New York City Health and Hospitals Corporation

Restructuring HHC: The Road Ahead

May 2010

Restructuring HHC: The Road Ahead

TableofContents
EXECUTIVESUMMARY__________________________________________________________3 CURRENTCOSTCONTAINMENTACTIONS___________________________________________9 FY20112014RESTRUCTURING,COSTCONTAINMENTPLAN AdministrativeSharedSupportServices__________________________________11 LongTermCareRealignment____________________________________________13 AffiliationContracts/PhysicianServicesRealignment_________________________15 AcuteCareRealignment________________________________________________16 Ambulatory/OutpatientCareRealignment__________________________________17 FINANCIALS ExecutiveBudgetandFinancialPlan_______________________________________19

ABOUTHHC_________________________________________________________________20

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RestructuringHHC:TheRoadAhead EXECUTIVESUMMARY
HHCsMissionandStructure Sinceitscreationasapublicbenefitcorporationin1970,theprimarymissionoftheNewYorkCity HealthandHospitalsCorporation(HHC)hasbeentoprovidecomprehensivehealthservicestoallNew Yorkersregardlessoftheirabilitytopay.Asanintegrateddeliverysystem,HHCcomprises11acutecare hospitals,fourskillednursingfacilities,sixdiagnosticandtreatmentcenters,morethan80community basedclinics,aHealthandHomeCaredivisionandtheMetroPlusHealthPlan,Inc.,aprepaidhealth servicesprovider. HHCsServices HHCsmorethan40,000staff(includingabout2,600physicianssuppliedundercontractwithmedical schoolsorlargeorganizedphysiciangroups)extendmedical,mentalhealthandsubstanceabuse servicestoover1.3millionpeopleannually.Inadditiontoacuteinpatientservices,primarycareanda broadrangeofspecialtyoutpatientservices,HHCoffersmultiplecentersofexcellence,e.g.,sixregional traumacenters,11designatedAIDScenters,twoburncenters,tworegionalperinatalcenters,11sexual assaultforensicexaminercenters,andeightstrokecenters.Toaddresshealthcaredisparitiesamongthe Citysdiversepatientpopulation,HHCcombinespreventivecare,screeningsforearlydiseasedetection, andtargetedpublichealthcampaignswithbroadaccesstolinguisticallyandculturallycompetent preventiveservicesandmedicaltreatment.Byidentifyingandenrollingpatientswhoareeligiblefor MedicaidandMedicaremanagedhealthcareservices,HHCanditshealthplan,MetroPlus,helpto expandthenumberofinsuredpatientstreatedbyHHCfacilities. TheNeedforChange Despiteacorporatewidereorganizationinthelate1990sthatimproveditsfinancialperformancefora fewyears,astructuralimbalanceinHHCsrevenuesandexpenseshaspersisted.HHCprovidesavast arrayofprimaryandpreventiveservicesthroughits5millionannualclinicvisits.Medicaidand Medicaremanagedcareplanscontinuetopayfortheseservicesatlevelsthatarefarbelowcost.Taken togetherwiththeunreimbursedservicesofferedtoHHCs450,000uninsuredpatients,theseoutpatient lossesresultinsignificantoperatingdeficits.Inthepastseveralyears,theselosseshavebeenmitigated principallybythesupplementalMedicaidfundedwithfederalandcitydollars.Nowhowever,that supplementalfunding,aswellasHHCscoreMedicaidrevenue,isbeingthreatenedbytheeconomic downturnandotherpressuresongovernmentfundingsources. Afterthreesuccessiveyearsofcuts,HHCsannualMedicaidreimbursementfromtheStatehas decreasedby$240million.Pendingproposalsfortheyettobeapprovedstatebudgetcouldreduce HHCsMedicaidpaymentsbyanother$70millionintheStatescurrentfiscalyear(20102011)andby $100millionannuallyintheyearsahead. ItisalsounclearwhethertheStatewillcontinuetogiveHHCaccesstoanadditionalDisproportionate ShareHospital(DSH)fundingthatiscriticallyneededtohelpcoverrisingindigentcarecosts.
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 FederalsupplementalMedicaidfunding(DSHandUpperPaymentLimit(UPL))forHHChasalsoeroded substantially.Forthelastfouryearsfromfiscalyear2007tofiscalyear2010thetwosourcesofsuch supplementalfunding,DSHandUPL,haveaveraged$1.4billionannually.TheStateisworkingdiligently withHHCtoidentifywaystogainFederalapprovalstorestorethesepaymentsandHHCsfinancialplan foraddressingitsbudgetdeficitsoverthenextfewyearsassumessubstantialrestorationofthis supplementalFederalfundingforwhichtheCityhasbudgetedthenonFederalshare. HHCisalsonotexemptfromsharplyrisingcostsandotherfinancialandoperationalchallengesthatare confrontinghealthcareprovidersacrossthecountry. Between2006and2009,thenumberofHHCpatientswithouthealthinsuranceincreased14percent, from396,000to453,000.Theestimated500,000immigrantsnowlivingandworkinginNewYorkCity withoutlegaldocumentationrelydisproportionatelyonHHCfortheirhealthcare,justaswavesof immigrantshavedoneoverthedecadespast.Theseundocumentedimmigrantswillstillremain uninsuredundertherecentlyenactedfederalhealthcarereforms. Inrecentyears,therehasbeenanexponentialgrowthinfringebenefitcostsforHHCsworkforce.By fiscalyear2011,pensioncostswillhaverisentoaprojected$333million,a150%increasesince2006. Healthinsurancecostswillhaveincreasedby60%since2006,addinganother$148milliontoHHC expenses.Unfortunately,becausethecostofpersonnelconstitutesroughly70percentofHHCs budget,theabilitytoreducetotalexpensessignificantlyislimitedunlessHHCreducesthesizeofits workforce. HHCsResponse