Public Hospitals a Growing Drain on NYC Budget

CEO resigns as city prepares to plug a $1.6 billion gap
By Petr Svab
Petr Svab
Petr Svab
Petr Svab is a reporter covering New York. Previously, he covered national topics including politics, economy, education, and law enforcement.
November 16, 2016 Updated: October 5, 2018

NEW YORK—New York City has long boasted of its dense social safety net. Every homeless person is guaranteed shelter, the city has the largest public housing system in North America, and a network of 11 hospitals and dozens of clinics—the NYC Health & Hospitals (H&H)—is obliged to care for the uninsured.

But the city is struggling to fund it all.

Public housing needs almost $17 billion in major infrastructure repairs, Mayor Bill de Blasio said last year. Homeless shelters cost the city $41,000 a year per family. And the public hospital system costs progressively more, even as usage of its facilities is declining.

“As inpatient admissions decreased by 13 percent from 2011 through 2015, total staffing expenses grew by 11 percent,” reported the city’s Independent Budgeting Office in June.

The city contributed about $2.1 billion to H&H’s more than $7 billion budget last fiscal year and the budgeting office estimated the city will continue to pay about $1.6 billion a year to keep the hospitals running.

Slow to Change

Technological advances in health care have diminished hospitals’ role over the past decades. Several years ago, many procedures—such as hernia repair or cataract surgery—required a hospital stay, but now they don’t. Hospitals have adapted by reducing bed counts, laying off staff, and switching to outpatient care. And about 20 New York City hospitals have closed down since 2003.

Yet H&H has been “much slower to adapt,” said Yevgeniy Feyman, adjunct fellow at the Manhattan Institute, a conservative think tank.

H&H plans to save money by moving more towards ambulatory and preventive care—services expected more at clinics than at hospitals. But it “has not yet determined its specific plan for doing so,” the IBO report stated.

H&H President and CEO Dr. Ram Raju blamed the financial peril on a lack of public funding. About 70 percent of H&H patients have no insurance or have only Medicaid, which doesn’t cover the full cost of treatment, Raju wrote in an article for Modern Healthcare in July. “[W]e are like a family station wagon that everyone uses, but no one gases up.”

Raju recently announced his resignation, for family reasons, The New York Times reported.

City, state, and federal governments give H&H additional money to cover the uninsured and Medicaid gap, but that hasn’t been enough.

Yet that’s not a new problem and H&H overcame it before.

Between 1996 and 2000, H&H managed to reverse budget deficits and even amassed over $300 million in cash reserves, primarily due to laying off at least 9,000 staff.

Since then, H&H hasn’t cut staff so rapidly, instead letting it wane through attrition. But that only mildly reduces costs, as the retirees then become pensioners.

Public pension costs have skyrocketed across the state due to generous pension plans and undue hopes for investment profits from pension funds.

In 2003, H&H contributed less than $22 million to its employees’ pension fund, compared to almost $500 million in fiscal year 2016.

Mayor Bill de Blasio has promised there will be no layoffs at H&H and no hospital closings to offset the pension costs.

Instead, H&H plans to capture more federal and state funding and to get more people insured. But a major part of its future hangs on whether it will manage to transform itself and offer more of the services New Yorkers seek, such as preventive and outpatient care.

Affordable Care Act

H&H partly relies on federal funding to care for the uninsured. But that funding is supposed to decline starting in 2017 under the Affordable Care Act (ACA). The assumption was that enough people would be insured by then.

In the last few years, H&H has only had a small decrease in outpatient visits from uninsured patients—from about 30 percent in 2013 to about 25 percent in 2016.

If President-elect Donald Trump repeals the ACA, as he promised, it is not clear if the federal funding for the uninsured will survive. About 200,000 uninsured illegal immigrants live in the city, and many depend on H&H for health care, according to a 2014 report by the New York Immigration Coalition and The Hastings Center. Trump’s opposition to illegal immigration may also affect how his administration and Congress decide on the funding.

The entrance of Bellevue Hospital in New York on Oct. 24, 2014. (AP Photo/Mark Lennihan)
The entrance of Bellevue Hospital in New York on Oct. 24, 2014. (AP Photo/Mark Lennihan)

History of New York City’s Public Hospitals

Public hospitals in New York City date back to 1736. A six-bed infirmary for contagious disease on the top floor of a public workhouse and jail served as the predecessor of the famed Bellevue Hospital. The name was adopted in 1825. By then the city had already built a new hospital complex, which grew to include 1,200 beds by 1870. Bellevue was the first public hospital in the country.

As the city grew, more hospitals were built: the Metropolitan and Harlem hospitals in the 1870s, Kings County Hospital in 1831, and Lincoln Medical and Mental Health Center in 1902. Elmhurst Hospital Center opened in 1832 on Roosevelt Island (at the time called Blackwell’s Island) as a facility for prisoners. The hospital moved to Queens in 1957.

The first hospital cesarian section in the United States was performed at Bellevue in 1867. In 1876, the hospital opened the first children’s clinic, and in 1887, it saw the first in-hospital appendectomy in the country.

Today, heads of state and United Nations diplomats receive treatment at the hospital.

Source: International Directory of Company Histories


Obligatory Emergency Treatment

Hospitals with emergency rooms are obligated to stabilize and treat every patient with a medical emergency regardless of citizenship, legal status, or ability to pay since the passing of the Emergency Medical Treatment and Labor Act in 1986.

A medical emergency is defined as “a condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that the absence of immediate medical attention could reasonably be expected to result in placing the individual’s health [or the health of an unborn child] in serious jeopardy, serious impairment to bodily functions, or serious dysfunction of bodily organs,” according to the American College of Emergency Physicians.

In addition, safety-net hospitals, like those under H&H, provide full range of care to the uninsured, regardless of citizenship or legal status. They charge the uninsured progressively, based on their income. Many times, though, the tab goes unpaid.

Petr Svab
Petr Svab is a reporter covering New York. Previously, he covered national topics including politics, economy, education, and law enforcement.