State Expenditure Increase

Indeterminate

 

State Revenue Increase

Indeterminate

 

Potential Expenditure Increase for University Hospital and Bergen New Bridge Medical Center

Indeterminate

 

 

·         The Office of Legislative Services (OLS) determines that the Department of Health’s annual expenditures will increase by an indeterminate amount to provide increased regulatory oversight of health care facilities licensed under the Health Care Facilities Planning Act.  Because the annual number of licensed facilities that may face heightened regulatory oversight by the department and the level of intensity of the oversight required for each facility cannot be anticipated, the OLS lacks the informational basis to determine the amount by which the department’s costs will increase.

·         University Hospital, an independent non-profit legal entity that is an instrumentality of the State located in Newark and Bergen New Bridge Medical Center (formerly the Bergen Regional Medical Center), a county-owned entity in Paramus, may potentially incur additional costs if they are subject to increased regulatory oversight by the department or are assessed higher monetary penalties for alleged violations of the act’s licensure provisions or patient care or physical plant standards.

·         State revenues may increase by an indeterminate amount due to a provision newly requiring certain closed hospitals to reimburse the State for the portion of the hospital’s charity care subsidy payment covering the period between the hospital’s closure and June 30th. 

·         State revenues will also increase due to higher monetary penalties that the department may assess against licensed health care facilities, or persons or entities that are part of a facility’s ownership structure, that violate the act’s provisions.  Because the number and magnitude of the financial penalties that may be assessed against health care facilities in a given year cannot be anticipated, the OLS concludes that the magnitude of the State revenue increase is indeterminate.

 

 

BILL DESCRIPTION

 

The bill authorizes the Department of Health to debar a health care facility or any individual in the ownership structure of a licensed health care facility from eligibility for a certificate of need after determining that the facility has substantial prior or ongoing violations of the provisions of the Health Care Facilities Planning Act or of the department’s certificate of need requirements.  Under the bill, if a hospital is debarred, the license of any other associated health care facility within the hospital’s health system would be made provisional, pending the completion of a financial audit and the hospital’s implementation of a department-approved comprehensive improvement plan.  One year following implementation of the improvement plan, the facility’s provisional license would convert to a full license.

      The bill provides that the department may seek injunctive relief against persons, firms, corporations, partnerships, or licensed health care facilities that are in violation of the act’s provisions.

      The bill raises penalties imposed by the department on certain health care facilities for violations of the act’s licensure provisions and patient care or physical plant standards.  Penalties assessed under the act would increase from $2,500 to $12,500 for the first offense, and from $5,000 to $25,000 for subsequent offenses.  The department would promulgate regulations imposing a graduated penalty on licensed health care facilities that violate the act’s provisions, commensurate with the facility’s licensed bed capacity.  The department is authorized to increase the penalty amounts annually, with the increase capped at the cumulative annual percentage increase in the Consumer Price Index for the five fiscal years prior to the date of the proposed penalty increase.

      Under the bill, a hospital that receives a charity care subsidy payment from the State, but closes before June 30 of a given year, will be required to reimburse the State for that portion of the subsidy payment covering the time between the hospital’s closure and June 30th.  If the hospital fails to reimburse the State, the State may apply an offset to the Medicaid payments to other hospitals within the same hospital system, as applicable.

For financially distressed hospitals and those with significant violations of State or federal health, safety, and patient care standards, the department may provide, at the hospital’s expense, or direct the hospital to management support services and other resources necessary to avoid bankruptcy or the cessation of operations.  In certain circumstances, the department is authorized to initiate receivership proceedings against the hospital in court.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS finds that the Department of Health’s annual expenditures will increase by an indeterminate amount to provide increased regulatory oversight over health care facilities licensed under the Health Care Facilities Planning Act.  Because the annual number of licensed health care facilities that would face heightened regulatory oversight by the department and the level of intensity of the oversight required for each facility cannot be anticipated, the OLS lacks the informational basis to determine the amount by which the department’s costs will increase.  To a large extent, the amount by which the department’s annual costs will increase will depend on the nature and seriousness of the alleged violations by health care facilities.  It would be more costly for the department to petition the courts for receivership of a hospital at risk of bankruptcy or closure than it would be for the department to impose a graduated penalty commensurate with a facility’s licensed bed capacity. 

      University Hospital, an independent non-profit legal entity that is an instrumentality of the State located in Newark; and Bergen New Bridge Medical Center (formerly the Bergen Regional Medical Center), a county-owned entity in Paramus, may incur costs under the bill if they are subject to increased regulatory oversight by the department or are assessed higher monetary penalties for alleged violations of the act’s licensure provisions or patient care or physical plant standards.  Under the bill, the department may also require hospitals that have serious violations to implement a department-approved comprehensive improvement plan, pay for and submit to the department a third party financial audit, and pay for management support services and resources to help the hospital avoid bankruptcy and closure.

      State revenues may potentially increase by an indeterminate amount due to a provision newly requiring hospitals that close before June 30th to reimburse the State for the portion of the hospital’s charity care subsidy payment covering the period between the hospital’s closure and June 30th.  Absent information on the extent to which a closed hospital may have the financial resources to reimburse the State for any portion of the hospital’s charity care funding, the OLS cannot determine the amount by which State revenues may increase under this provision.

      State revenues will also increase due to higher monetary penalties that the department may assess against licensed health care facilities, or persons or entities that are part of a facility’s ownership structure, that violate the act’s provisions.  Because the number and magnitude of the financial penalties that may be assessed against health care facilities in a given year cannot be anticipated, the OLS determines that the State revenue increase under the bill is indeterminate.

 

Section:

Human Services

Analyst:

Anne Cappabianca

Senior Fiscal Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).