HHCrespondedtothesedestabilizingchallengesbyembarkingonaseriesofinitiativestocontaincosts andincreaseoperationaleffectiveness,whilecontinuingtoimprovethesystemscompetitivenessfrom thestandpointofquality,patientsafetyandpatientsatisfaction. Costcontainmentactionsbegunlastyearincludedconsolidatingsomeprimarycareservicesintosites withthecapacitytoabsorbmorepatients,improvingthemanagementandoperationsofancillary servicestoreduceexpenditures,andreducingtheworkforcethroughattrition. Toincreaseoperationaleffectiveness,HHCadoptedanapproachtoperformanceimprovement,whichit calledBreakthrough,thatempoweredandsupportedfrontlineteamstoundertakerapidimprovements toreducewasteandlongtermcosts,optimizerevenuecollections,andincreasepatientandstaff satisfaction.ThefirstphaseofBreakthroughworkwhichincludedmorethan300rapidimprovement eventshasproducedmorethan$50millionincostsavingsandimprovedrevenuecollections. Incombinedsavingsandincreasedrevenues,alltheseinitiativeswillhavesavedHHC$210millionby theendoffiscalyear2010aswellasstrengtheningitspositionasahealthcareproviderintheNewYork Citymarketplace. Unfortunately,however,thisisnotenough.Eventakingintoaccountthe$210millioninsavings achievedthusfar,HHCstotalprojectedexpensesforfiscalyear2011willstillexceeditstotalprojected revenuebyroughly$1billion.Thisextraordinarybudgetdeficitwillworseninthecomingyearsascosts increaseandreimbursementsfailtokeeppace.
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 Toaddresstheseharshrealities,HHCsoughthelpinquicklydevelopingaplantorestructurethesystem, createamoreeffectivemodelofcareandidentifyadditionalcostcontainmentoptionstoaddressthe projectedbudgetdeficits.Throughacompetitivebiddingprocessduringearly2009,HHCselected DeloitteConsultingtoassistwithanalysisandthedevelopmentofrecommendationsforrestructuring andfurthercostcontainment. TheRestructuringProject HHCchargedDeloitteConsultingwithdevelopingaportfolioofoptionsforaclinicalandoperational strategicplanthatwouldachievesavingsoradditionalrevenuewhileallowingHHCtoremainfaithfulto itsmission.Onaparalleltrack,severalworkgroupswithinHHCfocusedoncompletinganalysesand recommendationsonpossiblecostcontainmentandrevenuegeneratingoptionsthathadbeen identifiedbyHHCsseniorleadership.AlthoughDeloitteandHHCsownworkgroupsweregivenbroad latitudeincraftingrecommendationsforconsideration,allpartiesunderstoodthatHHCwantedviable optionsthatwouldminimizeanyadverseimpactsonprimaryandpreventivecareservices,buildon qualityofcareandpatientsafetygains,furtherleverageHHCshealthplan,MetroPlusandhelpit functionasamoreunified,integrateddeliverysystem. TherestructuringprojectwascalledTheRoadAheadtosignifythepositivenatureandpromiseofthe changesthatweretobeproposedandimplementedtobettersecureHHCsfuture.InSeptember2009, HHCestablishedaRestructuringSteeringCommittee(RSC)comprisedoftheseniorleadershipofthe sevenregionalhealthcarenetworksandcorporateofficersfromourcorporateheadquarterstooversee andmonitortheproject.AProjectManagementOffice,staffedbyafewseniorHHCpersonnel,alsowas establishedtoworkwithDeloitteonadaytodaybasis.Deloittecreatedafulltimeprojectteamof10 15staffonsite,supplementedbyadditionalanalystsasneeded. Throughouttheengagement,DeloitteConsultingmetwithleadershipandstafftogatherfacilityspecific dataforanalysesandobserveselectoperations,tobetterunderstandvariousperspectivesonthe strengths,challengesandfutureopportunitiesforHHC,andtosolicitfeedbackonpreliminaryanalyses andrecommendations.Inaddition,Deloittemetandinterviewedstakeholdersatallthelevelsofthe organization,includingclinicalleadershipandlaborrepresentatives. DeloittesAnalyses Theintentofeachanalysiswastoprovideahighlevelsummaryofareasthatmightyieldsavingsor otherwisestrengthenHHCsfinancialpositionintheshortorlongterm.Allsupportinganalyseswere createdbyDeloitteConsultingincollaborationwithHHCby: (1) GatheringfinancialandoperationaldatafromHHCfacilitiesandcentralofficeandfromnational benchmarksources; (2) Developingabasemodelandasetofassumptionstodriveit; (3) Validatingthedata,basemodelandassumptionsthroughextensiveinterviewsatmultiple organizationallevelswithvariousrelevantHHCstakeholders. EachanalysiswasreviewedandcommentedonbytheRSCbeforebeingusedtoguideformulationof theoptionsforchange.Basedontheseanalyses,andanyadjustmentsarisingfromRSCreview,Deloitte developedalistofhighlevelrestructuringoptionstohelpcloseHHCsprojectedbudgetgapoverthe nextseveralfiscalyears.Becauseoftheimmediacyofthecurrentbudgetcrisisandtheuncertainty associatedwiththelongtermimpactofhealthcarereform,theportfolioofoptionsfocusedonshorter termcostcontainmentandoperationalefficiencyinitiatives.
