Culture change a heavy lift at New York City's hospital arm

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The numbers alone are daunting enough as Mitchell Katz strives to turn around New York City Health + Hospitals’ finances.

Reaching beyond, Katz is trying to change the culture at an $8 billion city unit long renowned for inefficiency, union pushback, scandals and management fiascoes.

Katz, H+H president and chief executive since January 2018, has been pitching his agenda before the City Council and at a variety of public sessions as the city embarks on NYC Care, Mayor Bill de Blasio’s plan for comprehensive health coverage.

The initiative has redirected a spotlight on the money-bleeding H+H, whose mandate to serve all New Yorkers regardless of ability to pay strains the system.

“It hits a lot of issues that we’re grappling with,” Katz said at the Kovner-Behrman Health Forum at New York University’s Robert F. Wagner Graduate School of Public Service.

NYC Care is modeled after a San Francisco program Katz oversaw 10 years ago. Brooklyn native Katz also ran the Los Angeles County Health Agency before starting his H+H tenure.

De Blasio in January rolled out NYC Care, which he said would guarantee that every New Yorker can visit a doctor and get affordable medical treatment.

NYC Care, de Blasio said, would serve 600,000 New Yorkers without insurance by strengthening the city’s public health insurance option, MetroPlus, and guaranteeing anyone ineligible for insurance — including undocumented residents.

The program will launch in the summer, starting in the Bronx. De Blasio expects it will be fully available across the five boroughs in 2021. The program will cost at least $100 million annually at full scale, he said. Additionally, MetroPlus will announce enhancements throughout the year.

Health + Hospitals, the country’s largest public health care system, has roughly 45,000 employees, 11 acute-care hospitals, five long-term care facilities and more than 70 community-based centers. A multitude of politically powerful unions represents its employees.

Because H+H’s patient revenues do not cover expenses, the system relies on government support. It has long been a strain on the city’s operating and capital budgets. The city also backstops its outstanding debt.

According to Moody's Investors Service, the city's roughly $78 billion of appropriation-backed debt as of June 30, 2018, includes $698 million issued through Health + Hospitals.

Since the Affordable Care Act passed, H+H has faced greater uncertainty regarding Medicaid Disproportionate Share Hospital payments, a federal financing vehicle H+H receives from the state — though largely funded through city and federal dollars — to subsidize care for Medicaid and uninsured patients.

“This is on top of broader ongoing policy decisions and changes in the healthcare marketplace the hospital sector is experiencing,” said Melinda Elias, health budget and policy analyst at the watchdog New York City Independent Budget Office.

H+H faces other risks to its revenue plan from potential actions at the federal and state levels.

“No matter how efficient you are in behavioral health, you can’t break even and that’s OK with me,” Katz said.

“I always wanted to take care of the people who no one else wanted to take care of,” he said.

Speaking last month before the City Council’s hospitals committee, Katz cited “great progress” on executing a transformation plan de Blasio initiated in 2016 with Katz's predecessor, Ram Raju. Katz said H+H is on target to generate $757 million in revenue and cut $430 million in costs. Initiatives range from better reimbursement rates to modernizing billing.

"It's something out of Kafka, the way their billing system is,” said Howard Cure, director of municipal bond research for Evercore Wealth Management.

Through the second quarter of fiscal 2019, patient care revenue is up $80 million year-over-year. Driven by the improved billing and “better performance in our value-based managed-care contracts,” the department is only $10 million, or 0.5%, below the target set for this year’s budget, according to Katz.

De Blasio is expected to release his executive budget, the next step for the fiscal 2020 spending plan, in about two weeks. The 51-member council must approve it by July 1.

"There's a lot of uphill climbing on this because the system is really designed to help anyone in the city that needs healthcare help. So almost by definition, it's not going to be a real cash cow,” Cure said on a Bond Buyer podcast.

"There are a lot of issues and if you increase the amount of people that get insurance, they may not be necessarily going to the city hospitals,” Cure said. “They have a lot of other hospitals in the city. There are probably too many beds right now for this city.

"The other issue is that you have very entrenched, powerful unions within the city hospital system that are not looking to close down beds and reallocating resources if it means cutting jobs with the idea of being efficient."

Scandal has also periodically engulfed H+H.

Victor Botnick resigned as chief of predecessor Health & Hospitals Corp. during Mayor Ed Koch’s administration in the 1980s after admitting he lied about his education. In 2015, four top officials were fired related to improper billing for a $764 million overhaul of its electronic records system.

Headline controversies aside, cumbersome bureaucracy and misplaced priorities have often held sway.

“Change is really hard and I think the things that Mitch laid out are absolutely essential,” said Bruce Siegel, president of America’s Essential Hospitals and former head of H+H under Mayor Rudolph Giuliani from 1993 to 1995. “It’s hard in a simple organization and this is not a simple organization in any sense of the word.

“Often — and any management consultant will tell you this — culture eats strategy. You can lay out the finest strategies, but organizational cultures may well resist that and may well undermine that. It’s going to be a tough cultural haul.”

Operational problems effectively mask what H+H has to offer, Katz said.

“Our system is full of Catch-22s, if you actually to try to get your patients the services they need,” he said. “We’ve had a few years too many of the kinds of bureaucracies that make it too difficult.”

Katz favors more of a primary-care model.

“New York City is not a primary-care place,” he said. “Everybody has a doctor for their right nostril and a doctor for their left nostril. It seems to be a very New York thing.”

He called the layoff of 160 management people unfortunate but necessary.

“I really like flat organization charts. I don’t believe in the sort of pyramid charts. What you want is as little distance as possible between the head of the organization and the nurse seeing the patient.”

Katz inherited a $1.9 billion deficit.

“Part of why we fixed that is recognizing that the hole wasn’t coming from the coverage of low-income, uninsured people; it was subsidizing insurance plans, so we’re fixing that," he said at a Citizens Budget Commission breakfast.

Reducing empty space, combining offices and eliminating shuttle vans has saved $50 million, according to Katz, who admitted space redeployment has been more difficult than expected.

"The rules for use of buildings are tighter here in New York than they are in California about the reuse of buildings,” he told council members. “What's harder is the expense of converting existing floors.

"Now we're slowly going through each facility."

Council hospitals committee chairwoman Carlina Rivera cited “our obsession with real estate and how we repurpose it."

Siegel said Katz brings a consistent focus and an ability to juggle politics.

“I think he saw his role [in Los Angeles] not only as a driver of change, but also as a protector, as a shock absorber, as someone who saw their role as a buffer between the political leadership of the county or the city or whatever and the thousands of people made the system real,” Siegel said.

“Managing the political reality of the mayor and the City Council in New York is not easy. Managing the L.A. County Board of Supervisors is not easy.”

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