ALAN D. AVILES
HHC PRESIDENT AND CHIEF EXECUTIVE
REPORT TO THE BOARD OF DIRECTORS
September 25, 2008

The National Quality Forum (NQF) and The Joint Commission today announced that they have selected HHC as a recipient of the prestigious Dr. John M. Eisenberg Patient Safety and Quality Award for Local Innovation in Patient Safety. The award cites HHC's work to promote public accountability and transparency in the areas of patient safety and healthcare quality, as exemplified by our public web site, HHC in Focus.

The award will be presented at the 9th annual meeting of the National Quality Forum on October 16th. The NQF -- a non-profit organization with diverse stakeholders across the public and private health sectors -- has been a driving force in advancing efforts to improve healthcare quality through performance measurement and public reporting.

The Eisenberg Award -- named after Dr. John M. Eisenberg a former Director of the Agency for Healthcare Quality and Research – was established in 2002 to recognize major achievements of individuals and organizations in improving patient safety and quality. Dr. Eisenberg was at the forefront of guiding national efforts to reduce medical errors and improve patient safety through implementation of evidence-based clinical practices.

On September 3, Alan V. Funtanilla, who served as The Joint Commission’s 2008 Survey Team Leader for HHC facilities, came to HHC and provided an overview of HHC’s survey performance against comparative national data for 2008. Mr. Funtanilla also identified best practices and corporate-wide opportunities for improvement, based on feedback from the 20 survey team members who participated in the on-site surveys this year.

Mr. Funtanilla said that "HHC was among … the best healthcare organizations reviewed by The Joint Commission." In addition, Mr. Funtanilla remarked that we had "a great cadre of staff and a wonderful organization," and that "you could benchmark yourselves against anyone; your best practices can stand up to the best."

I join our Chairperson, Charlynn Goins, in thanking the members of the Board who attended the summation. Mr. Funtanilla acknowledged and commended Board members for their active involvement in The Joint Commission survey process.

Since my last report in July, The Joint Commission completed its surveys of North Central Bronx Hospital and Coler-Goldwater Specialty Hospital and Nursing Facility. They both achieved successful survey results and unconditional accreditation consistent with the performance of our other four hospitals surveyed earlier this year, Harlem, Bellevue, Queens and Woodhull hospitals. We anticipate that Coney Island, Kings County, Lincoln and Sea View hospitals will be surveyed by The Joint Commission in 2009.

Earlier this week, Dr. Waafa El-Sadr -- the Chief of the Division of Infectious Disease at Harlem Hospital -- was named one of the 2008 MacArthur fellows by the John D. and Catherine T. MacArthur Foundation. The fellowships -- among the most prestigious and sometimes referred to as the “genius grants”-- are awarded to a select group of talented individuals each year who have demonstrated exceptional creativity in their field, a track record of significant accomplishment, and the potential to make important contributions in the future. The fellowship includes an unrestricted award of $500,000 to the individual paid out over five years.

Dr. El-Sadr is one of the world’s experts in the integrated treatment of HIV and Tuberculosis and she has pioneered a highly effective, multi-faceted, and family-focused approach to prevention and treatment of HIV and TB in low-income and medically underserved communities here in New York City and around the world. Beyond her work in the Harlem community, Dr. El-Sadr also oversees the federally funded International Center for AIDS Care and Treatment Programs at Columbia’s Mailman School of Public Health which supports care to more than 500,000 individuals across 600 sites in sub-Saharan Africa and Asia.

In the words of MacArthur Foundation President Jonathan Fanton, “ the MacArthur Fellows Program celebrates extraordinarily creative individuals who inspire new heights in human achievement… and exemplify the boundless nature of the human mind and spirit.”

An extraordinary honor for the extraordinary work of a clearly extraordinary and deeply committed individual, Dr. Waafa El-Sadr.

HHC ’s multi-faceted patient safety campaign recently encompassed two important new initiatives;

• HHC is the first hospital system in New York City and among the first in the nation to implement a surgical safety checklist in its operating rooms to reduce the risks of complications and death in surgery. Over the last few months, the surgical checklist -- a safety measure heavy promoted in other countries by the World Health Organization -- was piloted at six of our hospitals. It will be used by our 225 surgeons in all of our hospitals by the end of the year. Before major surgical procedures all across HHC, circulating nurses will get a verbal confirmation and document more than a dozen safety standards checks that go well beyond the routine verifications of the right patient, the right site and the right procedure. For example, the HHC checklist will also verify blood type and known allergies to drugs; confirm that the appropriate antibiotic (and beta blocker for heart patients) has been administered prior to making an incision; ensure the optimal prophylaxis has been ordered to prevent deep vein thrombosis after surgery; and use a strict accounting process to guard against the inadvertent retention of surgical gauze, sponges or other material or instruments.

• Metropolitan Hospital Center is among the first hospitals in New York City to implement a patient safety program that uses standardized color-coded wristbands to quickly communicate patients' high-alert medical conditions and help prevent medication errors, allergic reactions, and falls. The colors used are red bands for allergy, yellow for fall risk, and purple for do not resuscitate. Six other HHC hospitals and four long-term care facilities have signed up to participate in the program. The Colors of Safety initiative is a voluntary program developed by the Greater New York Hospital Association (GNYHA) and the Continuing Care Leadership Coalition. Its goal is to enhance patient safety by standardizing across all hospitals the color-coding of specific alert conditions.