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 HHCsDecisions AfterDeloittecompiledtheoptions,theRSCmetovertwodaystoselectachievablefinancial improvementopportunitiesthatwouldyieldapproximately$300milliononanannualizedbasisbyFY14 andthatwouldmoreeffectivelypositionHHCforthefuture. TheRSCmembersadopted12principlesthatguidedtheirselectionoftheoptionsforimplementation: 1. SupporttheHHCMission 2. Focusresourcesonpatientcare/customerservicefunctions 3. Builduponqualityofcareandpatientsafetyculture 4. Functionasmoreunifiedintegrateddeliverysystem 5. PursuerecommendationsthathelpHHCperformbetterinthecurrenteconomiccrisis andunderfutureHealthCareReform 6. Creategreatersimplicityintheenterprisebyfocusingonredundantandnoncore services 7. Valueleadershipandensurethatleadersarepartofthechange 8. Alignservicesandservicecapacitiestotargetmarkets 9. Leverageinternalsystemleadingpracticesandlearnfromoneanother 10. Deliverservicesinthemostcostefficientmodel 11. Leveragetechnology 12. Adoptstandardizedapproachestostrategicplanning,servicesplanningandpatientcare management Deloittepresentedarangeofoptionsthatwereconsideredduringthetwodayreview,includingsome optionsthatwouldyieldsignificantsavingsbutwouldhavedramaticallyreducedaccessforpatientsand greatlyimpactedadverselyHHCsoverallmission.Therejectedoptionsincluded: Closureofnearlyonethirdofallcommunitybasedhealthcenters Eliminationofmostoutpatientspecialtyservicesandconsolidationofsuchservicesin oneacutecarefacility Eliminatingnearlyallofourlongtermcarebeds Therepurposingofanacutecarefacilityasalargeambulatorycarecenteralsowasmodeled,butthis optionwasrejectedbothbecauseofitsimpactonaccessandmission,butalsobecausetheprojected savingswereexceedinglymodest.Thisexercisehighlightedtherealitythatacutecareservicesinthe aggregateeithercoverorcomeclosetocoveringrelatedexpenses.Accordingly,therevenueforfeited byshuttingdownanacutecarefacility(assumingtheoutpatientcapacityispreserved)comesveryclose tothecostsavoided,yieldingmodestsavingsatbest.
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 TheRoadAhead TheRSCselectedapproximately40optionstoincludeintheRestructuringPlan.Theseoptionshave beenorganizedbyareaofimpactAdministrative/SharedSupportServices,LongTermCare Realignment,Affiliation/PhysicianServiceRealignment,AcuteCareServiceRealignment,Ambulatory CareServiceRealignment.Implementationoftheseoptionswillhaveanestimatedfinancialimpactto theorganizationof$300millionannuallywhenfullyimplemented.Theinitiativesaredescribedbriefly inthefollowingsectionofthisreport. Administrative/SharedServices Includesproposalstotargetbenchmarkefficienciesinmultipleadministrativeareasbycreating costeffectivesharedservicesoperationsandcontractingoutthemanagementand/orprovision ofancillaryservices.Targetsavings:$141million LongTermCareRealignment IncludesproposalstobettermatchHHCslongtermcarebedcapacitytopatientsdemandfor skillednursingandchronichospitalservices;consolidateadministrativeandsupportservices wherepossible;andconsolidateunderutilizedservices.Targetsavings/revenueincreases:$47 million Affiliation/PhysicianServicesRealignment Includesproposaltomatchcontractedproviderresourcestopatientvolumesandneed:reduce administrativepositions.Targetsavings:$51million AcuteCareRealignment Includesproposalstoimprovethemanagementofcaretoreducepatientslengthoftimeinthe hospital;facilitatetheretentionofmoresurgerieswithintheHHCsystem;consolidateselected inpatientservices.Targetsavings:$26million AmbulatoryCareRealignment Includesproposalstoconsolidatesomespecialtyoutpatientservices;closesixsatelliteclinics withlowutilization;pursuealternativeadministrativemodelsfordeliveringoutpatientservices. Targetsavings:$40million PositioningHHCfortheFuture WiththeselectionofoptionsbytheRSC,therestructuringeffortnowcontinueswithextensiveplanning andimplementationeffortstomakeHHCamorecosteffective,efficientandcompetitiveorganization. SuccessinachievingthesegoalswithinthecomplexHHCenvironmentwillrequirethecollaborative effortsofmany.Tothatend,HHCPresidentAlanAvileshasappointedProjectOwnersfromthesenior leadershipgrouptodevelopdetailedimplementationplansandtomanagetheteamsworkingon implementation. Manyofthepaymentreformslikelytoarisefromthenewfederalhealthcarereformlegislationwill correlatetoquality,populationhealthoutcomesandrobustprimaryandpreventivecare.HHCmust anticipatethetrajectoryofpaymentreformasitformulatesitslongtermrestructuringplans.
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KeyareasoffocusforHHCgoingforwardinclude: IncreaseitsattractivenessasahealthcareprovidertoanincreasingnumberofNew Yorkerswhilemaintainingitssafetynetmission Developthecarecoordination/managementcapabilitiesofanaccountablecare organization AchievemedicalhomedesignationthatwillallowHHCtoreceiveoptimal reimbursementforprimarycareservices Pursueglobalcapitationpilotdesignationunderthefederalreformlegislation ContinuetobeagoodstewardoftheresourcesprovidedbytheCity,StateandFederal governments Thecostcontainmentandrestructuringactionstobeundertakenoverthenextseveralyears,if combinedwithfullsupportfromallthreelevelsofgovernment,willstabilizeourpublichospitalsystem. However,thesystemwillendureforthelongtermbaseduponitsabilitytodemonstrateindispensable valuetoitspatientsanditspayors,byimprovingthehealthstatusofthecommunitiesserved,and contributingtotheloweringoftotalhealthcarecostsinthefuture.Thesecondandequallyimportant phaseofHHCsrestructuringanditssuccesswillrequireanalignment,throughpaymentreform,of HHCsreimbursementwithaproactivefocusonrobustprimaryandpreventivecare,screeningforthe earlydetectionofdisease,andmoreeffectivechronicdiseasemanagementformedicalconditionslike asthma,diabetes,hypertension,congestiveheartfailureanddepression,thatultimatelydrivesomuch oflongtermhealthcarecosts.

