A Decade of Progress

Hospitals in New Jersey have spent the better part of the last decade shifting services from the costlier inpatient setting to the less costly outpatient setting, making a commitment to provide the right care with the right provider in the right setting. This approach is borne out in an analysis of inpatient volume, cost and length of stay.

In 2006, the total number of inpatient admissions to New Jersey’s acute care hospitals was 1,139,228. That number decreased by 14 percent in 2016, with inpatient admissions falling to 979,099. This reduction took place even though New Jersey’s population increased by 3.7 percent over that same time period, from 8,661,679 in 2006 to 8,978,416 in 2016.

Additionally, the average length of stay (ALOS) at New Jersey’s acute care hospitals declined from 4.93 in 2006 to 4.56 in 2016, a reduction of 7.5 percent. However, this flat comparison of ALOS doesn’t fully illuminate the progress hospitals have made on the road to efficiency. When more, less sick patients are treated outside the inpatient setting, what is left in the hospital inpatient setting is a more complex case mix. This measure is commonly referred to as case mix intensity (CMI), which is the average of high- and low-cost weights assigned to various patient services. With a weight of 1.0 as the norm, higher values are deemed more complex and lower values are considered less complex (e.g., the assigned cost weight for a vaginal delivery is 0.614, while a coronary bypass without cardiac catheterization or complications has an assigned cost weight of 3.9263).

In 2006, the average CMI for inpatient services across all New Jersey hospitals was 1.4987. In 2016 that index appropriately jumped to 1.7370. This represents a 16 percent increase in the average complexity of an inpatient stay at a New Jersey hospital. As a point of reference, the average CMI for hospitals in Rhode Island in 2016 was 1.597, which signifies a patient complexity that is 8.8 percent lower than New Jersey’s. When the New Jersey ALOS from each year is neutralized for the differences in CMI, the ALOS neutralizes to 3.29 in 2006 and to 2.62 in 2016, producing a real reduction of 20.4 percent over 10 years. This compares favorably to the national reduction of just 13.6 percent over the same period.

New Jersey vs. Nationally

Before New Jersey’s hospital costs can be compared to other states across the country, it is necessary to neutralize for cost drivers that are outside a hospital’s control. Specifically, to level the playing field and produce a fair comparison across states, it is important to control for differences in case mix intensity (the complexity of the services being provided), cost of living (labor costs), and the presence and density of medical resident teaching programs (training the physician workforce of tomorrow).

New Jersey’s raw cost-per-adjusted admission as a state ranked 7th lowest in the country in 2016 at $13,864. This is nearly 22 percent less than the national average of $16,886. In addition, New Jersey’s cost-per-adjusted admission grew at a slower pace from 2006 to 2016 compared with the national growth. During the 10-year period 2006-2016, New Jersey’s cost-per-adjusted admission grew 29 percent, while nationally the cost-per-adjusted admission jumped 50 percent.

Hover over chart to see data.

However, after adjusting hospital costs for differences in case mix, labor costs and teaching program density, New Jersey ranked as the 4th most efficient provider of hospital care in the United States.

Its neutralized cost-per-adjusted admission was $7,370. As with the non-neutralized metric, from 2006 to 2016 New Jersey’s neutralized cost-per-adjusted admission grew at a slower rate than the national average. During the ten years, New Jersey’s neutralized cost-per-adjusted admission increased roughly 15 percent, while the nationwide neutralized cost-per-adjusted admission grew 33.5 percent. Other peer states that also showed a low neutralized adjusted cost-per-adjusted admission were Florida ($7,784 in 2016, ranked 5th) and Connecticut ($8,149 in 2016, ranked 10th).

Adjust for Resident Teaching Programs

In 2016, 67 percent of New Jersey’s acute care hospitals were teaching hospitals. This ranks as the second highest percentage in the country, behind only Washington, D.C. On average nationally, 34.5 percent of a state’s hospitals have teaching programs. With this large number of teaching hospitals comes the increased costs associated with the training of residents. New Jersey’s hospitals spent over $574 million on resident salaries and costs in 2016, which equates to 2.6 percent of their total costs. This again is higher than the national average of 2.2 percent.

Despite the amount of resources spent on graduate medical education (GME) in New Jersey, many of these newly trained physicians choose to practice elsewhere. According to the Association of American Medical Colleges (AAMC) 2017 State Physician Workforce Data Report, in 2016 there were over 19,000 active physicians who completed their GME in New Jersey. Of those, roughly 8,500, or 44.5 percent, were active in the state of New Jersey, with the remaining practicing in other states. This is slightly lower than the national average of 44.9 percent and much lower than many states in the West, such as California (70.4 percent) and Alaska (64.8 percent). Despite New Jersey’s low retention rates, the state’s acute care hospitals remain committed to teaching the future physician workforce.