After a six-month strategic review and analysis of HHC operations to identify viable options to help close a looming $1.2 billion budget gap, HHC President Alan D. Aviles and HHC Network Senior Vice Presidents on May 11 presented a comprehensive restructuring and cost containment plan for the city’s public healthcare system that will generate $300 million in new savings and efficiencies.
The $300 million in new savings are in addition to $300 million in savings and enhanced revenues expected from actions HHC has implemented over the past two years to help address a budget deficit that results from reduced state and federal Medicaid funding, a dramatic rise in the number of uninsured patients and sharply rising pension and healthcare costs.
Under the four-year plan, HHC will right-size operations, consolidate programs, contract for targeted support and technical services, and close only a small number of clinics with low patient volume.
HHC also received gap-closing support from a new infusion of city funds announced in Mayor Bloomberg’s Executive Budget.
“With recent hospital closures in Manhattan and Queens, HHC’s role as a safety net is more vital then ever. We need to act now to stabilize the system and secure its long-term future,” said Aviles. “We are grateful to the City for its willingness to invest scarce resources as part of our overall plan to put HHC on firmer financial footing. This new infusion of city support allows us to spread the necessary cuts over the four year plan, which helps us secure more workforce reduction savings through targeted attrition rather than only through layoffs.”
In an effort to limit impact to patients and disruption to the system, HHC leaders rejected a number of cost containment options, which included the closure of approximately one-third of HHC’s community-based health centers; the elimination of most outpatient specialty services and consolidation of such services in one acute care facility; and the elimination of nearly all of the system’s long term care beds.
“We also continue to work with the State to optimize supplemental Medicaid payments intended to support safety net providers, like our public hospitals and health centers. We have identified hundreds of millions of dollars in such potential payments over the next four years. The City has budgeted the matching dollars required to access such Federal funds and the State will need to secure Federal approvals. Even if we succeed in obtaining these payments, we need to make tough strategic choices to become more efficient and further close our budget gap.” Aviles said.
Taking into account the reduction of 1300 staff over the last year by attrition, once the four-year restructuring and cost containment plan is fully implemented, the HHC workforce will have been reduced by a total of 3,700 – nearly 10% percent. During the first fiscal year of the plan, FY 2011, there will be a workforce reduction of 1,000 positions through a combination of layoffs and attrition
Highlights of the HHC FY 2011 – FY 2014 Restructuring, Cost Containment Plan
- Administrative/Shared Services – To target benchmark efficiencies in multiple administrative areas by creating cost effective shared services operations and contracting out the management and/or provision of ancillary services. Target savings: $141 million
- Long Term Care Realignment – to better match HHC’s long term care bed capacity to patient demand for skilled nursing and chronic hospital services; consolidate administrative and support services where possible; consolidate under-utilized services. Target savings: $47 million
- Affiliation/Physician Services Realignment – To match contracted provider resources to patient volumes and need; reduce administrative positions. Target Savings: $51 million
- Acute Care Realignment — to improve care management and reduce patients’ length of time in hospital; facilitate the retention of more surgeries within the HHC system; consolidate selected inpatient services. Target Savings: $26 million
- Ambulatory Care Realignment — to consolidate some specialty outpatient services; close six satellite clinics with low utilization; pursue alternative administrative models for delivering outpatient services. Target Savings: $39 million
Details of the four-year restructuring and cost containment plan are outlined in the 20-page report, Restructuring HHC: The Road Ahead.