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RestructuringHHC:TheRoadAhead CURRENTCOSTCONTAINMENTACTIONS

($s in Millions)

FY2010 HHC Program Personnel Services Attrition (1300) MetroPlus Risk Savings OTPS Savings Improved Collections

FY2011

FY2012

FY2013

FY2014

$ $ $ $ $

80.00 $ 35.00 70.00 16.00 201.00 $ $ $ $

125.00 $ 20.00 70.00 58.00 273.00 $ $ $ $

125.00 $ 20.00 70.00 91.50 306.50 $ $ $ $

125.00 $ 20.00 70.00 91.50 306.50 $ $ $ $

125.00 20.00 70.00 91.50 306.50

PersonnelServices(PS)Attrition HHChasimplementedahiringfreezewithexceptionsforcriticalcare,emergencyandrevenue generatingpositions.RequestsforexemptionforindividualpositionsaresubmittedtoHHCsVacancy ControlBoard(VCB)forreview.PositionsareeitherapprovedordeniedbytheVCBandforwardedto thePresidentforafinalreview.SinceFebruary,HHChasreduceditscurrentFullTimeEquivalent(FTE) levelby1,181.Basedonanassumedattritionlevelof3%,theCorporationplanstoreduceitsFTElevel byover1,300byJune30,2010.Includingfringebenefits,thiswilltranslateintosavingsof$80minFY 2010and$125mrecurringannuallybeginninginFY2011. MetroPlusRiskSavings HHCsriskagreementwithMetroPluswillyielda$35msurpluswhichHHCanticipatesfirstreceivingin FY2010.Thesesavingsaregeneratedthroughmoreefficientprovidercontracting,increasedutilization, qualityreviewofinpatientservicesandaggressivemanagementofClinicalRiskGroup(CRG)acuity measureswhichtranslateintoincreasedrevenuefromtheStateDepartmentofHealth. OtherThanPersonnelServices(OTPS)Savings HHChasinitiatednumerousprogramsacrosstheCorporationtoreduceOTPSexpenditures.The Corporationhasdiscontinuedtheuseofoperatingfundsforcapitaleligiblefixedassetsandrestricted newpurchasesofequipment.ThroughMarch,HHChasreduceditsfixedassetpurchasesby$26mfiscal yeartodate.Thisannualizestofixedassetsavingsofover$30minFY2010. HHChasalsoinitiatedinventorymanagementprogramswhichfocusonproductstandardization,more efficientpurchasingandreducedinventorylevels.Amongotherthings,theCorporationhasalso engagedininitiativestoreducethecostofpharmaceuticals,reduceconsultingexpensesandscaleback ITprojects.ThruMarch,HHCsOTPSexpenditures(excludingfixedassets)haveremainedflat, representinga3%savingsagainstthefinancialplan.ThisannualizestoadditionalOTPSsavingsof approximately$40minFY2010.
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 ImprovedCollections Inthepastyear,HHChasembarkedonBreakthroughinitiativestoreviewchargecaptureacrossthe Corporation.Asaresult,theCorporationhashostedcorporatewidechargecaptureRapid ImprovementEvents(RIEs)whichhaveidentifiedover$135minpotentialrevenue.Inadditiontothe Breakthroughwork,HHChasdevelopedtoolsandstafftrainingcurriculumtoimproveinpatient documentationandcoding. HHChasalsoenteredintohospitalagreementswithAetna,UnitedHealthcareandOxfordtodiversify ourpatientbaseandattractmorecommercialreferralsfromcommunityphysicians.Inaddition,the Corporationhasbeenworkingonrevenuerecoveryeffortswithparticipatingandnonparticipating plans. Intotal,HHCestimatesachieving$16millioninincreasedrevenuefromtheseinitiativesinFY10, increasingto$58minFY11andfullyannualizingtoover$90minFY12.

