The document summarizes the financial outlook for Hoboken University Medical Center. It notes that while the overall economic outlook is gloomy, Hoboken UMC's finances remain stable. Several cost-cutting measures were implemented to balance the budget for 2009. The long-term projection expects Hoboken UMC to weather the economic storm due to its loyal patient base and upcoming facility upgrades. The overall outlook for Hoboken UMC is positive despite uncertainties around future government funding cuts.

1. 308 Willow Avenue, Hoboken, New Jersey 07030 • 201-418-1000. www.HobokenU!V1C.com
January 28, 2009
George W. Crimmins
Executive Director
Hoboken Municipal Hospital Authority
308 Willow Avenue
Hoboken, New Jersey 07030
Dear Mr . Qrlll1mins: ~.'.
. ./quot; .
quot;.,.,. .v
. Responding to your Iette 00anuary 26ili, Iam enclosing information requested
about the finances of Hoboken University Medical Center, the overall economic outlook
for the industry, and long-term projections for the fiscal health of the hospital.
As you suggested, this material may be distributed at today's meeting of the
Authority.
Very truly yours,
J ..
IV·~~'-·
~
Harvey ~Zberg
Chief Executive Officer

2. General Economic Outlook
On January 27th, 2009, the Conference Board (a New York based business index
research group) said its Consumer Confidence Index fell to the lowest point it has ever
been since the survey began in 1967. quot;It doesn't feel good,quot; the report says, quot;and as a
result consumers are spending less and they are worried about the outlook for the U.S.
economy and their own personal situation.quot;
Despite general hopes that an economic stimulus initiative out of Washington will
sustain current jobs and generate new ones in the New JerseylNew York region,
consumer behavior is cautious, if not downright tight-fisted. Nationwide, physicians
report fewer patients seeking care and more patients postponing tests and treatments.
Eventually some of these patients may require care but at that point the treatment may be
more costly and fewer of these patients will have adequate insurance.
Financial experts differ on the time the current recession will last and how rapid
the recovery might be. But prudent management of resources requires that action be
taken now to prevent further financial losses, to compensate for losses already occurred,
and to adapt to rapidly changing circumstances.
Hoboken University Medical Center Outlook
Despite gloomy predictions from healthcare experts noting that inpatient and
outpatient activity began dropping in the last quarter of2008 and that investment income
will shrink as refinancing opportunities dry up, the outlook for Hoboken University
Medical Center is good.
The FAST (Fiscal Analysis & Statistical Trends) report issued by the New Jersey
Hospital Association, lists 52 acute care and 3 specialty hospitals. The most recent one
shows Hoboken UMC in the middle ofthe pack for all the indices that assess a hospital's
financial health except that it has the second highest percentage of charity care patients
(Jersey City Medical Center is first.)
Informal communications from peers in the local hospital industry indicate that all
other area hospitals are experiencing financial problems, including lessened cash flow,
fewer admissions, and declining investment income. Others have already laid off
employees, closed or curtailed services, temporarily shuttered nursing units, and taken
other steps to reduce operating costs.
The budget proposed for calendar year 2008 projected the continuation of then-
current levels of charity care funding. Instead, the state budget cut funding for charity
care reimbursement of all hospitals, as well as Graduate Medical Education funding. In
addition, interest received from bonds declined more than $1 million.
Despite those cuts, Hoboken UMC remained fiscally stable through three quarters
of 2008. Efficiencies in providing service, reducing overtime from 5 to 1%, and

3. renegotiation of some contracts achieved savings that balanced the loss. However, in the
last quarter of 2008, the number of patients in the hospital began to drop. The average
daily census went from an annual figure of 144.8 to 140.5. A percentage of that
difference resulted from an improvement in the average length-of-stay for patients, but
financial savings from that improvement can result only when staffing is adjusted.
However, at the start of2009, census began to rise again. For the first 27 days of
January, the daily census averaged 152.5.
It is important to note that payment for services rendered usually arrives 45 to 50
days after the submission of a bill. So payments received from insurers in January will
reflect care given to fewer patients in late 2008 while reimbursements for care given to
more patients in early 2009 will not arrive until March. Therefore, although actions to
cut costs begin almost immediately and patient activity has already begun to improve, the
changes will not affect revenues until spring.
2008 Loss
Although the first nine months of2008 showed break-even revenues and
expenses, in the final three months, losses began to accumulate. The year-end loss
totaled $4,314,174. Although $4,562,795 depreciation is not funded, this is not an actual
cash loss, but only a bookkeeping transaction.
2009 Budget
In order to provide a break-even budget for 2009, compensating for previous
losses, it was determined that $8,450,000 needed to be cut from the $150 million annual
operating budget.
• The reduction in overtime from 5 to 1% will result in $1,050,000 savings
• Technology contractual changes will result in $1 million savings
• Other contractual changes will result in $1 million savings
• Changes to ER physician stipends will result in $400,000 savings
• Reduction in physician payments will result in $800,000 savings
• Reductions in expenses in ancillary departments will result in $1,000,000
• Lowered insurance premiums will result in $150,000 savings
• Staff adjustments based on lower average length-of-stay will result in
$900,000 savings
The remaining savings needed ($2,150,000) will be achieved through a
combination of employee voluntary separations, union concessions, and layoffs, as well
as receipt of a gift from the Hoboken UMC Foundation from unrestricted funds. The goal
is to reduce payroll from 3 to 5 percent.

4. Long-Term Projection
Although health care is no longer considered recession-proof, most financial
experts predict essential hospitals will be able to weather the current economic storm.
Hoboken UMC, with its loyal physician base, skilled employees, and densely populated
referral area, is well positioned to do so.
Although financial problems unrelated to Hoboken UMC caused the imposition of
a State Fiscal Monitor on the City of Hoboken and hampered the Hoboken Municipal
Hospital Authority's ability to refinance as planned in early 2008, it is anticipated that
sufficient funds will be available from operating and investment revenues to remain
stable.
When the new Emergency Department opens in early summer 2009, hospital
administrators expect an increase of 15% in the number of patients seeking care there. In
addition, the new facility is expected to attract a larger proportion of patients with health
insurance. These increases will eventually improve the fiscal health of the hospital.
No assurances have been given that New Jersey and/or the federal government
will not impose further cuts to reimbursement. On the other hand, there is widespread
hope that the federal economic stimulus package will include relief for hospitals.
With that or without that, however, the overall outlook for Hoboken University
Medical Center for 2009 and beyond is upbeat!