Mayor Bill de Blasio's plan to prop up New York City's hospital system has inspired skepticism.
In May, Ram Raju, president of New York City Health + Hospitals, told the City Council's committees on health and finance that de Blasio's planned overhaul for that department would involve no hospital closures, service privatizations or significant layoffs.
"I'm not advocating for any of those three things," council health chairman Corey Johnson quickly responded. "The point I'm making is those are probably the most seismic ways you could see a significant reduction in costs toward the corporation.
"And if none of those three things are on the table and we are relying on federal and state action to benefit the corporation … I mean, where do we go buy the Powerball ticket?"
De Blasio's $82.2 billion
"With most of the labor contracts issued, this will be the biggest issue for the city budget," said Howard Cure, director of municipal bond research for Evercore Wealth Management.
Budget watchdogs and municipal analysts say the mayor's H+H plan hinges excessively on unlikely outside help, and efficiencies that would just nibble at the margins while skirting the heavy decision-making that Johnson referenced.
"It relies heavily on actions that have fallen short of target in the past," New York State Comptroller Thomas DiNapoli said in his review of the executive budget.
De Blasio's prescription for Health + Hospitals aims to close the gap over four years through $700 million in expense savings and $1.1 billion in new revenue. It includes an additional $160 million in fiscal 2016 for the agency. The city is also forgiving $180 million a year in debt service for fiscal 2017 and out.
According to city budget Director Dean Fuleihan, this will raise the city's commitment to $2 billion.
"All health-care institutions, particularly those that help large Medicaid and uninsured populations, face growing financing pressures," Fuleihan said Wednesday at a Citizens Budget Commission
Health + Hospitals – the former Health & Hospitals Corp. rebranded last November – is the nation's largest municipal hospital system, serving 1.2 million New Yorkers annually and employing more than 40,000 people with 11 hospitals and 70 community-based clinics.
New York established the first public hospital in 1736, a six-bed infirmary for contagious disease that eventually became Bellevue Hospital.
Today, Medicaid and uninsured patients represent roughly three-quarters of Health + Hospitals total hospital stays -- compared with about 40% for other hospitals within the city – thus straining the system. The federal Affordable Care Act, so-called Obamacare, is forcing the city to absorb immigrant populations without insurance and barred from Medicaid.
De Blasio is pushing the state and federal governments for higher reimbursement levels for those two categories.
The watchdog Independent Budget Office warns the city could be on the hook for more.
"NYC Health + Hospitals is counting on a considerable amount of support through state and federal actions, including waivers from the federal Centers for Medicare and Medicaid Services," IBO said in a report. "If the hospital system's balance sheet continues to bleed red ink — and the mayor determines closing hospitals or eliminating medical services is not politically feasible — then the city may well need to provide even more funding."
Other contributors to the H+H financial crisis include a sharp decline in critical safety-net funding, too many empty hospital beds, increased competition for Medicaid – the core revenue for H+H – through consolidation of other hospitals within the five boroughs, and an enrollment decline its own MetroPlus insurance program.
"We understand this will require cooperation from our partners in government and our labor force," said Fuleihan. "But we are confident that we can achieve our goals."
Workforce reductions, he added, would come through attrition and retraining for community-based care.
Fitch Ratings, in its report last month preceding the city's $800 million general obligation bond sale, cited H+H-related budgetary concerns "due to the adverse impact of overall changes in health care delivery methods and funding support at the federal level."
Fitch said a substantial increase in the city's ongoing financial support for H+H, whose budget is about 10% the size of the city's, could reduce the city's flexibility to cut spending in an economic downturn.
The corporation provides services to everyone regardless of their ability to pay. Its hospitals get reimbursement for emergency care for uninsured undocumented immigrants, but not for primary and ambulatory care.
High overhead, notably for labor, is also a factor.
"The system has high labor costs," said Cure. "The SEIU [Service Employees International Union] is very powerful politically and it's difficult to get costs down."
Federal and state Medicaid funding combined is expected to drop by $800 million by fiscal 2020 under an Affordable Care Act provision that stands to reduce a dedicated federal funding stream that states distribute to hospitals to partially offset costs of caring for large numbers of uninsured patients.
"We must all work together to urge the federal government to rescind scheduled cuts for 2018 that will further undermine the public hospital safety net," city Comptroller Scott Stringer told the City Council in mid-May.
Fewer paying patients are using the corporation's hospitals. Medicaid managed care hospital stays declined by 3%, while other major hospital systems gained 5%. In 2014, five of the hospitals had more than one-third of their beds empty.
"There are just a lot of hospitals compared with the New York City population, number one, and number two, the system in New York City is just an economic disaster," said Cure. "There's been a real reluctance to close hospitals. In the poorer neighborhoods they represent well-paying jobs."
Hospital downsizing has been the norm in New York overall. Since 2003, 19 hospitals within the city have closed, leaving 61 operating.
On May 25, Mount Sinai Health System announced it would close Beth Israel hospital on Manhattan's Lower East Side, phasing it out over four years while expanding behavioral and outpatient surgery services. "Much of the existing Beth Israel infrastructure is aging and unable to meet the needs of the modern healthcare landscape," Mount Sinai said in a statement.
Other closings include the headlined shuttering of Long Island College Hospital in Brooklyn's College Hill neighborhood. While running for mayor in 2013, de Blasio, then the city's elected public advocate, was arrested during a demonstration protesting its closing. Fortis Property Group, which acquired the site after the hospital closed, is looking to redevelop the parcel.
De Blasio's H+H overhaul would also attempt to boost enrollment from the current 500,000 in MetroPlus, which the city launched in 1985. According to the mayor, health insurance initiatives, including $373 million from a 37% in MetroPlus enrollment, could generate another $1 billion.
Telling, however, is that most city hospital employees choose other health insurance plans.
The past three mayors have sought H+H solutions differently, according to a CBC report in late 2014.
Under Rudolph Giuliani's tenure from 1994 through 2001, the city sought to privatize some HHC facilities and to cap the city subsidy. "The privatization effort was unsuccessful, but in response to the tighter subsidy arrangement, HHC closed hospital beds and reorganized for greater efficiency," said CBC.
Michael Bloomberg, who governed in between the Giuliani and de Blasio administrations from 2002 to 2013, supported intergovernmental efforts to increase revenue from federal supplementary payment programs.
Health + Hospitals' predecessor agency was ensnared in corruption scandals during Mayor Ed Koch's watch 30 years ago.
Koch administration whiz kid Victor Botnick oversaw the hospital system in 1986 at age 31, but resigned six months into the job after admitting he lied about having a college degree. Botnick died in 2002 while facing federal charges that he stole $200,000 from New Jersey's Cathedral Healthcare System.
A 1987 audit by state Comptroller Edward Regan found that Health & Hospitals routinely ignored its travel-expense policy and did not keep accurate records.
In addition, former HHC president John McLaughlin was tried but acquitted on charges of taking a bribe from a contractor.
