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Fiscal Year 2021: Preliminary Budget Hearing

Matt Siegler, Senior Vice President, Managed Care & Patient Growth
Chief Executive Officer, One City Health
NYC HEALTH + HOSPITALS
Monday, March 9, 2020

New York City Council Fiscal Year 2021 Preliminary Budget Hearing

Good afternoon Chairperson Rivera and members of the Committee on Hospitals. I am Matt Siegler, NYC Health + Hospitals (Health + Hospitals) Senior Vice President for Managed Care and Patient Growth, and Chief Executive Officer for OneCity Health. I am joined today by John Ulberg, Health + Hospitals’ Chief Financial Officer.

Top of mind for everyone is the novel coronavirus outbreak around the world and now here at home in New York City. As was shared with you last Thursday, Health + Hospitals is prepared, and has activated our expert emergency management and response operation. We are taking aggressive steps to ensure we have plans, guidelines, and resources in place to provide safe care to anyone who may present with COVID-19 infection. Despite this serious and emerging public health threat, which we are all concerned about and are addressing, I am here to report on our finances. I am pleased to report that Health + Hospitals has closed the first half of FY20 on track and projects a strong closing cash balance of $790 million for FY20. However, we remain deeply concerned about the proposed State Medicaid cuts, which would cause significant harm to New York City’s public health system, and look forward to partnering with you in our advocacy to prevent these cuts from happening.

Health + Hospitals has had a great two years – I am proud of the progress and success of our health system’s transformation.

  • We are generating more revenue by appropriately billing insurance companies for commercially insured patients; and improving our outpatient coding, and physician billing practices.
  • More patients are signing up for health insurance coverage – in fact we saw a 20% annual increase in insurance applications over the last two years.
  • We are negotiating with insurance companies for a fair rate for the services provided to their members as well as settlements for back payments.
  • We are providing more specialized clinical services with higher reimbursement rates, while continuing to expand access to primary care for all.
  • As of December, all of Health + Hospitals acute care facilities and federally-qualified health centers are on one unified electronic health record, which will help our clinicians provide safe, efficient, quality care, as well as help us document, code, and bill insurance companies.
  • We have opened six Express Care Centers where patients with lower acuity complaints can bypass the emergency department to have their immediate medical problems addressed rapidly with a smooth transition to ongoing primary care.
  • Our recently ratified 4-year NYSNA contract will allow Health + Hospitals to pay fair wages, ensure safe staffing, and improve recruitment and retention of our nurses. We’re proud that we’ve hired 600 nurses over the last 2 years.
  • With the launch of NYC Care in the Bronx, Brooklyn, and Staten Island, we are increasing access to primary and specialty care.
  • And, we’ve launched a redesigned inter-facility ambulance system that will transport patients faster and more efficiently. The new system is expected to generate $21 million in new insurance revenue through patient retention.

Financial Performance YTD

Health + Hospitals has closed the first half of FY20 on track; we are only $8.5 million, or less than a quarter of 1% below our annual operating budget through the first half of the fiscal year. Our expenses are $37.6 million (1%) over budget due to higher than expected overtime costs and OTPS spending, and we will continue to transition away from overtime positions to permanent positions. Balancing this, we have exceeded our revenue targets by $29.1 million (1%) thanks to all our efforts in patient care and revenue cycle. In fact, we had an overall increase in patient care revenue by $225 million over the same period last year. We will continue to implement the aggressive goals in our Transformation Plan, including management of denials with health plans.

FY21 Preliminary Financial Plan

We are projecting a strong closing cash balance of $790 million in FY20 and $869 million in FY21. However, we are facing formidable budgetary externalities on the federal and state levels, and as such we continue to focus on prudent financial management. We will increase our transformation plan revenue for health insurance initiatives from $552 million in FY20 to $710 million in FY24 by improving clinical documentation, coding, and billing to collect payments that are due for services rendered; negotiating fair reimbursement rates with managed care companies; and preventing unfair denials. We will also increase MetroPlus’s medical spend within the system; and connect more New Yorkers to affordable health insurance. We have also implemented transformation plan growth initiatives that are projected to increase revenues from $75 million in FY20 to $135 million in FY24, these include expanding primary care access throughout more parts of New York City. And throughout, we continue to control administrative expenses.

Risks

As I previously mentioned, we are facing significant headwinds emanating from Albany and Washington DC. In order to manage the State budget, the Governor has implemented $599 million in cuts to the Medicaid program, growing to $851 million in SFY 20-21. As a result, we have already absorbed a $35.2 million loss in one year from the 1% across-the-board cut to hospitals that was promulgated on January 1. We are also deeply concerned about the proposed elimination of $51 million in enhance safety net funding, for which Health + Hospitals is eligible. Ensuring appropriate funding for safety net hospitals is critical to our mission. The Governor has also reconvened the Medicaid Redesign Team (MRT) to find $2.5 billion in State savings. If the MRT fails to find the savings, the State is authorized to implement across-the-board cuts to achieve savings. That would be devastating to New York City’s only public hospital system – the safety for 1.1 million New Yorkers. We are grateful to the elected officials, community representatives, and City and State leaders who are supporting us in trying to find a better path forward.

On the federal level, we have a momentary reprieve with a delay in the Medicaid disproportionate share hospital (DSH) cut until May 22, which yielded $343 million for the current fiscal year. However, if the cuts are not delayed beyond May, Health + Hospitals is slated to lose $580 million in FY21 and $623 million each year thereafter. It is important to note that if the DSH cuts are not delayed, New York State must change the formula on how it distributes DSH funding and drive this critical funding stream to hospitals that provide the most care to low-income and uninsured patients. The Council has been instrumental in previous advocacy efforts to delay DSH cuts, especially you Chairwoman Rivera. We look forward to continue working with you to fight back these damaging cuts.

As you know, the Trump administration continues to launch cruel attacks on immigrants with the recent promulgation of the public charge rule in February. More than 100,000 Health + Hospitals patients could change their behavior out of concern about the rule even if they are not directly impacted by the rule itself. Many may disenroll from coverage, refuse to enroll, or use fewer preventive services, which could result in downstream increase of high-severity inpatient services. Our midline estimate, based on the chilling effect we saw following the 1996 Welfare Reform Act, shows there could be a financial impact of approximately $121 million in the first 12 months. And lastly, the Centers for Medicare & Medicaid Services (CMS) has denied New York State’s request for a funding extension for its Delivery System Reform Incentive Payment (DSRIP) program. DSRIP is now scheduled to end on March 31, 2020. Under DSRIP, New York State shifted a significant portion of Medicaid payments away from fee-for-service toward value-based payment (VBP) arrangements and performing provider systems (PPS) – OneCity Health is State’s largest PPS — achieved a 21% reduction in avoidable hospital admissions. OneCity Health will lose money on the opportunity to gain left over funds from meeting certain performance metrics once the program expires on March 31. However, H+H will continue its commitment to value-based care and targeted, comprehensive services for the most vulnerable New Yorkers.

Thank you for the opportunity to testify before you today and I look forward to taking your questions.