HHC President Alan D. Aviles's Testimony on the New York City Council Fiscal Year 2009 Preliminary Budget Hearing Committee On Health

Good afternoon Chairpersons Rivera and Sears, members of the Health Committee and other distinguished members of the New York City Council. I am Alan D. Aviles, President of the New York City Health and Hospitals Corporation (HHC). Thank you for the opportunity to discuss the fiscal year 2009 Preliminary Budget and HHC’s Financial Plan.

Before I discuss the Preliminary Budget and Financial Plan, I would like to share with you some of our current and future challenges, most notable achievements over this past year, and some of what we expect to accomplish in the year ahead.

Dramatic change in healthcare seems certain over the next few years, fueling both hope and anxiety. There is hope, engendered by the presidential primary campaigns’ focus on the crisis of the uninsured, that progress will be made toward universal healthcare coverage in the coming years. It also appears that government, at the federal and state levels, may finally begin to re-think whether it makes sense to continue paying for healthcare in ways that perpetuate a predominately passive approach of caring for the sick, rather than investing in more proactive efforts that keep patients and communities as healthy as possible.

However, there is also anxiety that the pursuit of simple approaches to the complex problems in healthcare may take us backward, potentially restricting access even further and deepening the inequities in an already inequitable system. Indeed, the federal administration recently proposed slashing Medicaid, Medicare and other healthcare spending by $200 billion over the next five years, and has issued or proposed federal regulations that would cut billions more in Medicaid funding that supports public hospitals specifically.

Although it is unlikely that all of these proposed federal reductions will occur, the sheer magnitude of the cuts proposed is chilling, and would disproportionately affect communities that are already underserved.

The concentration on healthcare spending cuts reflects the legitimate concern that the projected growth of spending in healthcare is unsustainable and requires radical intervention. New executive leadership at the federal level may deal with the growing crisis of spiraling healthcare costs differently, but there is a growing consensus across party lines that the status quo is untenable and fundamental change inevitable.

At the state level, our governor is proposing both cuts and far-reaching budget and Medicaid program reforms in the state’s approach to reimbursement of health care services. On balance, we support most of these reforms, which seek over the course of the next three or four years to make Medicaid reimbursement more rational and equitable.

However, the state is also proposing to use its purchasing power to channel volume for certain high cost services – initially bariatric surgery and breast cancer surgery – to a handful of hospitals on the theory that this will lower cost while improving quality. While such selective contracting may help to develop cost-effective centers of excellence in the future, we are deeply concerned about the extent to which access to essential services and new treatments or procedures may be limited, especially for patients traditionally served by our public hospitals.

However the current federal and state budget proposals play out, some things are clear going forward. Cost-containment pressures will intensify, and greater efficiencies will be demanded. Hospitals and providers will be compelled to report comparative quality and patient safety data and such data will be made available to the public. With hospitals soon to be ranked publicly on the basis of patient satisfaction, patients will become less accepting of poor service. Competition for patients, including newly insured patients, will undoubtedly increase and not all hospitals are assured of long-term survival, as we have seen.

This unfolding turbulent future will be challenging. As in the past, we will fight proposed changes that unfairly target safety net providers in ways that threaten our mission. Wherever possible, we will anticipate the trajectory of the forces of reform. And we will seize the opportunity to embrace and drive impending change that makes sense for our patients and furthers our mission.

We will remain steadfast in our core mission of affording broad access without regard to ability to pay or immigration status. As in the past, our intensely mission-driven agenda will continue to attract and help us to retain deeply committed and talented personnel at every level of our organization. We also appreciate that the Council strongly supports our mission and for that reason has been a stalwart champion of every HHC facility.

Unfortunately, we recently have had another advantage that is less enduring. Our success over the last few years has been enabled greatly by the unwavering support of Mayor Michael Bloomberg who has less than two years remaining in his term. Once again this past year, the Mayor made evident the City’s support for the public hospital system by funding the expansion of our World Trade Center (WTC) Environmental Health Center, a program that began at Bellevue and in the past year has been expanded to include sites at Elmhurst and Gouverneur.

