Good afternoon Chairperson Arroyo, members of the Health Committee and other distinguished members of the New York City Council. I am Alan Aviles, President of the New York City Health and Hospitals Corporation (HHC). Thank you for the opportunity to discuss the Fiscal Year (FY) 2013 Preliminary Budget and HHC’s Financial Plan. I will begin by summarizing HHC’s fiscal challenges and provide an update on the progress we are making on closing our budget gap. I will also highlight some of our work to develop innovative care models, implement more efficient processes, and upgrade our infrastructure (including our clinical information technology) to transform into a more integrated health system that is patient-centered, efficient and ensures better patient outcomes through coordinated care delivery.
This past year was one of considerable challenge as we continued to tackle a daunting structural financial plan deficit while maintaining our impressive patient safety and quality of care gains of recent years. We are able to balance our budget this year through the expected receipt of multiple prior-year supplemental Medicaid payments. In our budget for fiscal year 2013, we are projecting $6 billion in receipts and $6.7 billion in disbursements, leaving a $700 million gap. While we will be able get through fiscal year 2013 by rolling cash balances from fiscal year 2012, we will need to achieve another $225 million from prior year cost containment and restructuring savings and realize an additional $250 million in State and Federal actions. These numbers do not include approximately $40 million in increased pension costs resulting from lower fund earnings that we must account for starting in fiscal year 2012. We will recognize this additional $40 million gap in the Executive Budget.
Our financial outlook does not improve in the outyears with continued gaps ranging from $935 million in fiscal year 2014 to $1.2 billion in fiscal year 2016. We are doing everything possible to identify potential State and Federal actions, and we are also considering another reduction program that may necessitate targeted layoffs.
We reflect in the Financial Plan the “Program to Eliminate the Gap” (PEG) request to City agencies. This PEG will result in an annual reduction in City Tax Levy support to HHC of 6%, or $4.5 million, beginning in fiscal year 2013. The PEG essentially reduces the unrestricted City Subsidy to HHC which helps support all of our operations. We will achieve the $4.5 million reduction by increasing our attrition target of 500 full time equivalent positions for this fiscal year by another 50 positions.
I want to thank the Council for identifying the resources to restore the $1 million PEG to HHC’s unrestricted subsidy in the recent mid-year budget modification. We have been very fortunate to receive significant expense funding support from the City Council in prior years for many programs, including child health clinics, expanded HIV testing, and behavioral health programs. The Council has also provided capital funding for medical equipment and facility improvements. As in prior years though, the expense funding was not baselined in the Preliminary Budget. Unless this funding is restored, we will have $8.9 million less in City Tax Levy funding for fiscal year 2013:
I would like to thank the Council for restoring funds for its initiatives in previous years and urge the Council to again make restorations to these vital child health, HIV and behavioral health programs.
In Albany, the Medicaid program rate cuts and reforms adopted in last year’s state budget as recommended by the State’s Medicaid Redesign Team reduced our reimbursement by more than $174 million for State Fiscal Years 2011-12 and 2012-13. Over the past 5 years, we have absorbed cuts in Medicaid funding of $500 million on an annualized basis. This means $500 million less in operating funds each year, even as more and more demands are placed on our system. There are not any overt new cuts to State Medicaid reimbursement as part of the state budget agreement that is expected to pass later this week. However, state policy changes concerning inpatient utilization, supported by our own efforts to reduce avoidable admissions for certain conditions, have resulted in a 5% decline in inpatient discharges. This 5% decline in discharges results in a $65 million loss per year.
Budget and policy actions taken in Washington D.C., particularly those that have resulted in cuts to the Medicaid and Medicare programs, will compound our fiscal challenge. As recently as last month, new cuts to Medicare Bad Debt and Medicaid Disproportionate Share Funding were enacted. In order to pay for a 10 month extension of the Social Security payroll tax holiday, and an extension of a temporary fix to Medicare physician payment rates, the federal government enacted $4.1 billion in health care cuts. Specifically, reductions to Medicaid Disproportionate Share Hospital (DSH) funding that are included in the Affordable Care Act (ACA) were extended through Federal Fiscal Year 2021 and hospitals’ reimbursement for Medicare bad debt was cut 5% for a period of ten years beginning October 1, 2012. HHC will lose $1.9 million in Medicare Bad Debt payments over this ten year period and a whopping $421.8 million in Medicaid DSH in Federal Fiscal Year 2021 alone. Still more Medicare and Medicaid cuts have been proposed in Congress and by President Obama and may be enacted later this year. The deep cuts to Medicaid DSH funding that are included in the ACA, will begin to take effect in Federal Fiscal Year 2014. As a result of the recent actions and what was already in the ACA, we will lose $2.3 billion in Medicaid DSH funds between Federal Fiscal Years 2014 to 2021.
