Remarks by Alan D. Aviles
President, NYC Health and Hospitals Corporation
Good evening, I am Alan Aviles, President of the New York City Health and Hospitals Corporation, our City’s public hospital system. Thank you for being with us tonight. This is the first of our five annual public meetings for FY2012. As always, I am eager to hear what HHC’s communities have to say about our performance, especially during what continues to be a very challenging time in healthcare generally and for HHC specifically.
At the outset, let me recognize HHC’s senior executives here in Queens. Our hosts this evening are Dr. Ann Sullivan, the Senior Vice President of the Queens Healthcare Network, and Chris Constantino, Executive Director of Elmhurst Hospital Center. Julius Wool, who has just completed his first year as Executive Director of Queens Hospital Center, is also here with us. I thank all three of them for the excellent work they do every day as leaders helping us to render the best possible care to the residents of Queens.
I also want to acknowledge the support and guidance of our Board of Directors, under the leadership of Dr. Michael Stocker. My special thanks to Board members who are here tonight and to the members of our Queens and Elmhurst Community Advisory Boards, who advocate on behalf of our public system and help to keep us grounded and responsive to the needs of our patients and communities. Let me also congratulate the Queens Hospital Auxiliary on its recent successful fundraising gala celebrating the hospital’s 75 years of serving the Southeast Queens community.
As I did last year, I begin my remarks tonight by focusing on the financial challenges that continue to face HHC. Last year, I stressed that deep Medicaid cuts, skyrocketing pension costs, and a steady increase in our uninsured patients had all contributed to a daunting budget deficit of more than $1 billion dollars. At this time last year, I was able to say that we had put together the second phase of a comprehensive cost-containment and restructuring plan, which together with earlier cost-savings measures and substantial additional funding from the City, would close our existing budget gap over a four-year period.
We are only in the second year of our four-year plan, but when fully implemented, it will yield several hundred million dollars in new revenue and cost savings. However, as we have seen this past year, the plan includes a number of necessary but painful actions, including the outsourcing of some services and the targeted layoff of a significant number of employees. During the past year, we completed seven of the 39 initiatives encompassed by our four-year plan and we achieved our savings targets for the fiscal year that ended on June 30. I am confident that we will execute the next set of plan initiatives and achieve targeted savings for this year as well. To date, we have reduced our workforce by approximately 2,500 employees, mostly through attrition, and we have reduced our budget gap by nearly $350 million. We anticipate shedding another 600 positions through attrition by the end of this fiscal year and reducing our expenses by about another $38 million. Upon completion of the four-year plan we will have reduced our workforce by approximately 3,700 full-time positions.
I will not delineate all of the cost containment and restructuring initiatives that remain to be implemented as part of our overall plan because they can be reviewed in some detail on our public website.
Even as we make steady progress in closing the budget gap that I described last year, we have seen more financial challenges arise in the intervening year. First, the Medicaid cuts in the current state budget that became effective April 1, 2011 were again deep and sharp. They will reduce HHC’s total revenue by another $170 million, bringing our total Medicaid cuts over the last four years to roughly $500 million annually. Second, pension costs have continued to rise sharply and may increase by as much as $100 million this year, bringing our pension costs to more than $400 million. By comparison, just eight years ago our pension costs were less than $50 million. And third, we have seen another 6% increase in the number of uninsured patients we serve, bringing the total number of uninsured patients served in fiscal year 2011 to nearly 480,000.
And, of course, all of this is occurring in the context of the continuing, severe economic downturn. Because of declining tax revenues associated with persistently high unemployment rates, both the City and the State are projecting budget deficits in excess of $4 billion for the upcoming fiscal year. The State may be compelled to impose still more Medicaid cuts, while the City has already directed all City agencies (as well as HHC) to reduce their expenditure of City funds by 2% for this fiscal year and 6% for next fiscal year. For HHC, these new City budget cuts will mean $1.6 million less revenue this year and $4.6 million less next year.
At the federal level, both political parties are focused on reducing a federal debt that now stands at $15 trillion dollars and both parties have expressed a willingness to make further significant additional cuts to both the Medicare and Medicaid program. The recent failure of the Congressional “Supercommittee” to reach agreement on deficit reduction measures has likely spared us from further federal Medicaid cuts for the moment, but the Committee’s inability to agree triggers automatic Medicare cuts that will take effect on January 1, 2013. Those cuts will reduce HHC’s Medicare revenue by an estimated $20 million.
And, of course, under the federal health reform law, in 2014 the federal government will begin reducing dramatically the supplemental Medicaid and Medicare funding that supports public hospitals and other safety net institutions. Ultimately, these scheduled cuts could reduce HHC’s federal funding by more than $325 million annually. And there is very little prospect of Congress re-visiting the wisdom of these looming, devastating cuts.
I dwell on this litany of financial challenges not to depress everyone in the room, but because the magnitude of the present threats to our mission arising from sharply rising expenses in the face of falling revenues is unprecedented. It is important for our communities to understand what we are up against, and why we have resorted to extreme measures such as targeted layoffs, the closure of some small community clinics, and the outsourcing of certain services when such outsourcing lowers our expenses.