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RestructuringHHC:TheRoadAhead FY2011FY2014RESTRUCTURING,COSTCONTAINMENTPLAN

AdministrativeSharedSupportServices

AchieveBenchmarkEfficienciesinMultipleAdministrativeAreas

TargetSavings:$51.63million HHCsannualcostsinmultipleadministrativeareasFinanceandAccounting,HumanResources,Legal Services,Security,EnvironmentalServices,MaterialsManagementandSupplyChain,Biomedical EngineeringServices,FleetMaintenance,PlantMaintenance,andTelecommunicationsServiceswere measuredagainsttheannualspendforsuchservicesofsimilarlysizedandscopedteachinghospitals andhealthsystemswhosubmittheircostdatatoanationallyrecognizedbenchmarkingdatabase.In eachoftheabovementionedareasHHCspendsconsiderablymoreperunitofservicethanitsnational andlocalpeers.ReasonsforHHCshighercostsincludethelackofautomationresultingintoomany staff,higherwageandfringebenefitratesthanbenchmarkedentitiesforthesameservices, decentralizedcontractingandmanagementpractices,andotheroperationalinefficiencies.Accordingly, HHCwillenterintomanagementcontractsformanyoftheseservicesandimplementlaborsaving technologythroughthosecontracts;rightsizestaffingthroughattritionandlayoff;consolidateand standardizemanagementandcontractingprocesses;andsignificantlyreduceexpensesineachofthese areas.

EngageanIndependentThirdPartyAdministratortoTakeAdvantageofNewFederal340B PharmacyRegulations

TargetRevenueIncrease:$11million HHCphysicianswritenearly12millionoutpatientprescriptionsannually.HHCinhousepharmaciesfill 2.4millionofthoseprescriptions,withthebalancefilledatoutsideretailpharmacies.Asapublic hospitalsystem,HHCreceivesdeepoutpatientpharmaceuticalpricediscountsunderthe340Bprogram, afederaldrugdiscountprogramforproviderswhoservehighuninsuredpopulations.Duetoarecent changein340Bregulations,HHCcanrealizethebenefitsoflower340BacquisitioncostsforitsMedicare andcommerciallyinsuredpatientsevenwhentheyfilltheirprescriptionsatretailpharmacies.HHCwill establishcontractswithlocalretailpharmaciesandengagetheservicesofathirdpartyadministratorto establishacost/pricereconciliationprocesswhichwillallowittorealizethemajorityofthesavingsfrom theseprescriptiontransactionsinvolvingitspatients.
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ReduceCentralOfficeOperations

TargetSavings:$6.65million Asanintegratedhealthcaresystemrequiringcentralizedcoordinationorcontrolovercertainfunctional areas,HHCCentralOfficeoperationshousesanumberofadministrativeandsupportservicesthat includeregulatoryaffairs,intergovernmentalrelations,medicalaffairs,languageservices, communicationsandmarketing,legalaffairs,andotheroversightorsharedservicesactivities.Inorder tocreateanequitabledistributionofworkforcereductionsandsavingsfromgreateroperational efficiencyacrosstheentireHHCoperation,HHCwillreducetheCentralOfficeheadcountofits administrativeandsupportservicespersonnelby10percent.

ReduceInformationTechnologyContractStaff

TargetSavings:$3.9million Asanearlyadopterofelectronicmedicalrecords,HHCrunsanadvancedinformationtechnology operationthatrequiresthesupportofinhousepersonnelandexternalexpertswhoserveas consultantsandbringthelatestITskillsandtraining.Suchconsultantsgenerallycommandmarketfees, whicharehigherthanfulltimepersonnelsalaryandbenefitcosts.HHCwillreducethenumberof contractedstaffandreplacethemwithlowercostinhouseITprofessionalswithcomparabletraining andskills.

ReduceConstructionandMaintenanceStaffLevelstoMatchHHCsReducedCapital ConstructionProgram

TargetSavings:$32million Duringthelastdecade,HHCcarriedoutthelargesthospitalmodernizationefforteverundertakeninour city.Inordertosupportthisaggressivecapitalprogramofbothnewconstructionandrenovation,HHC increaseditsconstructionandmaintenancepersonnel.Recentbudgetcutsofnearly30percentto HHCs5yearcapitalprogramrequirethatHHCrealignthesizeofitsconstructionandmaintenance workforceofnearly1,200electricians,carpenters,plumbers,painters,metalworkersandotherworkers tobetterreflectthereducedmodernizationplansandthemorelimitedfocusonmaintenanceofour facilitiesforthenearterm.

OutsourceLaundryandLinenOperations

TargetSavings:$6.1million HHCspendsabout$17.3milliontoprocessabout16.5millionpoundsoflaundryannually.Nearlytwo thirdsofthelaundry10.4millionlbs.iscleanedinhouseatacostofnearly$1.30perpound.The balanceisprocessedthroughaspecialtyvendoratabout$.77perpound,includinginternaldistribution costs.Inaddition,HHCwouldhavetoinvestsooninmajorconstructionandmaintenanceworkto updatetheaginglaundryplantatleast$2millionincapitalbuildingandequipmentimprovements wouldberequired.HHCintendstoclosetheinhouselaundryoperationandseekaleasecontractfor linensfromaprofessionallinenscompanythatwillremoveanddeliverlinensdirectlytothemedical unitsatallofHHCsfacilitiesatsubstantiallyloweroverallcost.

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ImplementaContractwithaCommercialLabtoManageHHCsFourMajorLabs,Standardize EquipmentandReagentContractsandUse,andImplementaSTATLabOnlyModelforall HHCAcuteCareFacilities

TargetSavings:$30million HHCspendsover$88millionayear(splitalmostevenlybetweenlaborandsupplies)tooperatefourfull referencelabs.Theselabslackstandardizedequipment,usedifferentreagentsprocuredseparatelyby eachlab,andhavevaryinglevelsofstaff.Accordingly,theaveragepertestcostrangesfromalowof $7.68toahighof$17.85.Thesecosts,evenonthelowendoftherange,exceedtheperunitcostsfor highvolumelabservicesfromlargecommerciallaboratories.Byengagingacommerciallaboratoryto bettermanageHHCslaboratoryoperationsinacentralizedandstandardizedway,intheshortrunwe cansignificantlyreducecostsbystandardizingequipment,aswellasbyaggregatecontractingforand standardizingtheuseofreagentsandotherlabsupplies.Furthersavingswillbederivedbyultimately shiftingallbutstatlaboratoryteststocommerciallabsonacontractedbasisandrunningonlystatlabs inallofouracutecarefacilities.

