Good afternoon Chairman Johnson and members of the Health Committee. I am Dr. Ram Raju, President and CEO of the New York City Health and Hospitals Corporation (HHC)….your public hospital system. I am joined by Ms. Marlene Zurack, our Senior Vice President and Chief Financial Officer and Ms. LaRay Brown, Senior Vice President for Strategic Planning, Community Health and Intergovernmental Relations. Thank you for the opportunity to discuss our Financial Year 2016 Preliminary Budget and Financial Plan and programmatic initiatives. In my testimony, I will outline the strategic priorities that I have established for our corporation, review our financial plan and provide an update on recent key initiatives.
At the beginning of this year, I put forth four strategic priorities to preserve HHC’s mission. These priorities will benefit our patients, our staff and our bottom line. They are:
Expand Access to Care: When I first came before the Council last year, I said that we could not rest on our laurels for what we have achieved. While we have made significant progress on many fronts, including the strengthening of preventive and primary care services we provide, there is more that needs to be done. We will work to expand access to care so that our patients can more readily receive the care they need – when they need it. We have already expanded hours on nights and weekends in every borough so that our patients have a wider range of appointment times. We will continue to adjust schedules based on demand and feedback from our patients.
Another way to expand access is to reduce wait time. We are working to reduce the time it takes for patients to see their doctors and finish their appointments. By becoming more efficient, we can create additional capacity and save our patients time.
Next, we are working on a system to allow patients to log in to a secure site where they can review their medical information such as care plans, lab results, diagnoses, discharge information and more. Patients will also be able to send messages to their providers. By providing patients with tools that help them to play an active role in their own care, we expect they will become more engaged with their healthcare and remain healthier as a result.
Next initiative is to increase our Market Share: Right now, we serve roughly one out of every six New Yorkers. I want this number to grow over the next five years. If we can continue to improve the patient experience and increase customer satisfaction rates, we will see the proverbial needle move in the right direction. Our patients can be our best advocates, but only if they are satisfied with their experience.
As patients spread the word about the great care they receive at HHC, we expect our new partners will do the same. HHC will be working with many community organizations and other healthcare organizations as part of New York State’s Delivery System Reform Incentive Payment Program (DSRIP). I will discuss DSRIP later in my testimony but I’ll briefly mention how this relates to increasing market share.
Under DSRIP, the State’s goals are to, “promote community-level collaborations and focus on system reform, in order to achieve the state and federal governments’ goal of a 25 percent reduction in avoidable hospital use over five years. The Performing Provider Systems (PPSs) are required to collaborate with one another to implement innovative projects focusing on system transformation, clinical improvement and population health improvement.” Given this mandate, HHC will be working with more than 200 partners on numerous DSRIP projects over the next five years. If we are successful, these partnerships will prove effective in attracting and retaining new patients.
However, our best partner in attracting and retaining new patients is MetroPlus. MetroPlus is HHC’s award winning health plan. It is perennially ranked as the best or among New York State’s highest performing Medicaid managed care plans in terms of customer satisfaction and quality. They now have more than 469,000 members. My goal is for this number to grow to 600,000 by the end of Financial Year 2016. We have already formed alliances with HRA and DOHMH as well as Community Based Organizations that provide navigator services about how to work together more closely. We are hoping through these partnerships to leverage the next two cycles of open enrollment and capture new members into MetroPlus and assist the uninsured to obtain Medicaid, join a qualified health plan, or ultimately sign up for the State’s Basic Health Plan as it rolls out.
Recently, enrollment has increased with the coverage expansions resulting from implementation of the Affordable Care Act. Medicaid membership crossed the 400,000 barrier for the first time in December of last year and now stands at 411,000. Additionally, MetroPlus’ Qualified Health Plan enrollment has more than 27,000 members now after the most recent open enrollment period. This number will likely increase through April, as individuals discover during the tax filing process that they will face penalties and choose to sign up for coverage instead.
Next priority is to stabilize our Financial Health: The members of this Committee know all too well about our budget gaps and all too well that to accomplish our essential mission we need financial security. Each year we need to find new ways to close the gaps that result from our structural budget deficit. If we achieve the goals I just outlined, we will be in a better position to fulfill the goal to stabilize our finances and protect our unwavering mission to turn no one away.
While increased revenues from new patients is an important part of our strategy it is not enough. We need to obtain the fairest prices possible from our vendors and we must manage our supply chain. Also, we need to consistently raise critical reimbursement issues with all of our payers. Currently, we are in the early stages of implementing managed care for our behavioral health services. We have uncovered and begun discussions with the State about an important Medicaid behavioral health under-funding issue. This issue is one of many about which we are in negotiations.
Our final strategic priority is to focus on workforce development: A diverse, well-trained, mission-driven culturally competent staff is one of our greatest assets. As we work to increase the tools available to improve the patient experience, we also need to invest in both new and ongoing programs that benefit our 36,804 employees. We are expanding e-learning opportunities for staff so that they have opportunities outside of the traditional training rooms to learn new skills. We are investing in programs to train our managers to design systematic improvements and make strategic decisions. We are also identifying the next generation of leaders within HHC. In order for the next generation of leaders to be ready to meet future challenges, we must work now to develop the skills they will need.