By the middle of this year, we will have significantly increased our capacity to treat patients – including area residents and day laborers involved in the clean-up – who suffer from illnesses related to the immediate aftermath of the 9/11 attack. We will continue to work closely with community-based organizations to conduct outreach throughout the five boroughs to ensure that affected residents and workers are aware that these specialized healthcare resources are available to them at no charge. While the WTC Environmental Health Center provides expanded access of a highly targeted kind, we continue our efforts to provide broad access to those who most need our services.

Increasing Access in Staten Island

In Staten Island, for example, last year we supported the expansion of primary care capacity for low-income and uninsured Staten Island residents in several ways. While we worked to create more permanent solutions, we extended the temporary Staten Island Health Access program (SIHA) through June 2008 to enable low-income, uninsured Staten Islanders to continue receiving primary and select specialty care from private community physicians. We also continued to fund a local community-based organization to help eligible low-income Staten Islanders obtain government insurance programs for which they are eligible. Through this program, we have facilitated access to affordable health care for more than 4,500 Staten Island residents.

Our efforts to expand primary care capacity permanently in the borough include providing financial support to the Community Health Center of Richmond. We have financed a physical expansion at the Center’s Port Richmond Avenue site that should be completed this summer. By the end of this summer, we will bring a new source of affordable primary care to communities across the borough, through a state-of-the-art mobile medical clinic. This will be operated by HHC staff. In addition, we have purchased a site at 155 Vanderbilt Avenue that will be the home of a future HHC ambulatory care center and we are seeking an additional site from which to provide health services.

HHC Options Program

This past year we revised our HHC Options Program to make care more affordable for very low-income New Yorkers, even as we maintained heavily discounted fees to families with incomes up to four times the federal poverty level. We eliminated all outpatient fees for pregnant women and children of families with incomes below 250% of the federal poverty level. For patients at the lowest income levels, we reduced our already modest prescription drug fees – to $2 – to further lower barriers to services that people need. And we appreciate the Council’s continued funding toward the costs we incur in providing prescription drugs to uninsured patients. We are promoting our HHC Options Program broadly with marketing material that has been translated into the twelve languages most commonly spoken by our patients. In the first six months of this fiscal year, we had enrolled 95,419 people in our HHC Options Program.

Capital Investments for the Future

To ensure that HHC is positioned to meet the needs of the next generation of New Yorkers, we continue to move forward with an ambitious capital program to systematically rebuild large portions of our aging infrastructure.

Over the past three years, we have completed construction on major modernization projects totaling more than $700 million on the campuses of six facilities. Over the next five years, we will complete major projects on the campuses of five facilities constituting nearly $750 million in additional capital investment.

Replacing Major Information Technology Systems

To sustain and accelerate the pace of the clinical performance improvements we have made and to meet the financial challenges that lie ahead, the replacement of our outdated information systems is critical. A new revenue cycle management system was selected this past year that, among other things, will ensure that we optimize our collection of revenues due us from third-party payors for all services provided to our patients. In addition, later this year, we will commence a competitive procurement process for a new electronic medical record (EMR) system that will guide and support more comprehensive and consistent evidence-based care. We project that the implementation of these two new systems will cost approximately $315 million over the next five years.

Enhancing Quality and Safety

We are pursuing enhanced quality and patient safety across many fronts. HHC facilities continue to perform above national and local averages on federal quality performance indicators that measure our adherence to evidence-based medicine in the treatment of heart attack, heart failure and pneumonia, as well as in the prevention of surgical infection. Beyond that, we are improving patient outcomes in significant ways through a broad array of initiatives that reflect our proactive approach to prevention as well as to screening and the early detection of disease.

Over the past three years, our efforts around smoking cessation, colon cancer screening and expanded HIV testing have advanced meaningfully, with significant measurable benefits to our patients. Last year, we increased participation in our smoking cessation program for the third year in a row, enrolling roughly 23,000 patients. Over the past three years, we have helped more than 25,000 patients successfully quit smoking.

We also continue to focus heavily on cancer screening. Last fiscal year, HHC facilities performed 90,000 mammograms and 165,000 cervical cancer screenings. For the third year in a row, we also performed more than 20,000 colonoscopies, considerably more than twice the number performed just four years ago. As a result, we are more often detecting colon cancer at an earlier stage when the prognosis is better.