LongTermCareRealignment
ImproveAdmissions,CodingandCollectionProcessestoOptimizeReimbursement

TargetRevenueIncrease:$11.6million HHCwillensurethathardtoplacepatientsatisownacutecarehospitalsreceivethehighestpriorityfor availablebedswithinitslongtermcarefacilities.Thenewfirstprioritypolicywillhelptoavoidextended lengthsofstayinitsownacutecaresettingsthatrestrictrevenuegeneratingcapacityinthosefacilities. HHCalsowillreviseitsLTCadmissionpoliciestofocusmoreonhighacuitypatients/residentswho require24hournursingcare.Further,HHCwilloptimizereimbursementbyaligningserviceswith residentneedsandbyimplementingprocessestomorefullydocumentalltheresourcesprovidedtoits residents. Aspartofthesechanges,HHCwillforgenewcollaborationswithappropriatehomeandcommunity basedserviceproviderstofacilitatereferralsandalternativeplacementsoflowacuityindividuals.

IncreaseAccessToSubAcuteRehabandBrainInjuryServicesAtHHCLongTermCare Facilities

TargetRevenueIncrease:$4million RecentCMSregulationslimitthetypesofcasesInpatientRehabilitationFacilities/Units(IRFs)canserve basedonparticularclinicalconditions.CasesonceservedbyIRFsnowshouldbeservedbylongterm carefacilities.AllofHHCsSkilledNursingFacilitieshavesubacuterehabprogramsthatareunder capacityandcanaccommodatethesehigheracuityresidents.HHCwillenhanceitssubacuterehab programs,createamoreeffectiveandefficientadmissionsprocessandconductmoretargetedoutreach togrowitssubacuterehabservices.

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CloseandConsolidateUnderUtilizedServicesatColerGoldwaterSpecialtyHospitaland NursingFacility

TargetSavings:$10.1million Coler/GoldwaterisHHCslargestLongTermCarefacilitywithatotalof2,016certifiedSNFandLTCH beds.ItiscomprisedoftwocampuseslocatedontheNorth(Coler)andSouth(Goldwater)endsof RooseveltIsland.Hightech,highcostLTCHservicesareduplicatedbetweenthetwosites.Operating specialtyprogramsattwositesincreasestheoverallcostanddoesnotachieveeconomiesofscale.To gainoperationalefficienciesandreducecosts,HHCwillconsolidatethecardiacrehabandventilator programsatGoldwater.TherearemanyLTCHpatientswhonolongerrequiremedicalcare,butcannot bedischargedbecausetheyarehomeless.ThesepatientsareplacedonanAlternateLevelofCare (ALOC)whichHHCisnotcompensatedfor.Toaddressthisissue,HHCisactivelyworkingwith organizationsandprogramsthatcantransitionALOCpatientstohomesandconnectthemwithenabling servicesinthecommunitysetting.ByreducingthenumberofALOCpatients,HHCwillhaveadditional opportunitiestoconsolidateLTCHbeds.Overthecourseofthenextthreeyears,HHCexpectstobeable todecertifyapproximately136beds.

ReduceOverallLongTermCareBeds

TargetSavings:$14.563million HHCiscurrentlycertifiedfor2,223SkilledNursingFacility(SNF)bedsacrossitsfourfacilities.Thereare manylongtermresidentswhoarehighfunctioningandcouldbebetterservedthroughhomeand communitybasedprograms.Assuch,thereimbursementlevelforthissegmentoftheSNFpopulationis relativelylow.HHCwillpartnerwithhomeandcommunitybasedserviceproviderstoidentifyand transitionappropriatehighfunctioningresidentstocommunitybasedliving.Intheprocess,HHCwill reducebedcapacityby13.5percentbyeliminatingroughly300SNFbedsinthelongtermcaresystem. ThisactionrequiresthereviewandapprovaloftheNewYorkStateDepartmentofHealth.

ConsolidateAdministrativeandSupportServicesforSelectLongTermCareFacilities

TargetSavings:$2.3million SomeadministrativeandsupportservicesatselectHHClongtermcarefacilitiesareduplicativewith serviceseitherwithinthesamefacilityoratanearbyHHCacutecarehospital.Theseservicesinclude administrative,pharmacy,transportation,laundry,housekeeping,ITandeducationalsupport.HHCwill consolidatetheadministrationofsupportfunctionsand/orservicestocreateefficienciesandreduce costs.Thesemeasures,andtheresultingreductionofadministrativeheadcount,willyield$2.3million insavings.

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ConsolidateAdultDayHealthCareProgramsUnderOneOperatingCertificate

TargetSavings:$1million HHCrunsthreeAdultDayHealthCare(ADHCP)programs,with164certifiedslots.Thesedayprograms providerecreationalactivitiesandsupportindividualsabilitytoliveinacommunitybasedsetting.HHC willconsolidatealltheadultdayhealthcareservicesunderasingleprogramleadershiptobetter managethecaremanagement,operationalandfinancialaspectsoftheprograms.Aconsolidatedfocus ontheoperationsofallADHCPswillhelpHHCtoincreaseutilizationandimprovecollections.This actionrequiresthereviewandapprovaloftheNewYorkStateDepartmentofHealth.