As part of this effort, we are working with our labor partners in an innovative and collaborative way. For example, in our recently signed agreement with the New York State Nurses Association (NYSNA), we have committed to establish facility-based Nursing Practice Councils that will work with a corporate-wide Nursing Practice Council to improve, among other things, patient satisfaction, patient outcomes, and employee satisfaction. These councils will be comprised of an equal number of members of NYSNA and nursing management. The councils will employ innovative, collaborative and evidence-based techniques to achieve its goals.
As I mentioned, we work constantly to identify methods to reduce and eliminate our budget gaps. Through restructuring, cost-containment, revenue optimization and the ongoing support from the City, we have been successful in balancing our budget. Last year at this time, we were projecting a $430 million gap for Fiscal Year (FY) 2015. This deficit was projected to grow to nearly $1.4 billion in FY2018.
Currently, we are projecting a FY 2015 closing balance of $1 billion. Before you ask if that number is a typo, let me caution that this positive balance is solely attributable to the anticipated receipt of several years of outstanding Upper Payment Limit (UPL) funds totaling $1.2 billion before the close of this financial year. I want to stress that these funds do not recur. These are one-time funds that were due to us for services rendered between years 2012 and 2014. If we didn’t have these UPL funds, our deficit would have been negative $920 million, or negative $227 million on a cash basis.
After this year, our gaps revert back to the pattern of deficits growing each year. Before corrective actions, we project a $753 million gap in FY 2016. These gaps grow to slightly more than $1 billion in FY17 and further balloons to $1.5 billion in FY19. As with any financial plan, we are developing corrective actions to address these gaps. I can more fully discuss these at our next budget hearing.
One step we are taking now is through a productivity based benchmarking initiative to right size staffing levels across the Corporation. This measure will monitor full time equivalent positions globally, including our affiliate staff, temporary staff and use of overtime. This will allow the hospitals more discretion to fill positions with full time and part-time staff while reducing their reliance on temporary staff and remain within their productivity based target.
There are risks and opportunities that could alter our forecast. Our plan does not include current budget proposals on the table in Albany or in Washington. The 2015-2016 State Budget that should be passed in the next week may include a modest amount of new funding for a quality improvement program. There is also a proposal to eliminate a readmissions penalty that would save us $4 million. The positive benefit of these items will likely be lost though if a reduction in Medicaid reimbursement for certain low-income Medicare Beneficiaries, or dual eligible, is approved.
One of the most important items for us in this year’s Executive Budget was the proposed extension of the State’s charity care laws for three years and granting of new authority to the State Health Department (SDOH) to revise Disproportionate Share Hospital (DSH) funding formulas without having to seek further legislative approval when Federal DSH cuts begin in Federal Fiscal Year (FFY) 2017, which begins October 1st, 2016. To remind the Committee, the DSH program provides federal Medicaid matching dollars to states to make payments to hospitals that treat a disproportionate share of uninsured and Medicaid patients. The DSH funding that we receive is critical to supporting our mission and allowing us to serve low-income and uninsured patients.
We believe that the State’s policy should be changed so that DSH funds follow the patients and is directly targeted to hospitals that serve disproportionately high numbers of uninsured patients and Medicaid members. We advocated for a mechanism to revise the distribution to allow input on changes and requirements that the funds are targeted. We are concerned that without changes to the present methodology of distribution of DSH funds we will absorb all of the initial federal DSH cuts. We are optimistic that the State Budget will include a financing workgroup with our participation to come up with recommendations to the Legislature and Governor on how DSH funds should be disbursed in the event of Federal cuts. We appreciate your help and support with your colleagues in Albany.
As it stands now, we estimate a potential loss of $180 million in total DSH dollars during FFY 17, which spans our Fiscal Year 17-18. This grows to $508 million in total dollars in FFY18 and more than $3 billion over the period from FFY17 to FFY24. DSH cuts are slated to expire in FFY 24 but may be extended further to pay for other initiatives. For example, the President’s budget proposes to add another year of DSH cuts in FFY25.
The preliminary budget also reflects our latest projections for the impact of the Accountable Care Act. Our Financial Plan assumes a 12.5% reduction in uninsured patients by FY 19 translating into $50 million in additional revenue that year. The plan also recognizes significant increases in Medicare DSH payments. However the Medicare DSH payments will decline over the life of the plan as more people gain insurance. These increases in Medicare DSH funds are not to be confused with cuts we will see in Medicaid DSH funds that I just mentioned. While we will see gains in Medicare DSH funds, we will lose Medicare funds due to payment reforms that are projected to cost us up to $35 million annually.
In FY 16, the ACA is expected to provide a net $206 million dollar benefit to our corporation. However, this benefit is short-lived. When you calculate the loss of Medicaid DSH funding, this translates to overall ACA reductions of $130 million by FY 18 and $138 million in FY 19.
