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2010 Year in Review

Report to the HHC Board of Directors

 

HHC Finances, Cost Containment, and Restructuring
 

It is hard to start anywhere but the budget, and the deepening impact of repeated Medicaid cuts and certain escalating costs beyond our control. The magnitude of the combined blow to our system is unprecedented and daunting. It includes rapid increases in the cost of medical supplies and equipment, skyrocketing employee pension costs, increased numbers of uninsured patients, and decreased government funding at all levels. Most notably, since 2008 we have absorbed some $330 million in Medicaid cuts, with more on the near horizon.

The sum of these developments – a $1.2 billion budget gap at the start of this fiscal year – has been a central focus of HHC's time and energy. You are familiar with our cost containment and restructuring work, our efforts to reap savings and revenues through our Breakthrough activities, and the financial assistance from the City that have cumulatively enabled us to weather the first strong surges of the ongoing budget storm.

In addition to an investment of $350 million at the end of last fiscal year and an average of roughly $300 million annually toward our four-year financial plan, the City is working with us to secure State legislation enabling us to match those funds with $300 million in Federal supplemental Medicaid payments starting in 2011. If this effort is successful, it will restore supplemental Medicaid funding lost in recent years, and it will give us some breathing room to target and phase in further planned reductions and restructuring over a four-year period with minimal impact on our overall service capacity and without adversely affecting our ability to render safe, high–quality care.

Significant cost containment efforts, including an enterprise-wide hiring freeze, began in early 2009 and carried over into 2010. We saved $300 million through sharp reductions in discretionary spending, improvements in capturing every dollar in revenue owed to us from government payors and private insurance companies for care rendered, and reduction of staffing levels through attrition.

While this was all crucial, it still fell short of closing our gap, so we took further action.