HHC Targets Savings and Operational Efficiencies To Ensure Long Term Viability of City’s Health Care Safety Net System
Recent Cost Containment Actions and New Restructuring Plan Total $600 Million in Savings; Reduces Workforce by 10 Percent
Restructuring Initiatives, Along with New City Support, Help Close $1.2 Billion Gap; Preserve Mission to Care for Uninsured, Avoid Hospital Closures, Limit Impact on Direct Patient Care Services
May 11, 2010
President Alan D. Aviles announces HHC
Restructuring Plan, joined by
Deputy Mayor Linda Gibbs,
HHC Chairman Dr. Michael A. Stocker,
and network senior vice presidents
Antonio Martin, Lynda D. Curtis,
Dr. Ann Marie Sullivan,Iris Jimenez-Hernandez,
José R. Sánchez, Arthur Wagner and
William P. Walsh.
New York City Health and Hospitals Corporation (HHC) President Alan D. Aviles today presented a comprehensive four-year restructuring and cost containment plan for the city’s public healthcare system that will generate $300 million in new savings and efficiencies by right-sizing operations, consolidating programs, contracting for targeted support and technical services, and closing a small number of clinics with low patient volume. The $300 million in new savings are on top of $300 million in savings and enhanced revenues expected from actions HHC implemented over the past two years to help address a $1.2 billion budget deficit that results from reduced state and federal Medicaid funding, a dramatic rise in the number of uninsured patients and sharply rising pension and healthcare costs. HHC’s total $600 million in cost containment actions are reflected in Mayor Bloomberg’s Executive Budget plan, which directed additional support to the public hospital system to help prevent the need for further reductions and permit a more gradual reduction of the workforce.
Aviles was joined at the announcement by HHC Network Senior Vice Presidents Lynda Curtis, Iris Jimenez-Hernandez, Antonio Martin, Jose Sanchez, Ann Marie Sullivan, William Walsh and Arthur Wagner. For the past five years, Aviles and HHC senior leadership, including the seven Network Senior Vice Presidents, have led New York City’s public hospital system in its rise to national recognition for accomplishments in patient safety, quality, and transparency. Most recently, Aviles and the senior executive team led a six-month strategic review and analysis of HHC operations to identify the viable options for savings, reorganization and reductions announced today. In an effort to limit impact to patients and disruption to the system, HHC leaders rejected a number of cost containment options, which included the closure of approximately one-third of HHC’s community-based health centers; the elimination of most outpatient specialty services and consolidation of such services in one acute care facility; and the elimination of nearly all long term care beds.
“In meeting our financial challenges, we will close no hospitals, no patient will be turned away, and our commitment to serving the uninsured, undocumented immigrants, and the most vulnerable New Yorkers will remain intact. We are making difficult decisions that are necessary if we are to remain faithful to our mission, preserve our gains in quality and safety, protect our core patient care programs, and prevent the need for more drastic reductions or elimination of services,” said Aviles.
“Unlike other public hospital systems that have made severe cuts in patient services, New York City’s Health and Hospitals Corporation has developed a viable plan to ensure that any New Yorker who needs care will continue to receive it,” said Deputy Mayor Linda I. Gibbs. “Make no mistake, this targeted approach will be difficult for many, but devastating reductions have been avoided and we have preserved the integrity of a high quality system that meets its mission to serve the neediest among us.”
The Executive Budget helps HHC avoid an imminent cash crisis by waiving several short term obligations, and it supports a longer term restructuring through strategies that pull in new federal dollars in amounts equal to new city dollars over the following three years. Specifically, the City will provide $349 million in FY10 and the 50 percent non-federal share to support additional supplemental Medicaid reimbursements in future years. In total, the City added $349 million in FY 2010, $82 million in FY 2011, $229 million in FY 2012, $300 million in FY 2013, and $300 million in FY 2014.
“With recent hospital closures in Manhattan and Queens, HHC’s role as a safety net is more vital then ever. We need to act now to stabilize the system and secure its long term future,” said Aviles. “We are grateful to the City for its willingness to invest scarce resources as part of our overall plan to put HHC on firmer financial footing. This new infusion of city support allows us to spread the necessary cuts over the four year plan, which helps us secure more workforce reduction savings through targeted attrition rather than only through layoffs.”
The restructuring and cost-containment plan will be phased in over four years and once fully implemented will save HHC $300 million annually — $93 million in FY 2011, $136 million in FY 2012, $261 million in FY 2013, and $304 million in FY 2014. This follows another HHC cost containment plan implemented over the last 2 years that included $300 million in savings as a result of a hiring freeze, revenue initiatives, supply cost savings, and a significant reduction in new equipment purchases.
“We also continue to work with the State to optimize supplemental Medicaid payments intended to support safety net providers, like our public hospitals and health centers. We have identified hundreds of millions of dollars in such potential payments over the next four years. The City has budgeted the non-Federal share and the State is working to secure Federal approvals. Even if we succeed in obtaining these payments, we need to make tough strategic choices to become more efficient and further close our budget gap,” Aviles said.
