Remarks of HHC President Alan D. Aviles HHC Restructuring and Cost Containment Plan Press Conference

May 11, 2010

Good morning.  I'm Alan Aviles, President and CEO of the New York City Health and Hospitals Corporation. 

I am joined today by Deputy Mayor Linda Gibbs and our seven HHC Network Senior Vice Presidents: Lynda Curtis, Iris Jimenez-Hernandez, Antonio Martin, Jose Sanchez, Ann Sullivan, William Walsh and Arthur Wagner.  I also want to recognize Dr. Michael Stocker, Chairman of the HHC Board of Directors who is with us as well.

The HHC Network leaders who join me today were part of a senior executive team that just completed a 6-month strategic review and analysis of HHC operations to identify how we could further reduce our daunting budget gap without compromising our ability to serve the more than 1.3 million patients who rely on our system for care every year.  

Our goal to stabilize HHC's finances over the next few years has been aided greatly by significant additional financial assistance reflected last week in the Mayor's Executive Budget.  Without that city support, our ability to target and phase-in the reductions to minimize disruption to our delivery of care would have been substantially compromised.

We are grateful to Mayor Bloomberg for his continued strong support of HHC and our mission.  But there is still work to do at the State and federal level to assure that our projected gap is fully addressed, as I will explain.

I think many of you have reported on the reasons why our public hospitals and health centers are facing a fiscal crisis.  In short, the protracted economic downturn, a substantial loss of federal funding, increasing numbers of uninsured patients, sky-rocketing fringe benefit costs and $240 million in cuts to our Medicaid reimbursements, have created a perfect storm that has saddled HHC with a projected $1.2 billion budget shortfall. 

With the closure of St. Vincent's Hospital, the last vestige of a formerly vast Catholic healthcare system in the city, the viability of our public system, as the primary healthcare safety net for the most vulnerable among us, is all the more critical.  We need to act now to stabilize the finances of the system and secure its long term future.

Today we present a comprehensive four-year cost-containment and restructuring plan that will generate $300 million in new savings and efficiencies by consolidating programs, right-sizing operations, contracting for targeted support and technical services, and closing a small number of clinics with low patient volume.  You have the full report outlining those actions.  I will briefly take you through it before we conclude.

This new $300 million cost containment plan reflects a second round in projected new savings.  They are on top of roughly $300 million in reduced spending and enhanced revenues we have already put in place -- including the hiring freeze we imposed in early 2009 and the expected attrition of 1,300 staff by this June 30th.  

At the outset, however, let me be clear that in meeting our financial challenges, we will close no hospitals, no patient will be turned away, and our commitment to serve the uninsured, undocumented immigrants and others who need us the most will remain intact. 

We are not the only public hospital system in the country facing major budget challenges. But, I am pleased to say, that we have found a way to avoid some of the most draconian choices other hospitals have had to make.  In fact, there were a number of options considered that would have yielded significant savings, but were simply unacceptable, and antithetical to our mission.  And those options were rejected.

Our plan will reduce our workforce by another 2,400 employees -- bringing our total FTE headcount down from just over 38,700 in early 2009 to roughly 35,000 by the end of FY 2014.  We will accomplish that target through a combination of layoffs and further targeted attrition over the next four years.  Most of the workforce reduction, as you will see, is highly targeted and seeks to minimize impact on our direct patient care services and to allow us to preserve the substantial quality and patient safety gains we have made in recent years.

Nonetheless, these actions will have serious consequences for the employees affected, will cause anguish within our organization and will strain important relationships that we have forged over the years, especially with our union partners. 

We deeply regret that such action is necessary, especially at a time when alternative employment opportunities may be scarce.  But, these are the tough choices we have to make if we are to remain faithful to our mission, protect our core patient care programs, and prevent the need for a more drastic reduction or elimination of services. 

The gap closing actions on our part -- both those already taken and those planned -- will ultimately address only about $600 million of our projected $1.2 billion budget deficit.  Again, the City support will also go toward closing the gap -- specifically by allowing us to forgo the repayment to the City of $349 million of debt payments and other cash obligations this year. 

The Executive Budget also reflects additional city commitments to invest an average of about $300 million annually over each of the next four years to match federal supplemental Medicaid funding of roughly equal amounts.  These City dollars combine with federal dollars to yield about another $600 million annually to cover our expenses. 

We recognize that this is a difficult time for the City and that the City budget is very tight.  We take this willingness to invest in HHC as not only an affirmation of continuing strong Mayoral support for our safety net mission, but also as a vote of confidence in our ability over recent years to render high quality care.

Our fiscal stability plan for HHC will also depend on State actions.  And we assume that the State will do its part.  The leadership in both houses of the State Legislature, as well as the Governor's office, have voiced strong support for securing additional federal funding for HHC.  The State would have to gain federal approval of some technical amendments to its Medicaid Plan for us to receive those federal funds.  We believe that there is a firm basis for federal approval and such approval would bring federal funding for HHC back up to the average levels that we have received over the last four years.  

I need to stress, however, that this remains a real risk in our overall plan.  If, for any reason, these additional supplemental federal Medicaid funds do not materialize, we would be left with a deficit amounting to several hundred million dollars and that would lead to further, deeper and much more devastating cuts.

The last time HHC faced such hard times -- some 15 years ago -- our public hospitals were up for sale -- on the path to being dismantled -- for having failed to uniformly deliver the care New Yorkers deserve.

That controversial effort failed, but it became the stimulus for a difficult, but ultimately positive transformation.  Back then, the system shed nearly 2,500 hospital beds, reduced headcount dramatically, and major reforms began to take root to raise the quality of care. 

Ironically, the financial challenges we face today come at a point when our public hospitals no longer stand simply as the system of last resort. 

In recent years, HHC has outperformed the majority of private hospitals in New York City on many publicly reported clinical quality and patient satisfaction measures.  And our quality improvements and patient safety initiatives, in particular, have garnered prestigious national awards and recognition, including the Eisenberg Award from the National Quality Forum in 2008. 

Those recent accomplishments have been possible because we have had a strong and stable senior management team and a dedicated, compassionate workforce, because we have had the unwavering support of our Mayor and City Council, and because we have had a fair measure of fiscal stability. 

Though the implementation of our $600 million gap-closing plan will be difficult, we will accomplish it.  We fully understand that more than 1.3 million predominately low-income New Yorkers who get care at HHC every year are counting on us to protect and preserve the city's last major healthcare safety net. 

Let me now invite Deputy Mayor Gibbs to the podium.

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