And it is important that our community and all of our partners understand the severity of our fiscal dilemma and the advocacy required by all of us to preserve HHC’s mission and continue to meet community needs.
I know that there are those in the audience who are concerned about the outsourcing that we have done to date, including our dietary services, our laundry services, and the management of our housekeeping services. I must emphasize, however, that we have moved forward with outsourcing only after careful analysis has demonstrated that we could achieve significant savings. The dietary outsourcing initiative has saved us roughly $40 million over the past five years and will save us even more in the next year when the heavy capital investment in retrofitting our cook chill plant will have been paid off.
We are projecting that the outsourcing of our laundry services and the outsourcing of our housekeeping management will save us about $242 million over the next nine years. All three of the outsourcing initiatives implemented thus far have been achieved without laying off a single unionized staff member. Also, we have been open to “insourcing,” that is, the hiring of additional directly employed staff to replace contracted workers where our analysis shows that it will save money. This past year we hired 48 new staff to do work in information technology that was previously performed by contracted vendors and we estimate that by doing so we are saving more than $2.8 million annually. We plan to hire 76 additional staff over the next two years to shift still more IT work away from contracted vendors to save an even greater amount.
Unlike some public hospitals in the country, our willingness to make tough and at times painful decisions has enabled us to avoid closing any major HHC facilities and to remain faithful to our core mission of serving all New Yorkers without regard to insurance or immigration status. But the unrelenting financial pressure represents a grave threat to our mission and to our long-term ability to maintain sufficient service capacity to meet the needs of our patients across the City. And more tough decisions surely lie ahead.
Here’s why: Serving 1.3 million New Yorkers – more than one-third of whom are uninsured – will cost our system about $6.7 billion this year. Yet, our revenue from all sources will fall several hundred million dollars short of that amount, requiring us to tap limited and dwindling cash reserves to cover our costs. While in the past we have relied on increasing governmental funding to keep our system solvent in the face of rising costs that are outside our control, the current economic conditions at all levels of government, the resulting clamor for reducing healthcare costs, and the growing hostility in Washington to the undocumented immigrants who constitute many of our uninsured patients, make additional significant government support unlikely for the foreseeable future.
Given this harsh reality, we must redouble our efforts to make our system as efficient as possible. And we are doing that in many ways. One of the most promising is our work to involve as many of our front-line employees as possible in learning and applying process improvement techniques that enable teams of employees to identify ways to make our operations more efficient.
We call this continuous operational improvement approach Breakthrough and over the past four years more than 4000 of our employees have participated in team-based rapid improvement Breakthrough events that have helped us generate more than $211 million in combined new revenue and cost savings.
By way of example, Elmhurst Hospital and Queens Hospital staff collaborated in Breakthrough improvement events to develop a standardized process that has increased significantly the percentage of paid claims in outpatient surgery. And at Queens Hospital, Breakthrough teams have reduced dramatically the time that patients wait in the ED, shortening the time from triage to seeing a clinical provider from 146 minutes to 47 minutes. There are scores of similar examples from all HHC facilities on how our employees are helping us to make our system more efficient.
Even as we struggle to make our system more efficient and to manage the formidable financial challenges we face, we continue to be responsive to the needs of our communities day after day. We still provide about 225,000 hospital inpatient stays, more than 1 million emergency department visits, and more than 5 million outpatient visits annually. Here in Queens, HHC hospitals provide more than 80% of all hospital-based clinic visits made by uninsured Queens residents. And we continue to provide our patients with a full range of primary and preventive care services, with an emphasis on the early detection of disease and the effective management of chronic diseases such as asthma, diabetes, and hypertension.
As a measure of how well our facilities meet the primary care needs of our patients, all of our primary care sites here in Queens and across the City – encompassing nearly 600 HHC primary care providers – have been certified as patient-centered medical homes, the highest standard for provision of effective and comprehensive primary care services.
It is a tribute to our hard working and dedicated staff that despite the reduction of our workforce by more than 2,500 employees over the past two and one-half years, we have maintained essentially the same scope and volume of services. We are also maintaining and, in many respects improving, the quality and safety of care provided across all of our facilities.
And, on a brighter note, we now can clearly see opportunities on the horizon to do an even better job for our patients and communities. Although the United States Supreme Court will decide by sometime next year whether federal healthcare reform can proceed on schedule, and whether expanded healthcare coverage will begin as planned in 2014, earlier this year New York State began its own version of healthcare reform. Over the course of the next three years, New York State will change the way it pays for Medicaid services to help strengthen the management and coordination of healthcare services, especially for patients with chronic disease and for patients with significant mental illness. In addition, New York State also will be requiring providers to do a better job of helping frail elderly and other patients in need of long-term services to receive their care in their home and in their community as long as possible rather than being institutionalized.
