Press Releases

CONTACT:
Press Office
(518) 474-4015

 FOR RELEASE:

Immediately
March 15, 2005

 

Health and Hospitals Corporation Faces Large Budget Gaps

The New York City Health and Hospitals Corporation (HHC) is making progress on closing a projected cash deficit of more than $600 million for FY 2006, but the budgets proposed by the Governor and the President could set back those efforts, according to a comprehensive analysis of HHC’s finances by State Comptroller Alan G. Hevesi.

HHC’s primary mission is to provide comprehensive medical and mental health services to patients regardless of their ability to pay. While there has been a reduction in the number of uninsured served by HHC due to an expansion of public health insurance programs, HHC is serving a greater share of the City’s uninsured.

“The health care environment has become highly competitive and HHC has to compete with other healthcare providers for paying customers,” Hevesi said.

HHC must be given credit for having taken a number of significant and important steps to reduce costs, increase revenues, and improve services over the past decade in an effort to improve its bottom line. Nonetheless, HHC’s cash position has been eroding since FY 2000 due to a loss of market share; outdated reimbursement formulae, a shift to outpatient services, and rising pension contributions. Third party revenues from private insurers, Medicaid and others cover only 75 percent of HHC’s expenses in FY 2005 compared with 89 percent in FY 1999.

HHC projects a cash deficit of $612 million for FY 2006, which represents 14.8 percent of revenues, and deficits that average $568 million in subsequent years. The report identifies budget risks of $374 million in FY 2006, which could widen the deficit to nearly $1 billion if they materialize. The largest budget risk facing HHC is the potential impact of the Governor’s proposed budget.

The Governor has proposed a number of cost-containment and other actions in an effort to reduce the financial burden Medicaid imposes on the State and its localities. The State Division of the Budget estimates that these measures could widen HHC’s FY 2006 budget gap by $200 million, and HHC estimates that the impact could be as high as $275 million. The Governor’s Working Group on Health Care Reform recommended that the State reallocate certain subsidies to hospitals, such as HHC, that have increased the care they provide to the uninsured and underinsured.

HHC is making progress on a number of cost-reduction and revenue-enhancement initiatives to close the budget gap projected for FY 2006. These include retroactive rate appeals, staff reductions, and additional federal and State aid. The budgets proposed by the Governor and the President, however, include cuts that could adversely affect the HHC. The City recently increased its subsidy to HHC by $150 million and, unless HHC’s gap-closing efforts are successful, the City could be called upon to provide additional assistance.

“HHC has done a lot to reduce costs, increase revenues, and improve efficiencies. Unfortunately, it has to do more,” Hevesi said.

As part of the Comptroller’s continuing efforts to improve the financial reporting and transparency of public authorities, HHC has agreed to prepare its four-year financial plan on both an accrual and cash basis, and to reconcile the differences so that a more complete picture of HHC’s finances can be obtained. Although the Governmental Accounting Standards Board (GASB) requires HHC to have its independently audited financial statements prepared on an accrual basis in accordance with generally accepted accounting principles (GAAP), HHC’s four-year financial plan is currently prepared only on a cash basis.

The report also found that:

  • According to a recent report issued by the Governor’s Working Group on Health Care Reform, the formula used to determine payment levels for bad debt and charity care has not changed since 1996 and the Medicaid reimbursement formula for outpatient services has not been updated or amended since 1993.
  • HHC’s overall share of citywide Medicaid inpatient discharges declined from 30 percent in 1995 to 25 percent in 2002, and its share of Medicaid managed care inpatient discharges declined from 47 percent in 1995 to 17 percent in 2002.
  • Even though HHC experienced an 11 percent reduction in the total number of inpatient discharges between fiscal years 1995 and 2002, the uninsured represented a slightly larger share of the total discharges in FY 2002 (9.5 percent) because the number of uninsured inpatients served by the Corporation has remained essentially unchanged.
  • HHC has assumed greater responsibility for inpatient care to the uninsured relative to other hospitals located in New York City. For example, HHC’s share of citywide uninsured inpatients increased from 35 percent in FY 1995 to 55 percent in FY 2002.
  • Pension contributions are projected to grow from $21.7 million in FY 2003 to $117 million in FY 2005, and then to more than $200 million by FY 2007, which is an average annual rate of 78 percent during fiscal years 2004 through 2007.
  • HHC reduced the number of inpatient beds by 28 percent between fiscal years 1994 and 2000, which increased occupancy rates from 84 percent in FY 1994 to 91.4 percent in FY 2000 and allowed HHC to reduce staffing levels by about 30 percent. In recent years personnel levels have risen modestly and the occupancy rate declined to about 90 percent.
  • The President would greatly curtail certain financial arrangements utilized by some states to maximize their federal Medicaid reimbursement. HHC employs such arrangements, and therefore could lose an estimated $120 million in FY 2006.
  • Judgments and claims against the Corporation have risen from $79 million in FY 1995 to a projected $184 million in FY 2005.
  • Emergency room visits have increased since FY 1996 — after a 30 percent reduction between 1985 and 1996.
  • Since FY 1996, more than $1.5 billion has been invested in HHC’s facilities. These investments modernized acute care facilities, renovated heating and ventilation systems, purchased new information systems, and constructed new ambulatory care facilities.

Click here for a copy of the report.

###

Albany Phone: (518) 474-4015  Fax:(518) 473-8940
NYC Phone: (212) 681-4825  Fax:(212) 681-4468
Internet: http://www.osc.state.ny.us
E-Mail:press@osc.state.ny.us