The $700 million deficit that I mentioned earlier is attributable to a combination of factors that are outside of our control: the loss of the federal Medicaid and Medicare Disproportionate Share Finding funding; continued reductions to already inadequate Medicaid reimbursements; steeply rising fringe pension and health insurance costs. HHC facilities continue to serve increasing numbers of uninsured patients. In 2011, HHC facilities treated 477,957 uninsured patients – a 20% increase since 2006 – representing more than one-third of our total patient population.
Given this sobering picture, we have labored to execute our multi-year cost containment and restructuring plan to ultimately trim $600 million from our projected budget deficit. To date, we have achieved roughly $400 million of that goal. Our multi-year cost-containment and restructuring plan includes more than 35 discrete initiatives that must be fully implemented by the end of FY 2014. The seven initiatives that were slated for completion in FY 2011 were executed and have yielded the projected savings, and we are presently on track to meet our FY 2012 fiscal objectives as well. Some of the cost-containment initiatives slated for completion in FY 2013 and 2014 are complex and require significant lead time for execution, therefore, we have initiated the preliminary work on many of those.
Our workforce now includes about 2,500 fewer full-time employees than it did three years ago. Targeted attrition accounts for most of that reduction and has not significantly involved direct patient care positions. To the credit of our dedicated employees, we have maintained virtually the same service capacity across all care settings despite having trimmed our workforce by more than 6%.
One of the ways in which we have been able to sustain our service capacity is through the use of a system for process improvement that we call Breakthrough. This enterprise-wide improvement system empowers frontline staff – the people who do the work – to determine ways to improve processes, remove inefficient steps and activities, and increase efficiency. When new processes and procedures are implemented, Breakthrough teams evaluate and monitor them on an ongoing basis, creating opportunities for continuous improvement.
Our staffs’ Breakthrough work not only continues to contribute significantly to operational efficiency, it has reduced our costs and helped us to optimize revenue collection. We estimate the improvements devised by Breakthrough teams over the past 4 years have resulted in more than $215 million in combined savings and new revenue. Some Breakthrough teams have achieved truly impressive results, many of which include decreased waiting times for appointments and increased access to health care services. Some examples include:
Beyond the obvious benefits of improving patients’ experiences and empowering our employees to make the work processes that they know so well more efficient, the spread of Breakthrough methods throughout HHC is increasing our system’s capacity to make fairly rapid adaptive change. As the pace of change in our healthcare environment continues to quicken, this heightened adaptive capacity, fueled by the ingenuity and experience of our employees, will prove invaluable.
Even as we have focused on making our operations more efficient, we continue to build upon significant gains we have made in the areas of patient safety, quality and access. I will not catalogue all of the clinical improvements achieved over the last year, but I do want to provide a few examples.
We have made significant improvement at many of our facilities in reducing urinary tract infection associated with urinary catheter use. Further reductions in central line-associated blood stream infection at several of our sites have also been achieved. In addition, over the past two years, seven HHC facilities have demonstrated a reduction in patient falls; and five of our hospitals have reduced their rates of hospital-acquired pressure ulcers. Finally, the patient satisfaction scores of several HHC hospitals have improved significantly. HHC hospitals now have the highest patient satisfaction scores among all hospitals in each of the boroughs of Brooklyn, the Bronx and Queens; and Metropolitan Hospital has the third highest score of the 12 hospitals in Manhattan.
As we have aspired to make HHC one of the safest healthcare systems in the country, we have also continued to focus on reducing health disparities and improving the health status of residents in the communities we serve by providing extensive primary and preventive care to more than 1 million New Yorkers.
