The years following implementation of the Affordable Care Act have been a time of uncertainty for many city public hospital systems.
While the health law has reduced uncompensated-care costs for many providers and increased their volume of insured patients, public safety net health systems have largely not reaped many of the benefits of the healthcare law.
The growing financial challenges facing municipal hospitals have led to a series of closures in cities throughout the country over the past decade.
Decreases in federal and state support that were designed to offset the cost of caring for low-income patients have forced some of the largest public safety-net systems to cut services and personnel to survive.
Yet for some, those moves will not be enough, a point not lost on the head of the country’s largest public health system, which is itself working to get its financial footing.
“Philadelphia has a lot of low-income people, and they once had a public hospital but no more,” said Dr. Mitchell Katz, CEO of NYC Health + Hospitals. “Washington, D.C., Milwaukee and Sacramento (Calif.) all had a public hospital, but no more.”
It’s not just big cities that are losing their public hospitals. The number of state and local government-owned community hospitals has fallen 17% to 965 in 2018 from 1,163 in 2000, according to the American Hospital Association. By contrast, the number of investor-owned community hospitals increased by 73% over the same period.
NYC Health + Hospitals itself has faced years of rising costs and declining revenue due to low rates of insurance reimbursement, decreasing inpatient visits, and federal funding cuts.
Armed with an infusion of $1.1 billion in tax levy funds in 2016, the NYC system is aiming to take the lead in how public health systems should provide care by transforming its operations, following a different route than is typical.
NYC Health + Hospitals’ approach has largely focused on expanding primary-care access throughout more parts of the city, streamlining administrative expenses, and improving its billing practices to try to get higher reimbursement rates from insurers, instead of cutting back on services.
“The reason to grow is because you believe that you have something important to offer,” Katz said. “We’re growing because the system has something unique and special to offer people, and when we present what we have in a meaningful way, patients come.”
Still, the financial impact from the health system’s transformation has been muted so far. Net patient revenue as listed in its cost reports fell 0.7% to $5.45 billion in 2018 relative to 2016’s total of $5.49 billion, according to the system.
Net income from services to patients, which is net patient revenue minus total operating expenses, fell to -$1.2 billion in 2018 from -$1 billion in 2016, a calculation that system officials said they don’t believe carries much weight because it includes irrelevant figures. The figures are derived from Medicare cost reports.
NYC Health + Hospitals’ own reporting to its board showed that from 2016 to 2018 operating revenue rose 11.5% to $8.7 billion, while operating expenses climbed more slowly at 8% to $9.9 billion. The resulting $1.2 billion operating loss in 2018 was 11.5% lower than it was in 2016.
According to a statement from the health system, the numbers reflect several major revenue reforms that began in fiscal 2017 and 2018 that affected patient revenue by the end of fiscal 2018; those efforts have continued to grow in fiscal 2019 and 2020.
Critics argue the plan has not been ambitious enough toward achieving the system’s outlined goals of raising revenue by growing its volume of insured patients, or in cutting costs. They say while the effort so far has shown promise, much of the transformation strategy’s success—and the viability of the system more broadly—hinges on the municipal and state funding it receives to make up budget shortfalls. New York City Mayor Bill de Blasio recently warned state Medicaid cuts could reach up to $2 billion for New York City, further increasing the need for support.
“They’re moving in the right direction and the things they want to do are basically the right things on most of this,” said Charles Brecher, senior adviser for health policy for the Citizens Budget Commission, a not-for-profit, nonpartisan watchdog organization that advocates for good financial governance in New York City and New York state government. “It’s just that it’s going to be very hard because a lot of it depends on state actions.”