On a bright note though, our application for federally qualified health center look-alike designation of Gotham Health was approved last month by the Health Resources & Services Administration (HRSA). We estimate that we will eventually receive an additional $30 million per year in federal funding to support our strategic goals to expand access to geographically convenient and culturally-sensitive healthcare services for all New Yorkers and strengthen our ability to keep New Yorkers healthy. I want to thank Council Member Johnson for writing a letter to HRSA on our behalf.
We were pleased that as part of the Preliminary Budget, we received funding for the collective bargaining agreements reached with our union partners, as well as funding for Ebola preparedness and the Cure Violence program.
We have budgeted increased revenue in two key areas. The first is through increased MetroPlus enrollment that I mentioned. We are anticipating $15 million this year as a result. The other source is the DSRIP funding that was part of the Federal Medicaid waiver that New York State received approval for last year. These dollars are to be used to support delivery system reforms throughout New York State. Over the next five years, investments will be made to improve access, care management and care coordination consistent with transformation goals set forth in the waiver.
DSRIP – OneCity Health
As part of DSRIP, entities were required to form and be approved as Performing Provider Systems (PPS). Our PPS, OneCity Health, submitted its application with the State in December. We were required to perform Community Needs Assessments to analyze the needs of different neighborhoods. Then we were required to choose projects from a list created by the State to address these needs. There were three main categories: System Transformation, Clinical Improvements projects and Population-wide projects. Our application details our approach to meet community needs through eleven projects. These include initiatives to further increase access to care, develop care coordination programs, develop primary care and behavioral health integration initiatives and develop IT initiatives to link these programs on a population-health improvement based platform.
We expect to hear soon what our performance awards will be. Unless there are delays, funds are expected to begin to flow in mid-April. Initially these will be mainly for process requirements but will transition to performance based payments over the course of the Waiver. In our Financial Plan, we currently project $60 million in DSRIP funds in FY15 – these are now below the line. Once the awards are announced, we will bring this amount above the line in the next plan. It is important to emphasize that these funds are not grant funds and should not be considered as a solution to our budget deficits.
There is a second component to DSRIP funding which is for capital projects. These funds are intended to support sustainability of DSRIP transformation efforts. We submitted an application for HHC specific projects totaling $435 million last month. These projects are critical to achieving the important goals of improving access, care coordination and sharing information with our partners which include many community based organizations.
Turning now to our own Capital Program, work has been completed or is near completion on several major projects. Gouverneur Healthcare Services in lower Manhattan is preparing for a Grand Reopening ceremony next month to mark the completion of its major modernization which includes a renovated, state-of-the-art skilled nursing facility with an additional 80 beds.
At North Central Bronx Hospital (NCB) we completed renovations to the Labor and Delivery Suite and reopened this vital service last fall. We are very grateful to Council Member Ritchie Torres, Council member Andrew Cohen and members of the Bronx delegation who provided capital funding in last year’s budget to make this possible.
At Elmhurst Hospital in Queens, we will open a new Women’s Health Pavilion in the coming months which will expand access to prenatal care and comprehensive OB services.
As a follow up to a hearing the Council held in 2013 on access to healthcare services for women with disabilities, the Council appropriated $2.5 million in Capital funding in FY 2014 to make improvements at our facilities. These funds will be used to make renovations and purchase equipment to make exam rooms and bathrooms optimally accessible for persons with disabilities. The first phase of our preliminary design work including cost estimates is complete and construction will begin later this year at four of our sites. We are very appreciative of the Council for this investment and ask that you consider restoring the additional $2.5 million that was previously allocated but eliminated from the FY15 capital budget.
Before I conclude, I will share with you the details of our recently announced FEMA award to rectify the damage caused by Hurricane Sandy. As you know, our corporation suffered serious losses as a result of Hurricane Sandy. We experienced physical damage to four of our facilities and nearly $250 million in losses due to the closures of Bellevue and Coney Island hospitals. I was extremely pleased to stand with Mayor de Blasio and Senator Schumer last fall when they announced an award of 1.723 billion dollars to complete repair and protect our hospitals that were damaged. We are working closely with the Mayor’s Office of Recovery and Resiliency on these projects. I am very thankful for all the support and advocacy we received from the Council which helped us immensely with this award.
This award includes:
In summary, by achieving the strategic goals I have outlined, we will succeed in this dynamic and challenging health care environment with our mission intact.
We will continue to find ways to mitigate losses in revenues from traditional sources.
We will continue our pioneering work to align how we deliver care with a transformed delivery model that emphasizes population health.
And, we will continue to collaborate with our labor partners to develop ways to engage our workforce in meaningful ways.
We appreciate the Council’s support and believe that with your support, we will continue leading the way, both here in New York City and nationally, away from “sick care” and towards a new era of true health and wellness care, aimed at empowering New Yorkers, without exception, to live the healthiest life possible. This concludes my testimony. I now look forward to listening to your comments and answering your questions.