With the significant financial support of the Council, we have engaged in a major push to make HIV testing a more routine part of care across our emergency departments, inpatient units, and many outpatient clinics. We increased HIV testing by 50% and tested more than 92,000 patients in fiscal year 2006. During fiscal year 2007, we achieved another 45% increase and tested roughly 134,000 patients. As a result, over the past two years we have identified and linked to care more than 3,000 patients who were HIV positive and did not know it. That means a better long-term prognosis for those patients as well as a reduction in the likelihood of transmission of the HIV virus to others. We expect to test more than 150,000 patients for HIV this fiscal year; and more than 160,000 in fiscal year 2009.

Developmental Care, Breastfeeding and Palliative Care

Let me highlight three other, more recent, system-wide initiatives with equal promise that we have ramped up during the last year. Two of these initiatives focus on the health of infants.

In our neonatal intensive care units (NICU), we are re-engineering the physical environments, as well as implementing evidence-based protocols that have been demonstrated to improve survivability and outcomes for fragile infants born very prematurely. In 2007, all NICU staff – about 600 people – were trained in these nurturing developmental care protocols.

This past year we also committed ourselves to improving the health of babies born in our facilities by doing everything possible to promote and support breastfeeding. With dedicated grant funding from DOHMH, we have deployed breastfeeding coordinators at each of our hospitals. These staff are educating expectant mothers about the health benefits of breastfeeding during prenatal care and actively supporting successful breastfeeding post-delivery.

We have discontinued the routine practice of distributing free formula samples and formula marketing materials to all mothers; although we, of course, make formula available to mothers who cannot or who choose not to breastfeed. The percentage of new mothers who are discharged exclusively breastfeeding their well infants increased to 34% in 2007, and it is our goal to reach 50% by the end of this calendar year.

Even as we more effectively address the needs of our patients and families as a new life begins, we are endeavoring to do a better job toward life’s end. Over the course of this fiscal year, we have allocated dedicated funding to support the deployment or strengthening of palliative care services at each of our hospitals.

Now that our patients and providers have increasing access to expert palliative care as an option for end of life (and chronic pain) situations, fewer patients are spending their last days in an ICU – with all of the high tech, invasive indignity which that entails – and are opting instead for closure with family and friends in greater comfort and with less trauma. This past calendar year, approximately 1,500 patients received palliative care services across HHC. This coming year, we expect that number to increase as our palliative care services, supplemented by contracted home hospice services, mature further.

Stepping Up the Fight Against Chronic Disease

Chronic disease drives much of the cost in our nation’s healthcare system and disproportionately impacts the communities served by HHC. For this reason, we have spent the past three years developing and putting in place evidence-based best practices that help our patients manage their chronic disease more effectively. We have placed an emphasis on asthma, diabetes, congestive heart failure and depression. During this fiscal year, we deployed dedicated chronic disease coordinators in every network and have leveraged clinical IT solutions, including our electronic chronic disease registries, to support this work.

The incidence of diabetes in our City has doubled over the past ten years and the trend lines still point upward. We have nearly 50,000 patients with diabetes receiving primary care at HHC facilities and the implications of poorly controlled diabetes for these patients and their families are enormous.

With the stakes so high, this year we will be targeting additional resources to support the more effective management of diabetes. For example, we will be expanding a successful telehealth pilot program conducted by our home health agency.

This past year, by embedding a screening tool in our electronic medical record, we also began to make depression screening a routine part of our primary care services and we screened 72,000 patients across our system. We will endeavor to increase that number by 50% in fiscal year 2009 and to screen virtually all of our primary care patients who have diabetes. We know that untreated depression can be a significant impediment to engaging patients in the management of their diabetes and other chronic disease.

