ALAN D. AVILES
HHC PRESIDENT AND CHIEF EXECUTIVE
REPORT TO THE BOARD OF DIRECTORS
JULY 30, 2009

Three committees – one in the Senate and two in the House - have now reported health reform bills but no floor action is scheduled before the August recess.

In the House, the Ways and Means Committee, chaired by Charlie Rangel (D-NY), and the Education and Labor Committee, chaired by George Miller (D-CA), have completed their portions of the bill. The Energy and Commerce Committee, which has jurisdiction over Medicaid, is still in negotiation with the moderate Blue Dog Democrats.

HHC has concentrated strong advocacy efforts on Medicaid Disproportional Share (DSH) funding, which accounts for $1.1 billion of HHC's funding in the current fiscal year. HHC also receives $125 million in Medicare DSH.

The following are key provisions in the House Bill:

• Medicaid DSH reductions to total $10 billion, with $1.5 billion in 2017, $2.5 billion in 2018, and $6 billion in 2019. HHC is working to include a trigger mechanism in these provisions so that they would not occur unless certain conditions are met.
• Medicare DSH reductions to total $10 billion starting in 2017, including a trigger provision that there must be an 8% reduction in the number of uninsured before such cuts would occur.
• Two Institute of Medicine studies were agreed to regarding Geographic Differences and Quality-Based Medicare Pay, authorizing the HHS Secretary to implement wage index adjustments and value adjustments, unless opposed by Congress. New York State, as a high cost Medicare area, would likely lose significant Medicare reimbursements. These studies are viewed as a compromise from the proposal to establish an Independent Medicare Advisory Council (IMAC) empowered to make Medicare Payment decisions. IMAC has been endorsed by the Administration but is strongly opposed by provider groups, patient advocates and liberal House Democrats. The fiscally conservative Blue Dog Democrats, however, continue to demand that the IMAC be included in the house Legislation, despite the inclusion of the IOM studies.

On the Senate side, the Senate Health, Education, Labor and Pensions (HELP) Committee has reported their bill but six Senators on the Finance Committee continue to work on crafting a bipartisan agreement. Their negotiations include the following features:

• Creation of an independent commission, or IMAC/MEDPAC, that would be required to recommend an additional $35 billion out of Medicare over the next decade and larger sums in the years beyond.
• The taxing of high-cost healthcare plans as a way to fund health reform. This is estimated to raise $90 billion over 10 years.
• Health Cooperatives that would provide health coverage for consumers, rather than a Public Plan.
• Imposition of a fee on those employers who do not provide health insurance. The proposal is expected to include a restriction that would keep employees whose employers offer insurance from switching to the exchange. They expect employers who do not provide insurance will be forced to contribute about $400 per employee.

On July 7, 2009, several associations representing hospitals, including the American Hospital Association (AHA), the Federation of American Hospitals and the Catholic Health Association, met with Max Baucus, the Chairman of the Senate Finance Committee and the Obama Administration and reached an agreement to save approximately $155 billion from hospital Medicare and Medicaid payments. The majority of the cuts come from decreases in the Medicare inpatient and outpatient markups for inflation, commonly called "market basket updates" ($103 billion over ten years) and reductions in both Medicare and Medicaid Disproportionate Share Hospital (DSH) payments ($50 billion over ten years). The Hospital Association of New York State (HANYS) estimates that cuts in the market basket updates would reduce payments to New York State hospitals by $7.3 billion over ten years, and reduced DSH payments to New York hospitals, which would begin in 2015, would total approximately $5.5 billion. The Senate plan is expected to include these parts of the Hospital Associations-Chairman Baucus Agreement.

In the wake of the national economic tailspin and with potentially earthshaking healthcare reform on the horizon, HHC has been preparing to face extraordinary fiscal challenges in the months and years ahead. With the state reeling from projected deficits of historic proportions, we have already seen deep reductions in the Medicaid funding that represents the majority of our revenue base, and we can expect more to come. We also have experienced some tightening of the City’s very substantial financial support in light of its own daunting budget challenges.

Cumulatively, those revenue reductions; the steady and significant growth in the number of uninsured patients we care for – up more than 8% in the past year alone to a total of more than 450,000; the steady increasing costs of medical supplies, pharmaceuticals and equipment; and the pressures of dramatically escalating fringe benefit costs, among other factors, have required us to set a deficit reduction target of $316 million for fiscal year 2010. Various cost containment and revenue optimization initiatives (including some targeted service and workforce reductions) are being implemented to enable us to meet this immediate deficit reduction goal.

As we analyze projected expenses and revenues going forward, including the sharp diminution of supplemental Medicaid funding from unprecedented levels this current fiscal year, we foresee budget deficits for HHC that will approach and possibly exceed $1 billion annually. The magnitude of these challenges cannot be met by conventional cost-cutting or through mere attrition of staff. As a result, we will shortly engage in an analytical and planning process to arrive at a plan for fundamentally restructuring the delivery of services across HHC focusing on, among other strategies, consolidation of certain inpatient and specialty services for maximum efficiency.