RebalanceLongTermCareStaffingMixtoIncreaseDirectCareHours,ImproveQuality

TargetSavings:$3million HHCslongtermcarefacilitiestendtorelyonancillarystaffsuchastransportaidesandwardclerks,who eitherhavenodirectcaretrainingand/orlimitationsinfunctionaljobdescriptions.Theseconstraints driveupcosts,withoutimprovingcare.Further,comparedtoNewYorkStateaverages,HHCsLTC facilitiesrelymoreheavilyonRNhoursthanLPNandCNAhours.Byrebalancingthestaffingmixto bringHHCmoreinlinewithstateandnationalaverages,aswellastrainingandcertifyingancillarystaff inmoredirectcare,HHCcanchangenursinghomecultureforthebetter,improvequalityofcareand reducecost.RebalancingtheLTCstaffingmixfromanRNtoanLPN/CNAmodelwillimprovecareand decreasecost.

AFFILIATIONCONTRACTS/PHYSICIANSERVICESREALIGNMENT

ReduceCostofAffiliationContractsby6%

TargetSavings:$51.46million IthasbeenalongstandingpracticeofHHCtocontractforphysicianandsomealliedhealthprofessional servicesthroughaffiliationagreementswithMedicalSchools,ProfessionalCorporations,and/orHospital Systems.ForFY2011thosecontractsareprojectedtocostabout$857millionforabout2,600physician FTEs,1,600AlliedHealthProfessionalFTEs,and350administrativeFTEs.Additionally,HHCdirectly employsabout500physicianFTEsmostlyatKingsCountyandBellevueHospitalCenters.Basedupon threeindependentbenchmarkphysicianproductivitymodels,HHChasdeterminedthatthecorporation canrightsizetheproviderworkforce,andreduceadministrativepositions,withoutcompromising patientcareorquality.

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AcuteCareRealignment

ReduceExcessInpatientDaysbyStandardizingCareManagementModel

TargetSavings:$15million HHChasmadegreatstridesinreducingthelengthofhospitalizationforitsinpatientsoverthepast decadetoacurrentlowof4.7daysonaverage.HHCwilltargetafurtherreductionofpatientaverage lengthofstayforarangeofhighvolumedischargesbystandardizingHHCscaremanagementfor specificDRGcategories,standardizingandimprovinginpatientadmissionanddischargepractices,and streamliningemergencyroomandoperatingroomprocesses.HHCwillimprovecaretopatientsand theirfamilies,reducecosts,andcreateadditionalbedcapacitybyreducingunnecessaryhospitalization timeandensuringhospitaldischargesareprocessedassoonasmedicallyappropriate.

GrowSurgicalVolumeByImprovingOperatingRoomProcessesandRecapturingSurgeries PerformedOutsideofHHC

TargetRevenueIncrease:$3million HHCwillimplementoperationalimprovementsinOperatingRoom(OR)schedulingandreferralto increasevolume,reducecancellationratesandimprovestarttimes.Withtheseactions,HHCwill increasethesystemwideORprimetimeutilizationfromapproximately65percentcapacitytothe industrystandardpracticeof75percentutilization.This10percentincreasewillallowfor9,500 additionalsurgeriestobeperformedatHHCfacilities,increaseaccesstosurgicalprocedures,and increaserevenues.

ConsolidateJoint/SpineSurgicalVolumetoOneLocationperBoroughorHHCNetwork

TargetSavings:$3.4million Highend,costlyorthopedicsurgicalservicesareofferedatmultiplelocationsatHHC,someofwhichare lowvolume.ConsolidatingthesesurgicalservicestooneCenterofExcellenceineachboroughor networkwillnotonlydecreasecostsbutwillalsohelpensurehighqualityandbestoutcomesfor patients.

ConsolidatePrisonUnitstoOneAcuteCareHospitalLocation

TargetSavings:$4.6million Currently,prisonhealthservicesareperformedatbothBellevueandElmhurstHospitals.Movingprison healthservicestoonecentrallylocatedacutecarefacilitywillresultindecreasedcostofoperationsfor HHC,theNYCDepartmentofHealth,andtheNYCDepartmentofCorrections.Additionally,thespace freedatbothBellevueandElmhurstwouldcreatemuchneededadditionalrevenuegeneratingcapacity.

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 Ambulatory/OutpatientCareRealignment

SeekFederallyQualifiedHealthCenter(FQHC)StatusforSixDiagnosticandTreatment Centers(D&TCs)

TargetRevenueIncrease:$25.4million FQHCdesignationwouldresultinhigherreimbursementratesforHHCsD&TCs.Theselargeoutpatient healthcarefacilitiesprovideasimilarscopeofservicesasthatofFQHCs.HHCsD&TCsalsocomplywith FQHCrequirementsconcerningensuringaccesstouninsuredlowincomepatients.HHCwillbegina processofobtainingthefederalgovernmentsapprovaltoachieveFQHCdesignation.

