Good morning Chairpersons Arroyo, Koppell, Recchia, Wills and members of the Health, Finance & Mental Health Committees. 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 2014 Executive Budget and HHC’s Financial Plan.
As I have done at the past few hearings, I will begin this morning with the good news and then give you the other budget news that illustrates the financial challenges we face moving forward. I am pleased to say that $1.3 million in funding for the Sexual Assault Response Team was included in the Fiscal Year (FY) 2014 Executive Budget and base-lined for the out-years. HHC appreciates the strong advocacy by the Council for this program.
The most positive news, however, is that earlier this month, the Federal Housing and Urban Development Secretary Shaun Donovan announced the approval of New York City’s $1.77 billion Community Development Block Grant (CDBG) – Disaster Relief Action Plan. The plan includes approximately $183 million in funding that will reimburse HHC for maintaining operational preparedness during the post-storm period. It is possible that we may receive these funds in this fiscal year. However, it is more likely they will reach HHC in FY 14. We continue to work with OMB on the supporting details for expeditious receipt of the CDBG funds.
As we work on these details, we are simultaneously making claims to FEMA for storm-related system-wide damages. The majority of these claims have been for cleanup, temporary repairs and the replacement of critical mechanical and electrical equipment needed to stabilize the facilities that were the most severely impacted. We are also developing reimbursement claims for permanent repairs, replacement of destroyed equipment and future hazard mitigation. So far, we have received only $62 million of the first $143 million in claims submitted and approved.
We have completed the first phase of recovery from the storm by restoring services at our most heavily damaged facilities: Bellevue Hospital Center, Coney Island Hospital and the Coler campus of our long-term care facility, Coler-Goldwater on Roosevelt Island. Bellevue Hospital fully re-opened in February. Coney Island Hospital began to accept inpatients in the middle of January and has now restored most of its services. We have approval from the New York State Department of Health to fully reopen the Adult Emergency Department and anticipate approval for full 911 receiving capacity for Pediatrics, Obstetrics, and Psychiatry by the end of June. Coler is back on the Con-Ed grid and patients who had to be relocated to Goldwater during Sandy have been repatriated.
The Ida G. Israel Community Health Center, an offsite ambulatory care center of Coney Island Hospital, was irreparably damaged by flooding. Coney Island Hospital leadership conducted an exhaustive search for a replacement site that would be accessible to the community served by the health center, have enough square footage to accommodate the range of primary, behavioral health and dental care which had been available, and be located in an area that was the least vulnerable to future significant flooding. After exploring all available options, 24,000 sq. feet of 2nd floor space at 2857 West 8th Street has been identified and Coney Island Hospital staff are working on a lease agreement with the landlord that includes renovations in accordance with regulatory programmatic specifications. The completion date of these renovations has not been finalized.
That said, because restoration of this Center’s services is so important, Coney Island Hospital sought and has been afforded the opportunity to use a New York City Department of Housing, Preservation and Development parcel on Surf Avenue to install a temporary replacement facility for the Ida G. Israel Center. The temporary pre-fabricated facility’s design specifications have been completed. Preparation of the site will begin soon and the temporary facility will be operational in 5 – 6 months. While this ensues, Center staff continue to serve their patients at the hospital.
Beyond the work at these locations, there is still much work to be done to complete permanent repairs and to protect all of HHC’s facilities against any future storms of the magnitude of Sandy. Moving back to the budget discussion, at our last budget hearing in March, I stated that there were no new direct PEG’s to HHC in the City’s Preliminary Budget in light of our dire fiscal situation. That continues to be the case in the Executive Budget. However, we do have an indirect PEG in the amount of $216,000 through DOHMH to our substance abuse programs.
As in prior years, there were some programs for which funding was restored by the Council last year but for which funding is not base-lined in the Executive Budget. Specifically, funding for our child health clinics, HIV testing program, and behavioral health programs needs to be restored. Last year, the Council restored $8.5 million in City Tax Levy funding for these important programs, specifically:
Turning to HHC’s Financial Plan, we are projecting a $617 million gap in FY 14. We have several strategies to close this gap. These include:
As I have mentioned at previous hearings, HHC’s four-year cost containment and restructuring plan sought to close a $1 billion budget gap by $600 million, in part reducing the size of our workforce by 3,700 FTEs. As we near the end of the third year of our four year plan, we have essentially achieved our workforce reduction goal one year ahead of schedule. We also will have realized our target of $600 million in savings by July 1, 2013. Notably, we have achieved all of this while retaining most of our service capacity and minimizing the effect on direct patient services.