Patient Safety

Patient safety is an extremely important dimension of quality, one with the power to change the public’s perception of overall quality at HHC’s hospitals. In 2007, we deepened the dialogue with staff around patient safety at widely attended leadership forums and through an effective employee awareness campaign. We pressed forward with a wide range of patient safety initiatives. Among other things, we focused on:

• preventing hospital-acquired infections;
• reducing out-of-ICU cardiac arrest with rapid response teams;
• reducing the incidence of pressure ulcers;
• reducing suicide risks;
• implementing electronic medication administration;
• screening and treating patients at heightened risk for deep vein thrombosis;
• improving management of severe sepsis;
• preventing patient falls; and
• increasing employee influenza vaccination rates.

Our system-wide efforts to reduce the incidence of ventilator-associated pneumonia (VAP) and central line-associated blood stream infections among ICU patients have been dramatically effective. During 2006 we recorded a 30% drop in central line infections and a 65% drop in ventilator-associated pneumonia cases. Preliminary results for 2007 reflect significant additional declines in both types of hospital-acquired infections. In addition, we have achieved a 50% decrease in the incidence of pressure ulcers over the past year. Although the final results of this year’s employee flu vaccine campaign are not in, the data we have indicates that the rate of employee vaccination has increased by more than 50% above last year’s rate.

Our patient safety initiatives in the aggregate have contributed to a steady reduction in patient harm and preventable deaths. Although the acuity of our patients – as measured by each hospital’s case mix index – has increased over the past four years, our system-wide mortality rate has dropped for each of those years. As a result, about 880 fewer patients died across our system this past year as compared to four years ago, despite the fact that we had more inpatient admissions and patients on average were more acutely ill. This is an extraordinary accomplishment for which our facility leadership and staff can rightly feel proud.

Transparency

This past year, HHC was featured in the 2008 Progress Report of the Institute for Healthcare Improvement as a national leader in using transparency to drive performance improvement. This recognition is a reference to our taking a bold step last year to post on our public website important quality and patient safety data. Much of this type of data is not otherwise publicly available for other hospitals in this state. In a new section of our website entitled “HHC in Focus,” for example, we posted our system-wide and hospital-specific data reflecting mortality rates and hospital-acquired infection rates. We believe that sharing this data will engender greater confidence in our facilities and is evidence of our commitment to quality improvement and safety.

Next month, we will update the current data in “HHC in Focus” to reflect our performance during calendar year 2007 and we will add new data reflecting the outcomes of our work in treating and managing chronic disease. For example, a series of performance indicators reflecting the health status of our adult patients with diabetes will be posted on a system-wide and facility-specific basis, allowing the public to monitor whether we are being successful in bringing more diabetic patients into good control over the coming years.

All of our efforts to provide safer care, to better manage chronic disease, and to provide care that prevents or diagnoses disease at an early stage, confirm the commitment of all HHC staff to our patients and our mission.

I have provided an overview of the past year’s accomplishments and a preview of some of what we expect to do in the coming year. All is not rosy, of course, because we face significant budget challenges at the federal, state and city levels.

In particular, the budget proposals put forth by President Bush, that I mentioned earlier, would cut Medicare reimbursement to HHC by $67 million in 2009 and $628.7 million over the next five years. More troubling are the projected $520 million in cuts in federal Medicaid funding per year that our system would experience if three regulatory changes put forth by the federal Center for Medicaid and Medicare Services (CMS) are enacted. Last year, Congress wisely imposed a one-year moratorium on two of the proposed regulatory changes. This moratorium expires on May 25th, 2008. We are working closely with members of New York’s Congressional delegation to extend the moratorium for at least one more year and to include the third regulation that is not yet covered by the existing moratorium. I ask that you contact your colleagues in Washington and urge them to do all they can to get this moratorium extended.