FY 2011 – FY 2014 Restructuring, Cost Containment Plan
The bulk of the new savings and efficiencies announced today will be generated through changes to a broad range of support and administrative operations, by contracting for services formerly done in-house, and by right-sizing services to better align clinical resources with patient volume, demand and community needs. The plan impacts every aspect of HHC operations while limiting adverse impact on direct patient care and overall capacity to meet patient needs.
| New Initiatives ($$ in millions) | FY 2011 | FY 2012 | FY 2013 | FY 2014 |
|---|---|---|---|---|
| Administrative/Shared Services – To target benchmark efficiencies in multiple administrative areas by creating cost effective shared services operations and contracting out the management and/or provision of ancillary services. | $40 | $49 | $141 | $141 |
| Long Term Care Realignment – to better match HHC’s long term care bed capacity to patient demand for skilled nursing and chronic hospital services; consolidate administrative and support services where possible; consolidate under-utilized services. | $0 | $16 | $46 | $47 |
| Affiliation/Physician Services Realignment – To match contracted provider resources to patient volumes and need; reduce administrative positions. | $51 | $51 | $51 | $51 |
| Acute Care Realignment – to improve care management and reduce patients’ length of time in hospital; facilitate the retention of more surgeries within the HHC system; consolidate selected inpatient services. | $0 | $6 | $11 | $26 |
| Ambulatory Care Realignment – to consolidate some specialty outpatient services; close six satellite clinics with low utilization; pursue alternative administrative models for delivering outpatient services. | $2 | $14 | $14 | $39 |
| TOTAL | $93 | $136 | $261 | $304 |
A complete list of targeted operational improvements, savings and efficiency initiatives are outlined in the accompanying report.
HHC Budget Challenges
During 2009, the uninsured who sought services at HHC hospitals and health centers increased to nearly 453,000 – a 14 percent increase from calendar year 2006, when HHC served some 396,000 patients without health insurance.
The demand for HHC services from a growing number of uninsured patients comes at a time when its hospitals, community health centers, nursing homes and home care services now receive $240 million less in Medicaid revenue annually than was received in 2006 as a result of three successive years of State budget Medicaid cuts. The proposed State Executive Budget would cut HHC Medicaid funding by another $100 million per year when fully annualized in the years ahead.
At the same time that the state has reduced Medicaid funding to help address its projected budget deficits, federal supplemental Medicaid funding for safety net providers like HHC has also eroded substantially. For the last four years — from fiscal year 2007 to fiscal year 2010 — the two sources of such supplemental federal funding – DSH and Upper Payment Limit (UPL) funding – have averaged $1.4 billion annually. HHC is working with the State to identify ways to gain Federal approvals to restore these payments and HHC’s plan assumes substantial restoration of this Federal funding for which the City has budgeted the non-Federal share.
Added to these adverse shifts in funding, there also has been an exponential growth in fringe benefit costs for the HHC workforce. Pension costs have risen from $133 million in FY 2006 to a projected $333 million for FY 2011 – a 150 percent increase. HHC has also seen a more than 60 percent increase in health insurance costs for employees during this time, adding another $148 million to expenses.
Workforce Reduction
The HHC workforce, which exceeded 38,700 employees in early 2009, will have been reduced by nearly 10 percent to about 35,000 once the four-year restructuring and cost containment plan is fully implemented. The plan will impact all levels of staff. HHC will target a workforce reduction of 1,000 positions during the next fiscal year, FY2011. The total headcount reduction will reach 3,700 by FY 2014 through a combination of layoffs and attrition.
Fiscal Year
Headcount Reduction Target
Nearly all of the HHC labor force is represented by organized labor. The workforce reduction initiatives will have to follow a process that is consistent with our collective bargaining agreements and relevant law.
Medical Affiliation Contracts
HHC physician and technical services are provided through affiliation contracts with five medical schools: NYU School of Medicine, Columbia University College of Physicians and Surgeons, Mount Sinai School of Medicine, NY Medical College, and SUNY Health Science Center of Brooklyn; four Professional Corporations: Downtown Bronx Medical Associates, NY Medical Alliance, University Medical Group Associates, and Roosevelt Island Medical Associates; and one hospital: Staten Island University Hospital. Affiliation contracts will cost HHC $857 million in FY 2011. These contracts provide about 2,600 physician Full Time Equivalent positions (FTEs), 400 Resident FTEs, 1,600 Technical and other provider FTEs, and 350 administrative personnel FTEs to HHC facilities. In addition, HHC directly employs about 500 physician FTEs at several facilities. HHC intends to reduce these affiliation contract costs by roughly 6%, or $51 million, to align provider resources to current patient volume and need. The streamlining of affiliation contract terms also should permit the reduction of general affiliation administration expenses.
Clinic Closures
Through its 11 hospitals, 6 Diagnostic and Treatment Centers and 81 community health centers, HHC provides 5 million outpatient visits a year. Nearly 2 million of those are primary care visits. The 11 HHC hospitals provide fully one-half of hospital-based clinic visits in New York City; and significantly, 66% of all hospital-based clinic visits made by uninsured New Yorkers. HHC remains committed to ensuring New Yorkers broad access to primary and specialty outpatient care despite experiencing significant losses on outpatient Medicaid reimbursement. It is for that reason that planned reductions to HHC outpatient clinics are limited to a small number of clinics with longstanding low utilization, poor physical conditions, and close proximity of other providers to accommodate affected patients. Specifically, HHC will close one (1) dental clinic and five (5) child health clinics out of its 81 community sites. All proposed site closures are subject to prior review and approval of the State Department of Health.
Contact : Ian Michaels (HHC) (212) 788-3339
About HHC
The New York City Health and Hospitals Corporation (HHC) is a $6.7 billion integrated healthcare delivery system with its own 420,000 member health plan, MetroPlusHealth, and is the largest municipal healthcare organization in the country. HHC serves 1.4 million New Yorkers every year and more than 475,000 are uninsured. HHC provides medical, mental health and substance abuse services through its 11 acute care hospitals, four skilled nursing facilities, six large diagnostic and treatment centers and more than 70 community based clinics. HHC Health and Home Care also provides in-home services for New Yorkers. HHC was the 2008 recipient of the National Quality Forum and The Joint Commission’s John M. Eisenberg Award for Innovation in Patient Safety and Quality. For more information, visit www.nychhc.org/hhc or find us on facebook.com/NYCHealthSystem or twitter.com/NYCHealthSystem.