For example, HHC pioneered making rapid HIV testing a routine service across many care settings – primary care, specialty care, the emergency department, inpatient units, and even our dental clinics. However, we have not rested on our laurels. In 2011, we expanded testing and improved care coordination to better manage all of the chronic diseases that many HIV patients suffer, including Hepatitis C. I want to thank the Council for convening a hearing last year on the issue of HIV/AIDS-Hepatitis C co-infection. The spread of Hepatitis C is a large and underreported problem worldwide, that is further compounded by HIV co-infection.
Recognizing that lesbian, gay, bisexual, and transgender (LGBT) individuals often lack access to truly patient-centered care, last May we launched a mandatory employee-training program. Our training program will help all staff to provide respectful, patient-centered and culturally competent healthcare services to the thousands of LGBT New Yorkers we serve each year. To date, we have trained more than 15,000 new and incumbent staff. By understanding the unique clinical and non-clinical needs of individuals within the LGBT community, our facilities will be more accessible and better able to reduce health disparities that correlate with sexual orientation and gender identification.
At the same time that we are working to improve the health of our patients, we have continued to improve our infrastructure. Despite the sizeable cuts that HHC had to make in its five-year capital plan, we are completing several important facility modernization projects.
Our work at Harlem Hospital is on track for substantial completion at the end of this summer. This includes a new patient pavilion, the renovation to some spaces in the existing Martin Luther King Jr. Pavilion, and preservation of the hospital’s historic WPA Murals. Along Lenox Avenue, the spectacular multi-story glass facade that replicates one of the murals is already a Harlem landmark and a source of pride for one of HHC’s most venerable and beloved institutions.
In November, Gouverneur Healthcare Services, in Manhattan’s Lower East Side, completed the first phase of its major modernization, which includes a new Ambulatory Care Pavilion. The balance of the project, which includes a renovated, state-of-the-art skilled nursing facility with an additional 85 beds, will be completed by late 2013.
For many years, Lincoln Hospital Center has been New York City’s busiest single site emergency department. The final phase of Lincoln’s emergency department renovation will be undertaken this year. We anticipate completion of an expanded and modernized ED by May 2013.
We are also in the midst of an exciting project that involves our Roosevelt Island-based long-term care facilities, Goldwater and Coler Specialty Hospitals and Nursing Facilities. By the end of 2013, we will have relocated Goldwater’s long-term acute care hospital and skilled nursing facility operations to new facilities on the former North General Hospital Campus. “Goldwater North” will provide more program space and greater privacy for patients and residents, while also accommodating a new model of resident-centered programming. Goldwater North will have 164 skilled nursing facility beds and 201 acute long-term acute care hospital beds.
We are also engaged in identifying community-based housing resources and support services for Coler-Goldwater skilled nursing facility (SNF) residents for whom non-institutional long-term health services are appropriate. There are more than 300 SNF residents who could live in the community with health care and other supports if affordable housing options were available to them. None of these residents are undocumented immigrants, however most have very low incomes. Their average length of stay at Coler-Goldwater exceeds 4 years. Therefore, we are partnering with seasoned housing providers and developers to secure housing options for these individuals over the next 20 months.
I would like now to discuss what we are doing to implement innovative care models that align with state and federal policies focused on improving quality, patient outcomes and reducing Medicaid and Medicare costs. With the fundamental redesign of New York State’s Medicaid program (legislated as part of last year’s State budget) virtually all Medicaid beneficiaries, including those with the most complex needs, will be moved into a care management model of care within the next 2 to 3 years. The federal government is also focused upon payment and service delivery models that increase care coordination and result in improved quality and reduced costs. With the implementation of the State’s Medicaid Redesign Team’s reforms, reductions in Medicaid funding and implementation of some of the ACA’s components, HHC has the opportunity (and the imperative) to address provider, system and patient barriers that have impeded progress toward improved care coordination. This will enable us to have a positive impact on the quality of care and the cost of serving vulnerable populations. Therefore, we have engaged in accelerated development of our system capabilities around robust primary and preventive care, proactive care management for patients with chronic disease, care coordination across settings, reduction of preventable admissions and readmissions, and effective use of clinical information technology.
At the center of our efforts is the patient-centered medical home (PCMH). The PCMH is an advanced primary care practice model that employs a physician-led, team-based approach to ensuring comprehensive primary and preventive care, continuity, ready access, coordination of care and a systems-based approach to quality, safety and chronic disease management. PCHM is a foundational component of any healthcare delivery model that seeks to be both financially and clinically accountable for a patient’s long-term health.