CloseSixOutpatientClinics

TargetSavings:$2.41million Throughits11hospitals,6DiagnosticandTreatmentCentersand81communityclinics,HHCprovides5 millionoutpatientvisitsayear.Nearly2millionofthoseareprimarycarevisits.HHCshospitalsprovide fullyonehalfofNewYorkCityshospitalbasedclinicvisits;andasignificant66%ofallhospitalbased clinicvisitsmadebyuninsuredNewYorkers.WhileHHCwillcontinuetobecommittedtoensuringNew Yorkersaccesstoqualityoutpatientcare,HHCexperiencessignificantlossesonoutpatientMedicaid reimbursement.ItisforthatreasonthatreductionstoHHCsoutpatientclinicswereminimalandbased uponlongstandinglowutilization,physicalconditionsofclinics,andthecloseproximityofotherclinics toaccommodateaffectedpatients.Specifically,HHCwillclosethefollowingdentalclinicandfive(5) childhealthclinicsoutofits81communitysites: Clinic,Location StaffPatientsServedFY2009 WilliamsburgDentalClinic,214GrahamAvenue,Brooklyn 3FTEs 2,152 GlebeChildHealthClinic,2527GlebeAvenue,Bronx 6.5FTEs 513 WyckoffChildHealthClinic,266WyckoffStreet,Brooklyn 3.8FTEs 362 FifthAvenueChildHealthClinic,503FifthAvenue,Brooklyn 6.2FTEs 872 HowardHousesChildHealthClinic,1620EastNewYorkAve,Brooklyn 5FTEs 962 st AstoriaChildHealthclinic,123631 Avenue,LongIslandCity 4FTEs 1,167

ConsolidateSelectedSpecialtyCareClinicstoOneSitePerHHCNetworkorperBorough

TargetSavings:$1.278million HHCoffersawiderangeofspecialtyclinicswithinitshospitalsaswellasoffsite.Thenumberof patientsvisitingtheseclinicsvariesamongthehospitalsandinsomecasesisrelativelylow.This suggeststhatsomeconsolidationofspecialtyservicescouldoccuramongclinicsofferingthesame specialtyservicewithoutadverselyimpactingaccesstotheservices.Toachievetheseefficienciesand

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reduceoverheadcosts,HHCwillconsolidateDermatology,Rheumatology,PainManagementorother specialtyclinicsintoonespecialtyoperationbyHHCNetworkorbyborough.

RepositionSelectedSpecialtyServicestoAttractmoreInpatientVolume

TargetRevenueIncrease:$5million Whileaccesstooutpatientspecialtyservicessuchascardiology,endocrinology,gastroenterologyand pulmonaryisessentialtosomeofHHCspatients,theutilizationoftheseservicesacrossthesystemis somewhatlow.HHCintendstobetteralignprovisionoftheseservicesonanoutpatientbasiswiththe needanddemandforinpatientadmissionsandsurgeriesinthesespecialties.

OutsourceOutpatientChronicDialysisServices

TargetSavings:$5million HHCfacilitiesprovidechronicdialysisforhundredsofpatientsannually.Ananalysisoftherelativecosts ofprovidingtheseservicesthroughHHCoperationsandcontractedserviceshasdemonstratedthat contractedservicesaremorecosteffective,andaccessfortheuninsuredcanbecontractuallyrequired aspartofanysucharrangementbecauseemergencyMedicaidwillcoverchronicdialysis.HHCwillseek toestablishoneormorecontractswithprivatedialysisserviceoperatorstoachieveefficiencysavings andensureaccesstoallpatients,includingpatientswhoareuninsured.

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RestructuringHHC:TheRoadAhead FINANCIALS

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 AboutHHC TheNewYorkCityHealthandHospitalsCorporation(HHC)isa$6.7billionintegratedhealthcare deliverysystemwithitsown385,000memberhealthplan,MetroPlus,andisthelargestmunicipal healthcareorganizationinthecountry.HHCserves1.3millionNewYorkerseveryyearandmorethan 450,000areuninsured.HHCprovidesmedical,mentalhealthandsubstanceabuseservicesthroughits 11acutecarehospitals,fourskillednursingfacilities,sixlargediagnosticandtreatmentcentersand morethan80communitybasedclinics.HHCHealthandHomeCarealsoprovidesinhomeservicesfor NewYorkers.HHCwasthe2008recipientoftheNationalQualityForumandTheJointCommissions JohnM.EisenbergAwardforInnovationinPatientSafetyandQualityattheLocalLevel,which recognizedtheorganizationsworktomakeperformancedataaccessibleandtransparenttoallpatients andconsumersthroughitsHHCinFocusWebsite,anditseffortstofosteracultureofcontinuous improvement. Inrecentyears,HHCsrobustcommitmenttosystemicimprovementhasgarnerednationalrecognition fromleadinghealthcareorganizations,especiallyforitsinnovativeworkinqualityofcareandpatient safety.Notableawardsandhonorsinclude:TheNationalQualityForum/JointCommission2008 EisenbergAwardforInnovationinPatientSafetyandQualityformakingperformancedataavailableon theInternet,demonstratingHHCswillingnesstobeaccountableforcaredeliveredtopatients;the AmericanHospitalAssociation2009NOVAawardtoJacobiMedicalCenterandNorthCentralBronx HospitalfortheirrapidHIVtestingprogram;SeaViewHospitalRehabilitationCenterandHomereceived theJointCommissions2007ErnestAmoryCodmanAwardforusingoutcomesmeasurementtoachieve improvementsinqualityandsafety;HarlemHospitalbecamethefirsthospitalinNewYorkCityandonly thesecondinthestatetobedesignatedBabyFriendlypartofaglobalinitiativesponsoredbythe WHOandUNICEFinits2008report;and,in2008,aCommonwealthFundreportlaudedHHChospitals forefficiency,qualitycare,andcreativesolutionstoensuringaccesstoqualitycareinasafetynet system. Formoreinformation,visitwww.nyc.gov/hhc.

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