ALAN D. AVILES
HHC PRESIDENT AND CHIEF EXECUTIVE
REPORT TO THE BOARD OF DIRECTORS
APRIL 23, 2009

On May 22nd I will deliver a plenary session presentation at the Annual Congress of the National Patient Safety Foundation entitled “Patient Safety: Reaching for Transformational Change in Challenging Times.” My talk will focus on HHC’s demonstrated ability to maintain a core focus on patient safety and achieve acclaimed results, despite consistent funding challenges and resource limitations.

In addition to my address, three HHC hospitals -- Bellevue, Lincoln and Metropolitan -- will be presenting posters at the Congress. The topics of their presentations include eliminating patient identification errors, preventing infections, deploying rapid response teams, and improving stroke care.

The NPSF is one of the most significant and respected patient safety organizations in the nation and we can be proud of their recognition of HHC as a national patient safety leader.

In early February, HHC implemented use of the Surgical Safety Checklist in all New York City public hospitals, a safety precaution that has been hailed internationally by the World Health Organization, as well as by patient safety organizations throughout the U.S. Coney Island Hospital and Lincoln Medical and Mental Health Center have been named by the Institute for Healthcare Improvement (IHI) as two of only eight hospitals in the country that are designated as Surgical Safety Checklist Mentor Hospitals. IHI has developed the network of mentor hospitals to support the implementation of this strategy by hospitals throughout the nation. Mentor hospitals are chosen for their demonstrable success with implementation of the checklist and their willingness and ability to provide support, clinical expertise and implementation advice to hospitals seeking help. Congratulations to these two HHC hospitals and their involved staff for their national leadership in promoting this important patient safety measure.

In March, the federal Centers for Medicaid and Medicare Services (CMS) for the first time made public the results of patient satisfaction surveys that have been collected from hospitals around the nation. The surveys of patients at HHC hospitals were encouraging, with the average HHC hospital score exceeding the scores for most New York City hospitals. In Brooklyn and Queens, two of our hospitals, Kings County and Queens, each earned top ranking in their respective boroughs, in both overall patient satisfaction, and in patient willingness to refer others to the hospital. In the Bronx, Jacobi Medical Center ranked a close second place to Montefiore Hospital; while in Manhattan, Bellevue Hospital showed strong results that placed it in the top quartile for that borough.

The patient satisfaction survey, known as the Hospital Consumer Assessment of Healthcare Providers & Systems (HCAHPS), has been validated by CMS as a standard assessment tool for all hospitals throughout the nation. Adult patients admitted to a hospital for general medicine, surgery, obstetrics or gynecologic care are randomly selected each month throughout the year and asked a range of questions to elicit their evaluation of the hospital’s services, including staff courtesy and communication, facility cleanliness and overall patient satisfaction. The survey results provide an objective basis for comparing each hospital’s performance in meeting the needs of its patients, and give hospital leadership important feedback for improving those aspects of patient care which need further attention.

HHC will be publishing the results of the HCAHPS surveys in the “HHC In Focus” section of its public web site in several weeks and will continue to update the results quarterly.

As you are aware, HHC is developing an Advanced Learning Institute, recently renamed the Institute for Medical Simulation and Advanced Learning. IMSAL plans to use computer-aided simulation and other advanced methods to train clinicians and patient care teams, and aims to significantly improve the clinical performance, teamwork and processes of care throughout the HHC system.

The IMSAL staff completed its first round of training this month with courses taken at either the Mayo Clinic Simulation Center or the Center for Medical Simulation in Cambridge, Boston. Both centers enjoy an international reputation for excellence and each provides among the highest rated training courses in simulation operations and debriefing techniques. Our staff will replicate at HHC’s IMSAL the exemplary standards for course development, instruction, debriefing and managing simulation operations they have learned from these outstanding simulation facilities.

The first meeting of the Program and Evaluation Work Group was held this month to help prioritize coursework that IMSAL will deliver and metrics for evaluating coursework delivery and learner outcomes. Work on the facility construction remains on target and completion is scheduled for winter 2010.

One of the key features of the HHC Connectx program to support the community physicians who refer patients to our hospitals has been the development of HHCAdvantage, a computerized web-based referral management system. The system is made available to HHC Connectx providers and helps them to track the progress of the patients they refer to an HHC hospital, and the results of their treatment with us. After successfully implementing the system with more than 800 community providers, HHC has now entered into a licensing agreement with Data Industries, to market and commercially distribute the application to other hospital systems. The application will continue to be owned by HHC and will be branded as a “product of the NYC Health and Hospitals Corporation.” Along with 6% of sale proceeds, HHC will also receive, at no cost, any upgrades, code rewrites and new modules developed for the application as it continues to respond to market needs and improve.

Beginning April 1st, the federal government increased the federal excise tax on a pack of cigarettes to $.62. The new tax pushed the cost of smoking for a pack-a-day habit to $250 a month. Anticipating that the new tax would push many smokers to consider kicking the habit for good, HHC collaborated with the New York City Health Department to help New Yorkers by offering free nicotine replacement patches at HHC hospitals. Smokers also had the opportunity to enroll in any HHC hospital QuitSmoking clinic to receive comprehensive treatment for tobacco use. HHC offers individuals a variety of ways to stop smoking, including nicotine replacement therapy, counseling and case management to help patients remain engaged in treatment. During the single day's outreach, HHC facilities enrolled more than 280 patients in QuitSmoking programs. Research suggests that at least one-third of these patients will avoid smoking-related disease and premature death as a result.