We have worked diligently to ensure that our primary care sites developed the full capabilities of a PCMH. All 39 of HHC’s primary care sites – both hospital and community-based — applied to the National Committee for Quality Assurance (NCQA) and New York State for PCMH certification and were certified at level three, the highest level. We must continue to invest in our primary care sites to sustain the core elements of a PCMH.
Last year, New York State established a “Health Home” program focused on better care coordination for Medicaid patients with two or more chronic illnesses or serious and persistent mental illness. The goal is to have designated “Health Home” networks use multidisciplinary teams of medical, mental health, and chemical dependency providers, together with social workers, nurses, and others, to ensure that enrollees receive needed medical, behavioral, and social services in accordance with a single care plan. There is an expectation that the Health Home program will decrease unnecessary visits to our emergency rooms and trim long-term healthcare costs by preventing costly inpatient stays and/or eliminating the need for other expensive healthcare services that typically are employed after chronic disease has manifested itself.
In December, New York State conferred upon HHC the designation for a Health Home for eligible Medical patients in Bronx and Brooklyn. We have begun to establish formal agreements with community partners with clinical and non-clinical service and care management capacity; and to scale up our own care management infrastructure to accommodate the several thousand patients we expect to be assigned. We have also submitted an application for Health Home designation in Manhattan and Queens, and expect to receive such designation sometime in April.
HHC’s health plan, MetroPlus, served as a co-applicant with HHC in our application to be designated as a Health Home. The plan’s experience with outreach to engage enrollees in care, as well as its care coordination experience, is helping to inform the care management infrastructure that we are building for Home Health enrollees.
MetroPlus has been and will continue to be an extremely important ingredient to our success in service delivery reform. MetroPlus added membership again last year and now has more than 425,000 enrollees. It remains the second-largest Medicaid managed care plan in New York City. Even more impressive than MetroPlus’s growth is the plan’s quality of care and patient satisfaction record. Last year the New York State Department of Health ranked MetroPlus first among all Medicaid managed care plans in New York State. This number one ranking, based on performance measures of quality and customer satisfaction, has secured MetroPlus a 2.5% premium increase, the maximum incentive award that can be achieved by any plan. This will add an estimated $34 million to HHC’s revenue in 2012.
And, in light of the State’s announcement that it will soon begin channeling Medicaid patients who are eligible for long-term care into managed care plans, MetroPlus has applied for and expects to be approved as a long-term care managed care plan. Mandatory managed care enrollment for long-term care eligible Medicaid recipients is expected to begin this summer.
We wouldn’t be able to do most of this work without having a robust electronic medical record (EMR) system and through other health information technology advancements. I’m proud of the fact that HHC was an early adopter of electronic medical record technology and we have won several national awards for our use of clinical information technology to drive improvements in care. A data warehouse populated from the EMR has allowed us to run electronic chronic disease registries that have proven to be an effective tool in helping our clinicians better manage diabetes and hypertension. Indeed, partly as a result, all HHC facilities now qualify under NCQA’s Diabetes Recognition Program as excellent providers of diabetes care.
Our current EMR has now been “certified” as compliant with the first of three stages of requirements for federal funding available under the America Recovery and Reinvestment Act (ARRA) for hospitals and physicians that demonstrate that they possess certified EMRs that also meet “meaningful use” requirements. This is critical in that it will qualify us to begin receiving incentive payments that could be as much as $200 million in ARRA funds over the next several years.
Because our current EMR was first designed more than 30 years ago and lacks many of the capabilities that we need for the future, we recently conducted an extensive review of state-of-the-art EMRs as part of a competitive procurement process. Before the end of this fiscal year, we expect to select our new EMR vendor and begin the complex process of migrating our more than 15,000 EMR users to a new, and much more powerful, system.
Before I conclude, I want to acknowledge the support provided by Mayor Bloomberg and the members and staff of the City Council to HHC. Your collective continued support and guidance for New York’s public health care system is sincerely appreciated by the leadership team at HHC. I also want to thank the employees of HHC, who believe in our mission and who work hard day in and day out providing the best possible care for patients. This concludes my written testimony. I now look forward to listening to your comments and answering your questions.