As I reported to the Board previously, we concluded that we would need to retain outside expert resources to help us in this exceedingly complex analysis and strategic planning. Over the course of the last three months, we have employed a negotiated acquisition process through which we reviewed initially eight possible consulting firms, and then met at length with the four assessed as having the most relevant experience in both the voluntary and public hospital system context. Following the submission of detailed proposals from, and extensive meetings with, two firms identified as finalists, a selection committee of HHC leaders has reached a decision on the consulting firm best able to meet our needs. As a consequence, today's agenda includes a resolution that seeks the Board’s approval for a consulting services contract to assist HHC’s leadership in the development and implementation of an enterprise-wide clinical and operational strategic restructuring plan. The development of the strategic restructuring plan is expected to be completed within the next six months. Implementation will follow thereafter and, given the complexity of the likely changes, will take considerable time to complete.

The Joint Commission completed its survey of Kings County Hospital Center during the week of July 7th. Because of its size and range of services, of the four HHC facilities surveyed this year, Kings County had the largest survey team (7 surveyors) and the longest survey. I am very pleased to report that the hospital had a very successful survey. The surveyors commended Kings for the improvements made over the last year and recognized the staff for their dedication, openness and transparency. Antonio Martin, Network Senior Vice President and Executive Director of Kings County Hospital and all of his staff are to be commended for their excellent performance both during the week of the survey and every day.

The Kings County survey marks the end of HHC's 2009 survey cycle. We are currently organizing our Joint Commission Corporate Summation Program where the Survey Team Leader will return to HHC to provide you with an overview of the system-wide Joint Commission survey performance, including areas of strength and opportunities for improvement. We will inform you of the date of the Corporate Summation very soon.

On July 13th, CIS announced an important upgrade to HHC Advantage, its computerized system for tracking and managing patients referred to HHC facilities. HHC Advantage now directly handles referrals between HHC facilities, in addition to its existing functions which handle referrals to community providers. This means that a patient referred for services from one HHC facility to another will benefit from the system’s array of appointment scheduling, tracking and reminder features, including patient notification of upcoming appointments by mail or fax. Meanwhile, HHC providers, like community doctors, can now log onto the HHC Advantage system to access status queues showing the outcome of all their referrals. The system now also ensures that patients with preferred languages other than English are fully informed about upcoming appointments made through HHC Advantage. The system can now generate appointment-notice letters in Spanish, Russian, Creole, French, Polish, Chinese, Korean, Arabic, and Albanian.

With regret we must bid farewell to Claude Ritman, who has resigned as Executive Director of Coler-Goldwater Specialty Hospital and Nursing Facility, effective August 14th, to accept the position of Executive Director of the Saints Joachim and Anne Nursing and Rehabilitation Center at Catholic Charities in the Brooklyn Diocese.

For the past six-and-one-half years, Mr. Ritman led the City’s largest long term care hospital and nursing facility, capping a distinguished career at HHC that has spanned nearly 36 years. As Executive Director, Mr. Ritman provided critical leadership on a number of key strategic initiatives, including: a long range modernization plan; a culture change initiative to promote resident-centered care; the opening of an LPN School that graduated its first class last year; and a major information technology upgrade. Mr. Ritman also oversaw significant performance improvement programs that garnered national attention, including the reduction of ventilator associated pneumonia and the management and treatment of pressure ulcers.

Lynda Curtis, Senior Vice President of the South Manhattan Healthcare Network, has designated Robert K. Hughes as Interim Executive Director of Coler-Goldwater. An experienced and well-respected hospital administrator, Mr. Hughes has worked at Coler-Goldwater for 21 years, and is a licensed nursing home administrator and attorney. Please join me in congratulating Mr. Hughes.

A ribbon-cutting ceremony was held on June 17, 2009 at Coney Island Hospital to celebrate the completion of a new angiography suite that will provide state-of-the-art interventional radiology procedures for patients in the South Brooklyn Network. The project was funded through an allocation from the City Council.

Your packet contains a detailed letter highlighting the many egregious misrepresentations in the three-part series published in the New York Daily News this week. This letter has been broadly distributed to our staff, community advisory board members, labor partners, elected officials and other interested stakeholders. I also have sent a similar letter to the editor of the Daily News.

• 4th of July Food Safety, ABC, 7/2/09
• Mobile Medical Office Provides Checkups on the Go, NY 1, 7/27/09
• Jacobi Medical Center's patient safety conference features NASA astronaut, Bronx Times Reporter, 7/2/09
• Velazquez Presents $380,000 to Gouverneur, Grand Street News, 7/1/09
• Actions Speak Louder then Words, Nursing Spectrum, 7/15/09
• City commits to expand Coney Island Hospital emergency room as a part of redevelopment deal, New York Daily News, 7/22/09
• Modern Bronx: Amazing architecture in community service buildings, New York Daily News, 7/24/09
• Jacobi's farmer's market returns, Bronx Times Reporter, 6/18/09
• HHC Risk Database, Crain's Health Pulse, 7/1/09
• Conferencia Sobre Salud Urbana, El Diario, 6/24/09
• Health guide for 9/11 kids is released, with one doctor critical, Downtown Express, 7/13/09
• Graduación de madres primerizas
  Graduation of young mothers in Nurse Family Partnership program, El Diario, 7/10/09
• Noted Photographer Adds Artwork to Waiting Area, Bronx Times Reporter, 6/11/09
• Five Minute Consult, HealthLeaders, 6/24/09