Even as we continue to work on the final phase of the plan laid out four years ago, we must contend with another looming billion dollar gap. Our financial outlook worsens considerably in the out years with gaps that increase from $940 million in FY 15 to $1.3 billion in FY 17. The possibility exists that the strategies that I mentioned will not result in the budgeted targets for next fiscal year or in the out years. In the event that there are remaining gaps that need to be closed, it will be necessary for HHC to pursue another round of cost containment initiatives. I am not prepared to announce any specific plans today; however, I need to alert you to this very real possibility.
Looking ahead, we will certainly have to grapple with new state and federal cuts that will further increase our out-year budget challenges. For example, since I last testified before you in March, HHC’s Medicaid reimbursement and Article VI public health funding was cut by more than $54 million in the latest State budget. In total, HHC has now lost more than $554 million in annualized Medicaid funding as a result of State budget actions over the past five years.
On any given day in Washington D.C., there are dozens of spending reduction proposals that portend to cut billions more from the Medicaid and Medicare programs. Federal budget sequestration actions resulted in a 2% Medicare cut which equates to roughly $18 million less in annual payments for HHC services; and we lost another $2 million for federal grant funded programs.
Just last month, the President released his Federal Fiscal Year 2014 budget in which he proposed to extend the reductions in Medicaid DSH funding and to make substantial changes in Medicare reimbursement for long-term care. Our analysis shows that, if his spending plan were adopted, HHC would lose an additional $156 million in Medicare reimbursements over the next 10 years as well as an estimated $421 million if the Medicaid DSH cuts were extended to FFY 2023.
To remind the Committee members, HHC will see drastic reductions to Medicaid DSH funding that are scheduled to begin later this year, unless statutory changes are put in place to delay implementation. As it stands now, on October 1, 2013, our financial plan assumes that we will experience a 5% cut, or $56 million, to our current level of Medicaid DSH funding. This cut increases to $576 million in Federal Fiscal Year 2019 before decreasing slightly to a $471 million reduction each year in Federal Fiscal Years 2020-2022. The Medicaid DSH cuts currently in law through Federal Fiscal Year 2022, if proportionately imposed on HHC, will result in a total estimated loss of $2.7 billion to HHC.
Funding to HHC is also at risk if new cuts are made as part of Congressional deals to raise the federal debt ceiling later this year or to offset the federal budget sequestration.
Before I conclude, let me provide a brief update on our Capital Program. We are at or near completion on several major modernization projects.
On Staten Island, we were grateful that the Council allocated $2.5 million in FY 13 for the Diagnostic & Treatment Center that will be constructed at 155 Vanderbilt Avenue. The project will go to bid this summer and construction will begin this fall. This state-of-the-art 21,000 square foot facility will be completed in 2015. Pediatric and adult primary care and specialty services, as well as mental health services, will be provided at the new center. We look forward to working with Council Member Debi Rose to obtain additional resources for this much needed project.
In Queens, we opened a Geriatrics Center at Queens Hospital Center to address the growing healthcare needs of elderly residents of the borough. The new 4,400 square foot outpatient care center is now nearly double its original size. It is staffed by board-certified geriatrics specialists, nurses and social workers who provide quality, comprehensive and senior-friendly primary care and specialty services in more comfortable, modern space. This new center also features an activity room and six oversized exam rooms that better accommodate wheelchairs and special equipment. The $4 million center was funded through a grant from the New York State Department of Health.
At Harlem Hospital, we expect work to be complete on the hospital’s new Emergency Department later this summer. Similarly, we are in the final phase of the Emergency Department renovation at Lincoln Medical and Mental Health Center. We estimate that work will be completed by the end of this year.
Work is underway at the Henry J. Carter Specialty Hospital and Nursing Facility which is being constructed on the grounds of the former North General Hospital. This site will be the new home of the residents and patients from Goldwater Specialty Hospital and Nursing Facility currently located on Roosevelt Island. This new Harlem-based long-term care hospital and skilled nursing facility, consisting of nearly 400,000 square feet of combined new and renovated space, will be completed in fall of this year.
Gouverneur Healthcare Services in lower Manhattan completed the first phase of its major modernization at the end of 2011. The balance of the project, which includes a renovated, state-of-the-art skilled nursing facility with an additional 85 beds, will be completed in the spring of 2014.
This concludes my written testimony. I now look forward to listening to your comments and answering your questions.