The threat of massive federal funding cuts hangs over New York City's hospital system despite failed efforts to eliminate the Affordable Care Act, said its top administrator.

"We certainly dodged a bullet, but the gun is still loaded and we are already in a fragile position," Health + Hospitals interim chief executive Stanley Brezenoff told members of the City Council health committee at a City Hall hearing on Wednesday. Brezenoff, who succeeded Ram Raju last November, was CEO from 1981 to 1984 and board chairman from 1984 to 1985.

H+H, the former Health & Hospitals Corp., is the country's largest municipal health system.

In April 2016, Mayor Bill de Blasio released a transformation plan for the beleaguered H+H. It revolves around stabilizing funding, expanding community-based healthcare, improving efficiency and remodeling an outdated system. The mayor's four-year financial plan called for eliminating a $1.7 billion gap by fiscal 2020 through revenue generation and cost reductions.

Skeptics question how the city can accomplish that without large-scale state and federal aid.

"We need a better plan now," said council health committee chairman Corey Johnson, who represents Hell's Kitchen and other parts of Manhattan. "Hospital closures are not on the table and huge layoffs are not on the table, nor should they be. But when you take them off the table, it's a lot more difficult to stabilize the system.

"I don't know why you took this job," Johnson told Brezenoff.

Brezenoff had better news for the short term:. H+H forecasts plugging its $779 million shortfall for fiscal 2017.

"We expect to be successful in closing the gap by June 30," he said, citing $661 million in additional revenue and $118 million in savings. "That's a big deal."

Revenue-generating initiatives include Medicaid waiver programs, federal and state charity care, health insurance measures and development opportunities on city-owned H+H properties.

Cost cutting includes supply chain and care management initiatives such as centralizing the management of several large, core services into a centralized unit. In addition, H+H has undertaken a partnership with North Shore Long Island Jewish Health System – now Northwell Health -- to consolidate core labs for both healthcare systems. Also, updated guideline changes allow H+H to contract with multiple pharmacies within a single hospital.

Restructuring and personnel initiatives are also part of the mix. Projected savings are $216.5 million in fiscal 2018, and $348 million and $444 million the following years.

Reliance on Medicare and Medicaid have long strained H+H. Reimbursements don't fully cover costs related to those programs. In addition, H+H provides care regardless of immigration status or ability to pay.

"The city's hospitals had mostly treated those that were on Medicaid or that didn't get any benefits," said Howard Cure, director of municipal bond research for Evercore Wealth Management.

Although the transformation plan calls for the city to provide $100 million in revenue generated from development on H+H property, federal and state aid is expected to provide most of the additional revenues. According to the watchdog Independent Budget Office, about $1.3 billion or 51% of the $2.5 billion in expected federal and state revenue in the transformation plan for 2017 through 2020 had still not received approval as of February.

"Additionally, $306 million of expected revenue from a federal waiver program for the uninsured has been put on hold," said IBO.

The preliminary 10-year capital plan for fiscal 2018-2027 includes $1.3 billion in city funds for H+H capital projects. According to Fitch Ratings, another $1 billion is expected from federal sources.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.