NYC’s once-struggling public hospital system expects to be well-funded into next fiscal year

Budget documents released this week show that NYC Health + Hospitals is in good financial health going into the next fiscal year — a welcome development considering that just a few years ago, its hospital leaders were staring down a nearly $2 billion budget hole and facing speculation that they might have to cut services in order to stay afloat.

At a City Council hearing on Monday about the NYC Health + Hospitals budget, president and CEO Dr. Mitchell Katz said that the system had 42 days of cash on hand.

“Historically, [that’s] the most we’ve had,” he said. “We no longer have a deficit …Going forward, we are running even.”

The health system does expect to close this fiscal year with an $80 million shortfall, officials said, but that’s because some of the funds expected from the Federal Emergency Management Agency to reimburse the system for costs related to COVID-19 have yet to arrive.

The system expects operating gains of about $22 million in fiscal year 2023 and $91 million in fiscal year 2024 as FEMA catches up on payments, officials said.

Katz said the next priority should be to invest in upgrading the system’s crumbling infrastructure. New York City’s system of public hospitals and clinics has proven to be a crucial resource during the pandemic, but is also responsible for providing day-to-day care to more than 1 million New Yorkers each year.

Since Katz took the helm in 2018, the health system has turned around its finances, in part, through its own revenue-generating initiatives. At the hearing, Katz said the health system has gotten better at billing patients’ insurance, negotiating competitive rates with health insurance plans and making sure that uninsured patients who are eligible for health coverage get enrolled.

The health system said it expects patient care revenue to increase slightly in fiscal year 2023.

Dr. Mitchell Katz, head of NYC Health + Hospitals

But that’s still only part of the equation.

Assuming NYC Health + Hospitals receives the federal funds it expects for COVID-19-related costs, the department is still fighting off cuts in the coming years to the supplemental payments it receives for serving large numbers of patients who are on Medicaid or uninsured. Some of these cuts are the result of long-delayed changes that were originally outlined as part of the Affordable Care Act and are now expected to take place in fiscal year 2024.

A City Council report on the health system’s preliminary budget indicated that proposed changes in state policy could also result in significant reductions to other supplemental payments. If NYC Health + Hospitals can’t dodge these cuts, it faces projected losses of $309 million in fiscal year 2025 and $405 million in fiscal year 2026.

Mayor Eric Adams’ preliminary budget for New York City included $717 million for NYC Health + Hospitals — a $1.3 billion reduction from the current fiscal year. But this fiscal year’s budget was largely inflated by expenses related to COVID-19 and was padded with substantial federal funding.

If the federal government ends the state of emergency and the number of cases rises, then we could have expenses with no revenue.

NYC Health + Hospitals President and CEO Dr. Mitchell Katz

According to Katz’s testimony, the system of 11 hospitals and 70 clinics has spent $2.6 billion in total combating COVID-19 so far and has received $620 million in FEMA funds in addition to the $1.2 billion it received through the federal CARES Act.

At the hearing Monday, lawmakers questioned whether the health system would be in a good place to weather another wave of the coronavirus. Katz said, in the case of new pandemic-related expenses, the health system would continue to seek additional federal aid as long as it’s available.

“If the federal government ends the state of emergency and the number of cases rises, then we could have expenses with no revenue,” Katz said. “I am hoping that doesn’t happen.”

Health system upgrades

NYC Health + Hospitals has sought to expand access to and utilization of primary care in recent years. But when Councilmember Selvena Brooks-Powers, who represents Far Rockaway, asked whether it would be possible to open a new hospital to serve the isolated community’s growing population, Katz said he wasn’t sure.

“I can always create clinics near where people live and work,” Katz said. But, he said, when it comes to opening a hospital with specialized care such as a trauma center, there needs to be enough patient volume to make it possible to hire staff such as neurosurgeons and anesthesiologists.

Katz said he would discuss a potential expansion with Brooks-Powers. But in the meantime, the health system is looking to upgrade its existing facilities.

“Many of my buildings need work,” Katz told lawmakers. “Elevators, aeration systems. They’re not sexy but you can’t run a hospital if the elevators don’t work.”

The health system is planning to allocate $3.5 billion between fiscal years 2022 and 2026 for capital improvements.