On August 19th, the State Legislature returned to Albany at the request of Governor Paterson to deal with the state's growing budget deficit. The State Division of the Budget had estimated the deficit for next year at $6.4 billion and more than $26 billion over the next three years. Governor Paterson challenged the Legislature to cut state spending by $600 million in the current fiscal year and $1 billion in the next.

Healthcare-related cuts proposed by the governor included eliminating the trend factor for all providers, cutting Medicaid reimbursement rates, imposing a gross receipts tax on hospitals, delaying nursing home rebasing rates and cutting grants to public nursing homes. The impact of the proposed cuts to HHC could have exceeded $300 million.

The final cuts proposed by the Assembly and Senate, and accepted by the Governor, included reduction of the projected trend factor by 1.3% in fiscal year 2009 and by 1% in fiscal year 2010. They also agreed to a 6% across the board reduction to many state funded programs and a reduction of the Medicaid manage care premium by 1.45% and Family Health Plus premium by .7%. While the impact of these cuts are much less than what was initially proposed, HHC will still lose approximately $28.6 million in our 2009 budget and $41.4 million in the 2010 budget when the loss of matching Federal funds are taken into account.

The governor indicated that additional cuts may be necessary this fiscal year, if the revenue projections continue to decline as precipitously as they have done so far this year. Mid-year revenue forecasts for the state will be reported at the end of October.

As we have reported to you in the last few months, we have been working to determine HHC’s best options following failed auction of our auction rate securities (ARS), beginning in February. We have finally concluded the process of refunding the remaining $346 million ARS bonds and raising approximately $100 million new money to fund our ongoing capital program. Helped by HHC’s upgraded ratings from two rating agencies, and strong support from the City, we have been able to sell $269 million fixed rate bonds at a very favorable all-in interest rate of 4.5%. The bond offering also consisted of $189 million in variable rate debt obligations (VRDO) estimated at 3.8%.

Although we successfully marketed a portion of our VRDO bonds in early September, Lehman Brothers’ filing for bankruptcy on September 15 and subsequent events have caused a huge market dislocation. The market situation remains uncertain despite initial actions taken by the U.S. Treasury Department and the Federal Reserve Bank aimed at stabilizing the market. We have been in close contact with NYC Office of Management and Budget, NYC’s Comptroller’s Office and HHC’s bankers as we monitor the situation and consider all options that allow HHC to minimize the financial impact pending further market-calming action at the federal level.

On September 4, I joined Mayor Bloomberg at a press conference at City Hall as we announced a $5 million grassroots marketing campaign to promote free treatment and awareness of the services provided by HHC’s WTC Environmental Health Center at its three locations – Bellevue, Gouverneur, and Elmhurst.

The campaign’s tagline is "Lived There? Worked There? You Deserve Care." The ads target adults and children who may not have linked their symptoms to 9/11 exposure, or who do not know that treatment is available. The ads, which are in English, Spanish, Chinese, and Polish, were developed in close conjunction with community members and 9/11 health advocates. The campaign directs New Yorkers to the WTC Environmental Health Center or to dial 311 for help. Ads for the campaign, are running on subways, print, radio, and television, and can be accessed on HHC's web site, nyc.gov/hhc.

As part of the campaign, 10 community-based and other organizations received $2.1 million in grants to conduct grassroots outreach to hard-to-reach groups, host educational forums, conduct health fairs, and provide patient navigation services to improve access to care.

HHC will again conduct a major public health education outreach in October during our seventh annual "Take Care New York" month. The campaign urges all New Yorkers to get screened for HIV, cancer, heart disease, diabetes and other serious conditions. HHC facilities will conduct health screenings at little or no cost to participants. Take Care New York outreach will be promoted via public service announcements and strategic partnerships with local radio stations and newspaper outlets. HHC staff will participate in major educational activities and special events, including the WBLS Circle of Sisters expo for women of color at the Jacob Javits Center on October 11th and 12th. From 25,000 to 30,000 New Yorkers will have an opportunity to visit the HHC Health Pavilion at the expo to hear our experts speak about diabetes, depression, colon cancer, HIV and other major health topics.

HHC facilities will inform New Yorkers about its patient safety and HHC Options programs, while providing free flu shots, smoking cessation counseling, depression screenings, HIV tests and much more. HHC will also partner with Univision radio stations and El Diario to promote Take Care New York to the Hispanic community via public service announcements, van appearances and on-air interviews with our HHC experts.

For the sixth consecutive year HHC will be a multi-site flagship sponsor for the American Cancer Society's Making Strides Against Breast Cancer walk on Sunday, October 19. The campaign raises millions of dollars each year, and the money raised in each community funds programs in the same location where it is raised.

