Bloomberg News

NYC Hospital Agency Deficit to More Than Triple to $1.4 Billion

February 24, 2014

New York City’s Health and Hospitals Corp., which operates the biggest municipal health system in the U.S., said its budget deficit will more than triple to $1.4 billion in four years.

The system, which served 1.4 million patients last year, including 500,000 without health insurance, is suffering from Medicaid reimbursement cuts and “astronomical increases” in pension and employee health-insurance costs, Alan Aviles, president of the agency, said today in written testimony for the city council health committee.

“The safety-net role of our public hospital system has made HHC especially vulnerable to deep cuts to Medicaid, the cost of serving a rising tide of uninsured patients and the erosion of federal funding,” Aviles said.

The hospital corporation’s woes add to the fiscal strains facing Mayor Bill de Blasio, whose $74 billion preliminary budget doesn’t account for settling expired contracts with more than 150 public employee unions. Providing retroactive pay may cost more than $6 billion, according to the Independent Budget Office, a city-funded fiscal monitor.

An $8 billion federal Medicaid waiver announced two weeks ago may help HHC weather its fiscal storm, de Blasio said when he presented his first budget on Feb. 12. The waiver will allow New York to restructure its health-care system, de Blasio said. About 80 percent of HHC’s patients are on Medicaid, the federal-state health insurance program for the poor, or are uninsured, according to HHC.

Cutting Staff

The agency’s deficit is growing even after it cut 3,700 positions, mostly through attrition, and restructured operations, saving $600 million annually. HHC, which has an $8 billion budget and operates 11 acute-care hospitals, received $600 million in city and federal funds to close a $1.2 billion deficit in the fiscal year that ended June 30.

Under the Affordable Care Act, the federal government will reduce supplemental Medicaid and Medicare funding to HHC for poor patients. Those cuts could reduce the hospital corporation’s federal funding by more than $325 million annually, Aviles said last month. Federal reimbursements also haven’t made up $142 million in costs resulting from Hurricane Sandy, Aviles said.

Since 2008, HHC has lost more than $540 million a year because of cuts to Medicaid reimbursement rates. Pension and employee health-care costs have increased by $680 million since July 1, 2001, Aviles said.

To contact the reporter on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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