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2011 Year in Review

HHC Board of Directors


The Fiscal Challenges Continue

Three years into the severe economic downturn across our State and our nation, another round of Medicaid reimbursement cuts stripped our system of more than $170 million of annualized revenues, bringing the total cuts to HHC's annual Medicaid reimbursement base during the past three years to roughly $500 million. Even as our Medicaid reimbursement falls dramatically, costs beyond our control continue to spiral; most notably our pension costs, which stood below $50 million in 2004, but are projected to reach $400 million next fiscal year. At the same time, the persistently high rate of unemployment drove more uninsured patients to seek care in our system. Of the 1.3 million patients we served, 478,000 – or 37% – were without insurance, a 6% increase in the number of our uninsured patients compared to 2010.

In Washington, recent cuts to the Medicare program, beyond those already made as part of the Affordable Care Act (ACA), have compounded our fiscal challenge. Still more Medicare and Medicaid cuts have been proposed in Congress (and by the President) and may yet be enacted later this year. And, of course, the looming deep cuts of the ACA to supplemental Medicaid and Medicare funding, upon which safety net providers disproportionately rely, will begin to take effect in 2014. HHC projects that it may lose more than one billion dollars in funding over the seven-year period between 2014 and 2020.

These reductions in reimbursements are but the leading edge of an unrelenting drumbeat going forward to reduce healthcare costs. Of course, the hurdles will be even greater for safety net systems such as ours because of our heavy reliance on Medicaid reimbursement that is now below the actual costs of providing care, and the fast-dwindling supplemental federal funding that supports our extensive service to the uninsured.

Against this threatening backdrop, we continued to execute our multi-year cost containment and restructuring plan to ultimately trim $600 million from our projected budget deficit. To date, we have achieved roughly $400 million of that goal. As the Board well knows, some of our cost-containment initiatives have been painful and have strained our relationship with our unions.

Our workforce now includes about 2500 fewer full-time employees than it did three years ago, with targeted attrition accounting for most of that reduction. To the credit of our dedicated employees, we have maintained virtually the same service capacity across all care settings despite having trimmed our workforce by more than 6%. In the main, most of our targeted attrition has not involved direct patient care positions.