Once again, during the month of May, as New Yorkers are celebrating Mother's Day, HHC and ACS will inform women over 40 about the potentially life-saving benefits of getting an annual mammogram. Throughout the month of May, HHC will partner with the American Cancer Society to host public education and screening events at several public hospitals and health centers. The campaign will launch the first week of May with public service announcements on FOX 5 -TV, Univision Radio, WBLS-FM and the New York Post. HHC experts will speak on radio programs about the importance of mammograms and radio vans will make appearances at selected HHC locations. Television public service announcements on FOX 5 with on-air personality Dari Alexander, whose mother is a breast cancer survivor, will encourage women over 40 to get a mammogram. HHC’s public education and screening events will also be featured on high-volume Web sites of ACS, FOX 5 and NY Post. Posters featuring HHC’s staff providing a message on the importance of mammography will be on display in strategic locations at HHC facilities. In collaboration with the Staten Island Healthy Living Partnership, HHC will also make breast cancer screenings available at Richmond University Medical Center and Staten Island University Hospital throughout the month of May. Postcards in English and Spanish with HHC’s outreach message will also be sent to hundred of community organizations. Samples of the postcards are included in your Board packets today.

Earlier this month the City announced a further wave of across-the-board cuts to be incorporated in the City’s proposed executive budget for FY 2010. On April 8, the City's Office of Management and Budget sent a memo requiring HHC to reduce its City funding by 4% beginning in FY 2010. This represents an annual reduction of more than $3.5 million per year in the upcoming fiscal year. This reduction was in addition to the $10 million reduction in City funding announced over the past several months.

We also understand that another $2.8 million in reductions to HHC has been proposed by the City Department of Health and Mental Hygiene, in addition to the $4.1 million in previously proposed pass-through cuts to HHC. These latest proposed reductions add $550,000 to the $1.5 million in previously proposed cuts to our Child Health Clinics and another nearly $1.2 million in cuts to various behavioral health programs (which will trigger a further loss of $1.1 million in matching state funds for these programs).

At the beginning of April, as the final state budget results became clear, I sent a message to HHC Community Advisory Boards, labor partners, and other HHC supporters and colleagues, outlining its negative impact on HHC. (This message, as well as my letter to SDOH Commissioner Richard Daines concerning HHC’s budget deficit and need for state funding support, are included in your Board packet.) Net state budget cuts to HHC over the course of this fiscal year and the next fiscal year are estimated to be more than $190 million. The state budget cuts had a disproportionate impact on HHC. Although HHC accounts for only 35% of all Medicaid reimbursement to hospitals in New York City, HHC hospitals incurred 56% of the net cuts imposed by the final state budget.

In addition, although the state budget created new pools that will distribute nearly $400 million to offset voluntary hospitals’ costs of providing services to uninsured patients and to assist voluntary hospitals in making the transition to a new inpatient methodology, public hospitals are excluded from receiving these funds. The state budget does authorize HHC to access up to an additional $150 million in federal Disproportionate Share Hospital (DSH) funding, with a required equivalent City match. However, this amount was much less DSH funding than needed by HHC and we had anticipated that new DSH funding would be made available to address our structural budget gap, not the imposition of new state funding losses.

We continue to review the many reimbursement and other funding changes contained in the recent state budget to determine whether there are opportunities to mitigate HHC’s loss of funding. It appears, for example, that a charity care funding pool for diagnostic and treatment centers, which had previously not been available to HHC’s D&TCs, will yield at least $4 million a year to HHC going forward. We also continue to work with SDOH to secure retroactive Upper Payment Limit (UPL) funds for which HHC is eligible. These UPL funds, like Disproportionate Share Hospital (DSH) funds, are a form of supplemental Medicaid payments that permit a federal match to support supplied to us by the City; UPL funding does not entail the expenditure of state dollars. In addition, the state budget includes Medicaid coverage expansions for certain populations which are positive for patients we serve. The State has also agreed to work with HHC to identify ways to mitigate some of the adverse impacts of the state budget through its 115 Medicaid waiver that the State is currently renegotiating with the Centers for Medicare and Medicaid Services (CMS).

My recent letter to Commissioner Daines outlines HHC’s fiscal dilemma in some detail and I will not repeat all of it here. However, in short, our challenges are a product of our mission. Last year, we saw the number of uninsured patients we serve increase by 8% to 450,000. The cost of providing care, including prescription medications, to this number of uninsured patients is roughly $850 million. In addition, HHC’s vast ambulatory care network and its 11 emergency departments provide a prodigious amount of outpatient care to Medicaid patients (5 million outpatient visits, plus another 1 million ED visits annually). The cost of these outpatient and emergency services exceeds collected Medicaid and other third-party reimbursements by about $900 million. This $900 million deficit is largely a function of the longstanding under-reimbursement of the Medicaid program for both outpatient services and emergency department encounters. (Only recently, and for the first time in more than 15 years, have these rates been increased modestly; however, the gap between costs and reimbursement remains great.)

