Federal COVID-19 relief funds distributed during the pandemic provided critical financial support to New York City Health and Hospitals (H+H), but reliable funding and timely payments from all government sources is needed to keep the largest municipal health system in the country in good fiscal health, according to a report released today by State Comptroller Thomas P. DiNapoli.
“H+H’s essential mission to serve all city residents, including its most vulnerable, puts the system under constant financial pressure. The pandemic has only added to that challenge,” DiNapoli said. “H+H administrators have taken steps to shore up the system’s finances, and federal funding provided critical relief when COVID first hit New York. Senate Majority Leader Schumer and the New York City congressional delegation fought hard to get H+H the money it had coming from the Federal Emergency Management Agency, which should help with critical cash flow. Going forward, however, the system needs help from all levels of government to stay solvent and prepare for future emergencies.”
The challenges facing H+H are daunting. Its patient base reflects the underlying socioeconomic and health disparities in the city. Likewise, more preventable hospitalizations and lower rates of health care coverage are more likely in low-income communities, where the majority of H+H patients live. These communities were also more likely to have people with underlying conditions that increase the risk of contracting and having severe cases of COVID-19.
Pandemic Tested Operations and Finances
At the outset of the pandemic, H+H experienced challenges with supply shortages and emergency room and ICU capacity, particularly at Elmhurst hospital. However, as the pandemic unfolded, H+H assumed a significant role in planning for and responding to the city’s public health emergency.
H+H faced structural budget challenges prior to the pandemic, including the declining use of services, reduced federal funding and a large share of uninsured and Medicaid-insured patients who are, on average, less likely to reimburse H+H for the full cost of services. The ability of H+H to manage its finances and balance its budget has required regular subsidization from the federal, state and city governments.
The crisis created by the COVID-19 pandemic came as H+H was stabilizing its financial situation through its transformation plan. Since 2015, H+H has been introducing initiatives as part of this plan to reduce costs and increase revenue collections through improving billing procedures, negotiating higher insurance rates, and attracting and keeping patients.
The pandemic put more pressure than ever on H+H and strained physical and staff resources at its facilities. It acted early to expand capacity, increase telehealth to treat patients remotely and launch new initiatives such as the Test & Trace Corps. The system hired 1,305 technical specialists and contracted for 4,000 nurses to manage increased operational demands.
By June 23, 2021, H+H had administered one million vaccinations (11% of the vaccines administered in the city), with 76% of those delivered to people identifying as ethnic or racial minorities. This compares to 73% for the independent hospitals, and 56% for the other hospital systems in the city.
H+H estimates that total costs related to its COVID-19 response will reach $2 billion through fiscal year (FY) 2022, excluding $3 billion in costs for the Test & Trace program. Total COVID expenses are also expected to increase as new variants continue to spread, which will continue to strain the system’s finances.
Government Support Critical
The receipt of federal COVID-19 relief funds early in the pandemic was instrumental in supporting H+H’s financial condition in the short term, as they provided direct support for activities related to the public health emergency. Pandemic-related costs of $788 million in FY 2020 were offset with the receipt of more than $1 billion in provider relief funds. However, subsequent delays of $590 million in FEMA reimbursement have created financial pressure. While these funds have received preliminary approval, it is uncertain when the funds will flow to H+H.
Federal aid enabled H+H to end FY 2020 with a closing cash balance of $688 million, and largely attain its bottom-line target for the year under its transformation plan. In total, H+H achieved $1.3 billion in savings during FY 2020.
The longer-term outlook for federal support to H+H also remains uncertain. Federal legislation passed during 2020 spurred another delay to planned cuts to supplemental Medicaid payments, which are set to return in FY 2024. In an effort to reduce uncertainty about its future funding levels, H+H has been working with the federal, state and city governments to update how H+H will receive certain supplemental Medicaid payments, with the goal of not only providing additional revenue but also obtaining the payments on a more reliable and consistent schedule. However, these payments have yet to receive federal approval.
H+H’s most recent financial plan estimates that H+H will achieve savings of $747 million annually from previous cost saving efforts starting in FY 2021, and $1.2 billion in new savings which includes $611 million of new supplemental Medicaid payments. Additionally, the budget assumes planned cuts in federal supplemental Medicaid payments of $580 million will be delayed. City-funded support to H+H is projected to exceed $2 billion in FYs 2022 through 2025, as compared to $1.3 billion annually between FY 2012 and 2015.
DiNapoli’s report highlights the importance of providing reliable and timely payments from all government levels going forward. It also recommends H+H continue efforts to improve billing and coding, work with insurance companies to increase reimbursement rates, retain the new patients gained during the pandemic, promote primary and preventive care in underserved communities and plan for future health crises.
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