I indicated that we are supportive of many of the policy reforms in the proposed budget for state fiscal year 2009. The proposed state budget includes an expansion of the Child Health Plus Program; investments in outpatient services; and the creation of financial incentives to encourage doctors to maintain, establish or expand practices in underserved areas. The state also proposes significant revisions to the methodologies used to determine inpatient reimbursement rates, and payments for ambulatory care. When the inpatient rate changes are fully implemented in 4 years, HHC hospitals could lose approximately $160 million. However, if the outpatient rate changes are also implemented, HHC facilities would gain nearly $114 million towards the cost of the emergency room, clinic and ambulatory surgery services we provide. While the outpatient reforms substantially mitigate the inpatient revenue losses, there are certain budget proposals that represent unmitigated cuts in Medicaid funding and may have a substantial adverse effect on specific services we deliver. Most notably, funding for hospitals that operate inpatient detox services would be reduced dramatically. In the case of HHC hospitals, the proposed changes would mean a reduction of $27 million. The proposed state budget also includes a “take back” of funds anticipated by nursing homes from increased reimbursement rates that had been agreed to by the governor and legislature in the 2006 state budget, but have not yet been approved by the federal government. This would result in a loss of $7 million in funds for our long term care facilities.

Overall, the net impact of the state executive budget proposals is a loss of $28 million to HHC in state fiscal year 2009; and a loss of $118 million a year in state fiscal year 2012 when the changes are fully implemented. We will continue to advocate that the state legislature revise some aspects of the proposed budget to mitigate these impacts.

Financial Plan

In terms of the City budget, the January Financial Plan included a PEG program of 2.5% in fiscal year 2008 and 5% for the out-years. In order to meet this target, we will reimburse the City for increases in its debt service and A-87 expenses on our behalf. This proposal will result in a reduction of approximately $20 million over the life of the Financial Plan.

As you know, our base funding for fiscal year 2009 does not include the $21.8 million in funding that the Council restored last year for the operation of the Child Health and Communicare clinics; behavioral health programs; HIV and TB programs; and the pharmacy fee waiver program. Specifically, unless funding is restored in fiscal year 2009 we will receive:

• $2.4 million less for the provision of waivers of our outpatient pharmacy fees;
• $6.2 million less for substance abuse, mental health and mental retardation/developmental disabilities programs;
• $12.2 million less for the operation of child health clinics and Family Health/Communicare clinics; and
• $1.0 million less for HIV and TB services

The HHC Financial Plan for fiscal year 2009 includes $6 billion in expenditures and $4.8 billion in baseline revenues. Therefore, we are facing an above the line gap of more than $1.2 billion in fiscal year 2009. This gap is largely due to the loss of revenue from several sources that is not in the current baseline.

Over the past several years, we have received large payments from prior year retroactive Disproportionate Share (DSH) payments. The decline in DSH funding in the Financial Plan for fiscal year 2009 of more than $300 million is based on prior year payments that are non-recurring and, accordingly, are not reflected in the Plan. In fiscal year 2008, HHC anticipates $140 million for outstanding retroactive Medicare appeals dating back to 1992. However, we do not anticipate significant recoveries from appeals in future years. Additionally, due to pending federal legislation, the availability of the Upper Payment Limit funds of $432M is at risk for fiscal year 2009 (as well as for future years); therefore this revenue is shown below the line. The Plan also reflects the end of a multi-year state grant (i.e., Community Health Care Conversion Demonstration Program) and the cessation of a workforce retraining and recruitment grant resulting in a revenue loss of approximately $45M.

The HHC Financial Plan assumes modest increases in the cost of personal services—1.25 percent per annum for the life of the Plan. In addition, the Financial Plan reflects significant increases in fringe benefits in fiscal year 2009. Most noteworthy, our pension costs and health benefits are scheduled to increase by approximately $30 million. The Financial Plan forecasts increases in other than personal services (OTPS) of about 3 percent in fiscal year 2009 and 2.5 percent thereafter. We anticipate that our contracts with affiliate organizations providing physician and other clinical services will grow at an average rate of 4 percent per annum. To sustain this level of modest growth will require that we continue to leverage our volume to find strategic purchasing opportunities to lower our OTPS costs. The Financial Plan assumes about $200 million per annum for debt service costs. We are concerned about the affect the recent changes in the bond market will have on our variable rate debt. Accordingly, there is a risk that we may face increases in interest expense of as much as $4 million per year.

As you can see, the road ahead has many challenges in terms of HHC securing adequate funding to sustain our mission and to ensure that we can continue to transform for the better our delivery of health care to 1.3 million New Yorkers.

This concludes my written testimony. I now look forward to listening to your comments and answering your questions.