Although the provisions of the State budget related to supplemental Medicaid funding to HHC are welcome, they represent anticipated combined federal and city funding already factored into our five-year financial plan and they fall short of the full amount that HHC had hoped to secure to help provide long-term financial stability. As such, the deep Medicaid cuts combined with the shortfall on access to future DSH funding significantly worsens our projected budget deficits going forward.

As you know, last month I made the painful announcement that the first phase of our cost containment initiatives to pare down our projected budget deficit required the layoff of approximately 200 HHC employees by the end of June. We have provided notification of pending layoffs to the Mayor’s Office of Labor Relations and to the labor unions representing employees in the affected titles. The layoff process is dictated by the Corporation’s Personnel Rules and Regulations and collective bargaining agreements. The factors that affect the identification of employees to be laid off include civil service status, seniority, and work location. Meetings with the affected unions will be ongoing throughout the process. The projected last date on payroll for employees to be laid off is June 27th.

Our first phase of cost containment initiatives, including the targeted service reductions and layoffs already announced, address only about $105 million of what was an estimated $316 million budget gap. We continue to work with local facility leadership to identify further cost containment measures that can be executed in the near-term, and some will necessarily entail further service and workforce reductions. However the cuts resulting from the state budget on top of our structural deficit necessitate that we consider a fundamental restructuring of our system to achieve the magnitude of expense reduction required over the next two years. Unless we re-think our delivery of core services and, for example, find ways to thoughtfully re-organize and consolidate aspects of service delivery for greater efficiency, we risk great damage to our ability to maintain our mission.

To quickly undertake the complex analysis, deliberation and planning that is required to outline a feasible restructuring plan, we will require the assistance of external consulting resources. Accordingly, I want to alert the Board that I will grant a deviation from our Operating Procedures related to our normal competitive procurement process to facilitate a more expeditious competitive procurement of the necessary consulting services to support our central office and network senior staff in planning for this fundamental restructuring.

We are in the process of identifying consulting firms with relevant expertise and with knowledge of the New York City healthcare environment. Once we complete a round of preliminary discussions with potential firms to identify those with the most relevant experience, we will solicit cost proposals. I want to stress that our focus will be on devising a restructuring plan that achieves substantial cost savings and efficiency gains while remaining faithful to HHC’s mission, preserving the access required to meet the needs of our patients, and sustaining our hard-earned quality and patient safety advances of recent years. I would hope to bring a proposed consulting contract to the Board for its approval by the July Board meeting. I anticipate that it will take at least six months to produce a restructuring plan.

On our agenda today is an Affiliation contract renewal with Roosevelt Island Medical Associates, P.C. (RIMA) for the provision of general care at Coler-Goldwater Specialty Hospital and Nursing Facility, and dental and rehabilitation therapy services at Gouverneur Healthcare Services. The agreement is a three-year contract from July 2009 to June 2012, for a total three-year cost of approximately $97 million. The proposed agreement, like the prior agreement, will compensate RIMA on a non-workload basis, and includes facility specific pay-for-performance indicators, created with RIMA to address patient safety and the effective management in these facilities.

Also on our agenda today is consideration of a one-year extension of the current Affiliation Agreement with the University Group Medical Associates, P.C. (UGMA) for the provision of general care and behavioral health services at Coney Island Hospital. This proposed extension, from July 2009 to June 2010, is to provide time needed to complete negotiations for a new agreement, due to the recent changes in administration and leadership at both Coney Island Hospital and UGMA. The cost for the one-year extension period is approximately $49 million.

• Go! New York: Preventing Colon Cancer, WCBS-TV, 4/9/09
• Diabetes Monitoring, WABC-TV, 3/27/09
• Afghani Teen "Feels Good" Following Jaw Surgery, NY1, 3/26/09
• Now cancer costs $9, New York Daily News 4/1/09 (also covered by The New York Times City Blog, WNBC-TV, NY 1, Queens Courier)
• Recession Now Hits Jobs in Health Care, The Wall Street Journal, 4/13/09
• Health care takes $2.3 billion budget hit, Crain's Health Pulse, 3/31/09
• Budget’s impact on city hospitals: $420M, Crain's Health Pulse, 4/1/09
• New equation needed on Medicaid spending, Crain's Health Pulse, 4/10/09
• Budget Hits City's Public Hospitals Hard, Crain's Health Pulse, 4/13/09
• NYC Hospitals Embark on 'Baby-Friendly' Quest, Women's eNews, 4/14/09
• Big Fashion, Grand Street News, 3/31/09
• NYC Public Hospitals Push Colon Cancer Screening, Close Race Gap, New York Daily News, 3/30/09
• Jacobi, Columbia bring skills to Montenegro, Bronx Times Reporter, 4/9/09
• Elmhurst Hospital gets new psychiatric center, Queens Chronicle, 3/26/09
• Troubled Sleep, Troubled Hearts, Advance for LPNs, 3/26/09