New York City’s public hospitals face funding crisis

It was a rare and effective Empire State leadership tableau on display when Gov. Andrew Cuomo joined New York City Mayor Bill de Blasio at a press conference to update an anxious public on the status of the city’s first Ebola patient.

The men were joined at the Bellevue Hospital Center briefing on Oct. 23, 2014, by New York City Health Commissioner Mary Bassett and Dr. Ramanathan Raju, the city’s public hospitals chief. The measured tone of the presentation exuded a calm competence that the city, the nation, indeed the world needed at a time when bungled public health responses, both in West Africa and Houston, had raised serious concerns about the world’s ability to respond to the deadly disease.

All these months later, it’s easy to forget the anxiety as 100 medical professionals succumbed to the exotic infectious disease, with many more falling gravely ill. Ebola had easily jumped oceans with a jet-age efficiency, faster than it appeared we could fashion a response to stop its advance.

As it turned out, consistent public investment in New York City’s municipal health system, which dates back to the 19th century, was paying real dividends of global consequence in the 21st. 

“And we want to emphasize that New York City has the world’s strongest public health system, the world’s leading medical experts, and the world’s most advanced medical equipment,” de Blasio told reporters that day. “We have been preparing for months for the threat posed by Ebola. We have clear and strong protocols, which are being scrupulously followed and were followed in this instance. And Bellevue Hospital is specially designed for isolation, identification and treatment of Ebola patients. Every hospital in the city is prepared in the event that other patients come forward.”

A few weeks later, the patient, Dr. Craig Spencer, left Bellevue a cured man. 

In retrospect, New York City’s response was a critical turning point in the global crisis. At a time of collective high anxiety, the value of New York City’s public hospital system proved to be priceless. 

Yet, barely sixteen months later, that same public hospital system – formerly known as the Health and Hospitals Corporation and now re-branded as NYC Health + Hospitals – is facing perhaps the greatest financial crisis of its existence.

Formed in 1969, the city’s municipal hospital system for decades has provided the kind of universal health care in the real world that still remains an aspirational talking point in our national politics. In New York City no one is turned away, and unlike at other hospitals the city’s public hospitals don’t have the cost saving option of just stabilizing the seriously ill patients and transferring them out to some other facility. They keep patients until they’re well.

“With the city’s system the mission is that everyone has a right to health care no matter who you are, what ZIP code you come from, or even your immigration status,” said Kevin Collins, the executive director of the Doctors Council, an SEIU affiliate that represents the 2,500 doctors and dentists who staff the city’s 11 acute care hospitals and dozens of outpatient facilities and clinic sites across the five boroughs.

However, New York City’s medical safety net model is now facing a tidal wave of red ink that’s projected to grow exponentially. From 2008 to 2014, HHC was losing more than half a billion dollars annually.

According to a city filing on September 2015 with the state Financial Control Board, the municipal hospital system’s yearly operating losses are projected to double from $984 million in 2016 to $1.83 billion by 2019. When you add in debt service the numbers are even more dire, with a $1.1 billion loss in 2016 jumping to a $1.95 billion shortfall in 2019.

The trend lines show a system with declining revenue, even as costs continue to spike.

In March of 2014 the city’s Independent Budget Office listed the system’s challenges: repeated state and federal cuts, decreased patient utilization of the system’s facilities, a patient base heavily weighted toward the indigent, the uninsured and those on Medicaid, and “stubbornly high labor costs.”

The city’s municipal hospital system does not operate in a void. For decades, national efforts at health care cost containment and advances in medicine combined to reduce the need for hospital beds as the nation shifted to outpatient services and one-day procedures.

Mayor Bill de Blasio hosts a press conference at Bellevue Hospital regarding the discharge of Ebola patient Dr. Craig Spencer. Photo: Rob Bennett/Mayoral Photography Office.

Over the same period, even as actual medical costs nationwide continued to rise in the era of “managed care,” federal reimbursement rates were cut. Hardest hit were the big urban teaching hospitals and “safety-net” public hospitals that were providing medical care for the tens of millions of people who lack insurance and the swelling ranks of undocumented immigrants. In essence, these are the critical portals through which a potential Ebola risk could float, as it did, undetected. 

Nowhere was this battle over which hospitals should be declared an unnecessary “surplus” more bitter than in New York City. The process of “right-sizing” the number of hospital beds in a community has been fraught with bitter politics that often pitted constituencies against one another.

All too often, community activists found themselves unable to counter health care systems and real estate developers who saw selling off of a hospital campus as a “win-win.” Advocates warned that if keeping a local hospital open was purely decided on short-term economics, historically poor and disadvantaged neighborhoods of color, already dealing with the legacy of health care disparities, would lose even more ground.

Since 2003, 16 hospitals in New York City have closed. 

As public advocate and a candidate for mayor, de Blasio was arrested in a high-profile protest of the closure of Brooklyn’s Long Island College Hospital, which was founded in 1858. Although de Blasio went on to win the mayoralty, the hospital was ultimately closed in 2014.

The stage was set for the New York City municipal hospital system’s latest and most daunting crisis in 2010 and 2011. After years of inaction in Washington, D.C., and Albany, the election of President Barack Obama in 2008 and of Cuomo in 2010 would bring seismic changes in health care. 

Obama’s landmark Patient Protection and Affordable Care Act, passed in March 2010, aimed to reduce the number of uninsured Americans, but it also expressly prohibited the participation of millions of America’s undocumented residents. In addition, the landmark legislation promised reductions in federal support for safety net hospitals, like New York City’s public hospitals, for charity care. The logic was those indigent care costs should be ratcheted down as the number of uninsured declined. 

