NYC Health & Hospital's new chief looks to add doctors and cut costs

Dr. Mitchell Katz, who took over as CEO at NYC Health & Hospitals in January, plans to address the public health system's fiscal woes by spending his money where it counts the most.

Katz, who testified at a city council hearing last week, signaled an end to the payroll-slashing strategy of recent years, in which the system let the number of doctors and nurses dwindle through attrition. Instead, Katz plans to invest in primary and specialty care with an eye toward attracting patients discouraged by long wait times for appointments. For openers, he committed to hiring 55 primary care clinicians.

The directive comes at a time when the number of hospital discharges and outpatient visits have fallen as of Jan. 1 by 2.3% and 2.4%, respectively, across the 11-hospital system. Katz asserts that the understaffing trend has hurt the health system by discouraging patients from seeking care at Health and Hospitals facilities.

"Utilization is decreasing not because people don't want our services," Katz told the council's Committee on Hospitals at a fiscal 2019 budget hearing, "but because we're full."

Katz's turnaround prescription does require some tough choices, however. Last week he laid off 35 administrators in the system's central office. But those cuts will save $4.9 million annually, freeing up funds to hire doctors and nurses.

"I can't accept having an administrative position if I can't deliver care," he said.

Moreover, when treating insured patients, the health system is missing out on significant revenue by not properly coding and billing claims, Katz added. In fiscal 2019, which starts July 1, the system aims to generate $110 million simply by improving billing and revenue collection.

Closing the deficit

The health system's head count has declined by more than 4,900 since November 2015. Health and Hospitals had about 44,000 employees in January, according to the most recent data available.

The system has slashed $16 million in consulting costs in the past three months, according to Katz's written testimony. And it is on track to close its expected $1.2 billion budget deficit this fiscal year, which ends June 30, by increasing revenue by $820 million and lowering costs by $387 million.

But spending more on clinical care won't solve all of Health and Hospitals' problems, said Mariana Alexander, a research associate at the Citizens Budget Commission. The health system must begin difficult conversations about services and facilities that need to be restructured, she said.

"I don't really see how they're going to find the cash to do this," she said. "If they're going to increase [the] service provision, they're going to have to have decreases elsewhere."

Katz isn't new to financial turnarounds. He formerly ran the Los Angeles Department of Health Services, which operates four county hospitals that care for the uninsured. He reversed a $177 million deficit in 2010 into a $247 million surplus in 2015 largely due to of improvements in the payer mix because the hospitals treated fewer uninsured patients. That success was helped by California's Medicaid expansion under the Affordable Care Act, the CBC said.

New York City's health system got a reprieve last month, when Congress delayed cuts to the federal Disproportionate Share Hospital program, which funds facilities that treat high numbers of Medicaid and uninsured patients. Katz said the two-year delay will save the system $600 million, but it must prepare for reductions.

"This gives us a ramp," he said. "This gives us the time."

"NYC Health & Hospital's new chief looks to add doctors and cut costs" originally appeared in Crain's New York Business.