The American Cancer Society supports generous programs that benefit many of our patients throughout the year. Their Cancer Services Program, formerly known as the Healthy Living Partnership, funds screening, preventive care and treatment for uninsured patients. Their "Look Good, Feel Better" program provides makeup and cosmetic guidance for cancer patients who are struggling to maintain a positive outlook while undergoing the challenges of cancer treatment. And the Hope Lodge in Manhattan provides free lodging for relatives who need to travel to New York to support their loved ones during surgery or other difficult treatment procedures. By sponsoring this walk, we tell our communities that we are willing to go the extra mile -- as we always do -- to fight cancer and the other diseases that challenge them.

Last year more than 1,800 HHC staffers joined the walk, raising more than $250,000. I walked with our Brooklyn teams last year and this year I look forward to walking with my enthusiastic colleagues in the Queens walk.

Numerous modernization projects are proceeding on schedule, and I want to share with the Board the status of the most significant on-going work, as we continue to rebuild or renovate important parts of HHC’s physical infrastructure.

• Together with local elected officials, I attended a groundbreaking ceremony on September 18 for the Harlem Hospital Patient Pavilion. The new building is part of a five-year $319 million campus-wide modernization project. The pavilion will allow the hospital to meet the growing needs of the Harlem community and will integrate inpatient, emergency room and outpatient services.

• On September 22, Assembly Speaker Sheldon Silver and several members of the City Council joined me at the ground-breaking ceremony at Gouverneur Healthcare Services, for a major $180 million, four-year modernization project that will expand primary care and preventive health services for the Lower East Side and Chinatown community, vastly improve the physical and therapeutic environments, and create a large, modern, 295-bed nursing facility. The project, which is expected to be completed in 2012, will feature a new ambulatory care pavilion that will serve more than 345,000 outpatient visits a year. The new space will house a state-of-the-art 30,000 square foot Women and Children’s Center, a dialysis center, a new CT scan area and space for a full spectrum ambulatory surgery center. The new nursing facility will resemble a well-appointed apartment building with communal recreational and dining areas, private rooms and a resident-centered design to foster a sense of community.

• On September 24, Mayor Bloomberg joined me at the opening of Jacobi Medical Center’s new Ambulatory Care building. The building – which includes an attractive atrium -- is entirely devoted to outpatient services, and was designed to be user-friendly and can accommodate over 380,000 outpatient visits annually.

• The HHC Foundation announced a $300,000 grant from the Fan Fox and Leslie R. Samuels Foundation for Woodhull Medical and Mental Health Center to implement Project IMPACT, an evidence-based model to improve treatment of depression in the elderly by integrating geriatric mental health services with primary health care. The project is Woodhull's first step toward establishing a comprehensive Geriatric Center of Excellence.

• Queens Hospital was awarded a $22,500 grant for its Pediatric Special Events/Socialization Program by the Starlight Starbright Children's Foundation NY*NJ*CT, to help children and their families cope with the stresses of serious illness through entertainment, education and family activities. The Starlight Foundation also donated a Nintendo Wii Fun Center to provide a portable entertainment unit for children who are bedridden.

I know that you are all aware that Charlynn Goins, HHC’s Board Chair, is stepping down from her role at the end of this month. After more than four distinguished years at the helm of our Board, Charlynn now holds the record as the longest serving HHC Board Chair. Add to that singular achievement, the assessment of many within our organization that no one with as much talent, personal achievement and confidence has served us with more respect, humility and style.

Everyone who has seen Charlynn in action at the head of this table knows that she has carried out these formal duties with grace, tact and keen intelligence. Few understand the role she has played behind the scenes in offering insightful advice to me and others on senior staff, and in advocating on behalf of HHC with those of influence in our City.

Charlynn was appointed by Mayor Bloomberg after a distinguished career as a lawyer and financial executive as well as a consultant to the United States Department of Commerce’s Minority Business Development Agency. She stepped down from the Executive Committee and Board of a prominent voluntary hospital system to assume her role as HHC’s Board Chair. At the time of her appointment Mayor Bloomberg said that "[h]er background and experience in the fields of health care, business and law mean that New Yorkers can be sure that HHC hospitals will continue to be second to none for years to come.” I know that I speak for our entire senior staff and my fellow Board members when I say that she did not disappoint.

The United Hospital Fund recently honored Charlynn at its annual Tribute to Hospital Trustees with the 2008 Distinguished Trustee Award for her extraordinary stewardship of our Board. She has been a remarkable and inspiring leader, and all of us at HHC will miss her greatly.

As we say farewell to Charlynn Goins, we welcome our incoming Board Chair, Dr. Michael Stocker, who steps into his new role on October 1st. Dr. Stocker -- whose appointment was announced formally by Mayor Bloomberg yesterday afternoon -- is a family practice physician, healthcare policy advisor and healthcare executive who brings a deep understanding of the challenges facing all healthcare systems today. Dr. Stocker spent the early years of his career as a practicing physician in Cook County Hospital, the historic public hospital in Chicago. As he joins HHC, he comes full circle and brings a lifetime of healthcare experience to bear in helping us to further strengthen and position our city’s public hospital system for the future. I know that I speak for other Board members and HHC’s senior staff when I say that we are all looking forward to working with Dr. Stocker.