In 2011, just a few months after being elected, Cuomo appointed a Medicaid Redesign Team with a mandate to rein in the state’s escalating Medicaid spending while improving the quality of the care.

The stakes were high. The state was spending $50 billion a year on Medicaid. For a majority of the state’s 62 counties, the cost of Medicaid was half of their annual tax levy, with no relief in sight. New York state spent more than twice the national average on Medicaid on a per capita basis. Its spending per participant was the second highest in the nation, and for all that spending it ranked only 21st in the overall quality of the health care system. The Empire State ranked last among all states when it came to avoidable hospitalizations.

By June 2015, Cuomo was able to report that under the Affordable Care Act, 500,000 state residents had signed up for Medicaid. At the same time, overall Medicaid spending had “significantly slowed” to just 1.4 percent annually since 2011, as compared to the 4.3 percent hike in costs the state averaged between 2003 and 2010.

Thanks to a 2014 deal Cuomo cut with federal Medicaid regulators, the state would make a crucial shift from a fee-for-service model of hospital compensation to a value performance system. This pivot would reward reductions in emergency room visits, reduce hospitalizations and produce better health outcomes. Under the terms of the pact, New York would be entitled to invest $7.3 billion of the resulting savings back into improving its overall health care system. 

“There are many shifts in NYC Health + Hospitals’ traditional revenue and expenses going on right now because of policy changes on the federal, state and local levels, as well as changes in the health care landscape,” said Erin Kelly, a health budget and policy analyst with the city’s Independent Budget Office. “If NYC Health + Hospitals is definitely at a moment where they need to decide how to respond to these changes and what their strategy is moving forward, they’re certainly not alone in this, as many people are wondering where safety net providers fit in a post-ACA, managed care and highly consolidated health care landscape.”

Raju, NYC Health + Hospitals’ president and CEO, is confident that the hospital system that successfully beat Ebola can navigate the challenging road ahead. Despite the two tracks of reform coming from Washington and Albany, he said, major reforms are needed in both how care is delivered and how it is paid for.

“The delivery of care in this country has for too many years been purely a physician driven system,” Raju said at the system’s executive offices on Worth Street in Lower Manhattan. “Now we need to be given care by a care coordinator, social worker, nurses, physician’s assistant and nurse practitioners.”

Raju said the only way for the city’s system to get into the black is to increase its market share by improving the level of patient satisfaction and turning patients “into our ambassadors,” promoting the system by word of mouth.

Raju is banking on the expansion of the municipal system’s MetroPlus health insurance plan from its current half a million subscribers to one million in five years. To be competitive in a marketplace increasingly driven by patient choice, Raju said the city’s health care system must be easily accessible both physically and culturally.

But while Raju hailed the passage of the Affordable Care Act, he acknowledged that it does have gaps, such as not extending coverage to undocumented immigrants, a big part of the patient base of New York City’s public system. By some estimates there are about half a million undocumented New Yorkers, and roughly half of them are uninsured. According to Raju, excluding the undocumented from coverage is a mistake. 

NYC Health + Hospitals’ edge in the battle for patients is the diversity of its 38,000-plus employees, Raju said. ‘’We have one great advantage: You can come from anywhere in the world, and you can come in and I’ll be able to find you somebody from your part of the world who speaks your language and looks like you.”

Collins, the executive director of the SEIU Doctors Council, said his workforce is very much engaged in improving the patient experience in working with the system’s management and the broader community. 

Through what Collins calls collaborative councils, the medical professionals he represents in New York City are empowered to have a meaningful role in the decision-making about how best to improve patient care. “You improve the patient experience through the engagement of front-line doctors who are not just being told what’s going to happen,” Collins told City & State.

Even in a best-case scenario, achieving Raju’s goals is still a few years off. It's not clear, based on just how much red ink there is on the system’s books, how much time he really has.

In his State of the City address, de Blasio called for a $337 million cash infusion into the city's financially strapped municipal hospitals. At a press conference, de Blasio committed to releasing his own strategy that would “figure out long-term financial stability and viability” for the city system. 

“It’s premature to start to outline it until it’s all done, but it’s going to have to put Health + Hospitals on a strong footing for years and years to come in a substantially changed health care environment,” de Blasio told reporters.

“And we now know many good things came out of the changes at the federal and state level – I want to be very clear, a lot of good came out of Obamacare, a lot of good came out of the Medicaid reforms, but some real unintended consequences, too,” the mayor continued. “We now have that picture and we’re going to have to adjust for a very different future.”

Right now, the short-term fiscal future of the city’s hospital system, the largest in the country, is at best murky. It’s likely the mayor’s plan for ensuring the long-term sustainability of the city’s hospital system will come out later this spring around the time of his proposed budget. 

No doubt, this is a heavy lift that the city can’t do alone. State officials play a key role in terms of hospital funding, and Cuomo’s initial budget, released in January, only increased concerns inside City Hall. The governor's budget appeared to shift to the city Medicaid costs historically borne by the state, to the tune of a $1 billion by 2020. 

In public statements since, Cuomo has said his budget is only aiming at efficiencies, not actual cuts. “It won't cost New York City a penny," Cuomo insisted. 

Cuomo and the state Legislature have until their April 1 budget deadline to frame a final budget, at which time the de Blasio administration will know just how much of a partner they have in Albany.