New York City Health & Hospitals reported a $776 million operating loss for the first half of fiscal 2017, according to unaudited financial statements.
The public health system's operating loss widened by 84.5% over 2015, when the system lost $420.4 million. After investment losses and interest expenses, the system lost $842.6 million.
The city paid the health system $78.8 million in capital contributions, resulting in a $763 million net loss. Enrollment in MetroPlus, its insurance arm, showed modest gains. But the system's goal of increasing the number of patients it serves is in jeopardy following declines in utilization at its hospitals and outpatient clinics, Crain's reported in January.
The results aren't directly comparable to estimates prepared as part of Mayor Bill de Blasio's turnaround plan for H&H. But expenses are growing faster than revenue—a bad sign for the system's finances, said Charles Brecher, director of research at the Citizens Budget Commission. "That's not how you close budget gaps," he said.
A spokesman for H&H downplayed the financial loss, citing the timing of government payments and accounting rules that count noncash costs, such as depreciation. The spokesman added that the system is still on track to reduce the budget gap by $770 million for the current fiscal year by increasing revenues and lowering costs. Of its operating loss, $200 million is the result of the city making a prepayment toward its fiscal 2017 subsidy to H&H last fiscal year. He said another $270 million were "noncash costs that do not impact system operations," such as depreciation and the noncurrent portion of pensions and post-employment benefits.
The system's financial situation will also improve as supplemental Medicaid payments, such as Disproportionate Share Hospital payments, become available later this year and it begins to realize savings on employees it has eliminated through attrition, the spokesman said. "Our headcount reduction through attrition is yielding results, which are cumulative and will therefore show much greater benefit in the second half of the fiscal year," he said.
Stanley Brezenoff, interim chief executive, will appear before the City Council's health committee March 20 to offer his testimony on the health system's finances and answer questions from members.
Operating revenues increased 2.1%, to $4.2 billion, including an 11.1% increase in premium revenue from MetroPlus, which Brecher, the fiscal watchdog, described as "modest" progress.
Increasing enrollment in the health plan is a major pillar of de Blasio's turnaround plan—and one of its only viable options due to the mayor's staunch opposition to clinical staff layoffs, service-line cuts and hospital closures.
Operating expenses rose 9.8%, to $4.9 billion, as spending on nonlabor costs, such as supplies, equipment and drugs, increased 11.1%, to $1.9 billion. Meanwhile spending on salaries and wages rose 3.9% despite efforts to lower costs through attrition and the cutting of administrative jobs.
De Blasio increased support for H&H by 10.9%, to $766.8 million, for fiscal 2018, which begins July 1, Crain's reported in Pulse Extra in January. That total represents cash support but does not include spending to cover the health system's debt service, medical malpractice claims and employee health insurance costs. When accounting for those expenses, as well as the city's share of supplemental Medicaid payments, the city's support for H&H could reach $1.9 billion next fiscal year, according to a June Independent Budget Office report.
"NYC Health & Hospitals loses $776M in first half" originally appeared in Crain's New York Business.