These changes in the New York State Medicaid program here are meant to reduce Medicaid costs by improving the health status of patients who are at highest risk of needing expensive emergency department, inpatient, or skilled nursing facility services. This proactive approach to promoting health and providing robust primary care has long been a central part of HHC’s mission-driven strategy and is a far better way to reduce long-term healthcare costs than continued Medicaid and Medicare rate cuts. We are fully supportive of the Governor’s efforts to redesign the Medicaid program in ways that bolster and better reimburse comprehensive primary and preventive care, more effective chronic disease management, and better overall care management and care coordination to reduce the need for hospitalizations or nursing home admissions.
We are already taking concrete steps to align our services with this new direction in the State Medicaid program. For example, our health plan, MetroPlus, has just submitted an application to offer long-term managed care services that would help patients at risk of entering a nursing home to stay at home and receive the services they need there.
We also recently submitted an application to become what is known as a “Health Home” for patients with multiple chronic disease and/or serious mental illness. The “Health Home” initiative will leverage funds available under federal healthcare reform to pay providers to hire and train care managers and related staff who will become part of a patient’s care team.
These care managers will establish relationships with patients and help educate them about the importance of adhering to their treatment plans and medication regimens; encourage patients to change behaviors, including diet, that will better control their diabetes or hypertension; help patients navigate the healthcare system; and ensure that multiple providers who are caring for the same patient have a common understanding of the patient’s needs and a single, integrated plan of how to meet those needs to produce the best possible outcomes.
And for patients with serious mental illness there will be an increased focus on integrating mental health services with primary care and other general medical services required to treat patients in a more holistic way. For too long, patients with serious mental illness have died prematurely precisely because the health system has focused on their mental illness to the exclusion of other serious medical conditions, like diabetes and cardiovascular disease that put them at great risk.
We fully expect to be certified as a “Health Home” by the end of this year and to begin enrolling patients in the Bronx and Brooklyn into our care management support services by very early next year. We expect to be able to do the same for our eligible patients in Queens and Manhattan by the spring of 2012.
The full range of Medicaid reforms now set in motion in our State are more complicated than what I have just described and will require major changes in the way that we and others deliver care. But the end result should be better care and better health for the majority of our patients and for the communities we serve.
We are committed to be at the forefront of these Medicaid program reforms, and our health plan, MetroPlus, will be a very important partner with us in providing better care. The commitment of our MetroPlus colleagues to our patient care mission is underscored by the fact that this year – for the sixth time in seven years – MetroPlus was rated the best New York City Medicaid managed care plan based upon quality and patient satisfaction scores measured by the New York State Department of Health.
Our Work in Queens
Right here in Queens, both our public hospitals continue to exceed national benchmarks on many important publicly reported measures of quality and patient safety. Earlier this year, Elmhurst received an IPRO Gold Plus Quality Award from New York State for its nurses’ effective use of information technology to drive better patient care. For the third year in a row Elmhurst has received national recognition for its Stroke Program, and Statewide and national recognition for its Organ Donation efforts. Elmhurst also has made significant progress on reducing avoidable hospital admissions and readmissions through its case management initiative in its busy emergency department that has decreased avoidable admissions, allowing more patients to be safely discharged to their homes rather than be admitted to a hospital bed.
Work is now under way on the new Women’s Health Pavilion at Elmhurst, which will provide sorely needed additional ambulatory care space.
And 10 years after 9/11, Elmhurst’s WTC Environmental Health Center continues to enroll new patients and provide ongoing treatment to address the mental and physical health conditions experienced by those who lived or worked near Ground Zero, many of whom now have serious and chronic health problems.
At Queens Hospital Center, a state-of-the-art fully monitored 40-bed medical/surgical unit was opened in December of 2010. This additional inpatient capacity has enabled the hospital to reduce dramatically the average time it takes patients to be moved from the emergency department to an available bed and has facilitated greater efficiency in a very busy Emergency Department. Queens Hospital has also increased its capacity to conduct mammogram screenings. Women can obtain screening appointments within three days of referral by their primary care provider. Queens Hospital staff’s excellent work to reduce the transmission of antibiotic-resistant Staph infections, and decrease the incidence of such infections among hospitalized patients, has been recognized by the New York State IPRO Quality Improvement Team.
Finally, I will note that both Elmhurst and Queens Hospitals continue to do extensive outreach in the community to ensure that consumers and community-based organizations are informed about each hospital’s services and the availability of those services regardless of a patent’s insurance and immigration status.
I am proud of the work that our dedicated HHC staff performs every day here in Queens and across our city to provide accessible, high quality health care to our patients. We are working hard on many fronts, as I’ve outlined, to make our system as efficient and effective as possible. And we are advocating strenuously at every level of government to fend off additional cuts that would undermine our ability to continue meeting the needs of our vulnerable patients and communities. We appreciate the strong advocacy support that we continue to receive from our partners in labor, from our community advisory boards and auxiliaries, and from many community-based organizations that care about our mission. Our strong connection to, and support from, the communities we serve continues to be one of our most important assets.
Thank you all for your attention and for being here. I now will turn the program over to Mr. Russo. I look forward to hearing your comments.