New York City Health+Hospitals to sue state over $380 million in withheld DSH payments

System is already cutting hiring, using attrition to conserve cash and will end the week with only 13 days cash on hand.

NYC H+H plans to sue New York state over the $380 million in disproportionate share hospital payments they claim should have been delivered to them by Sept. 30, NYC H+H interim CEO Stan Brezenoff said on Friday.

City spokeswoman Freddie Goldstein said the suit would be filed sometime next week, though she couldn’t specify whether it would be filed in state or federal court. She also couldn’t specify exactly what state entities would be named as respondents or whether it would include the federal government.

More details will be forthcoming in the coming days, but regarding the purpose of the lawsuit, she said the payments in question were allocated by the federal government for the purpose of reimbursing the city for services already rendered in fiscal 2017. She said the state has no role other than to be a vessel for this funding.

“They can’t change the purpose of the funding once it’s been allocated by the feds.”

Dean Fuleihan, director of the NYC Office of Management and Budget said pursuant to state law it’s clear the $380 million has to go H+H. While he recognizes that there are reconciliations after every fiscal year, he said the $380 million in DSH payments has nothing to do with that.

“That can not turn into we are not giving you the $380 million that you expected, that we knew you expected, that we never objected to and that had to be paid in the prior federal fiscal year.”

The state has argued that the impending massive federal cuts to the DSH program are the reason for not releasing the funds, and that the state will be conducting detailed financial analysis of each hospital that receives funds from the program to assess their situation and need. Gov. Andrew Cuomo said the $1.1 billion cut that will unfold over the next 18 months will mean the state can’t fund any public hospital 100 percent, and they have not made any DSH payments since Oct. 1, when the law went into effect. The cuts are a caveat of the Affordable Care Act.

Fuleihan also conceded that there is no actual statute stipulating the Sept. 30 deadline. Rather, the past pattern of payment dictated it, and the payments are for expenses incurred in fiscal 2017, which ended Sept.30. He said the state’s decision to withhold the funds is a first.
And there was no federal cut to DSH funding in fiscal 2017, so the money should come.

“Is there anyone in the state of New York that does not recognize that NYC H+H is the major provider of care to Medicaid recipients and the uninsured. One-third of our patients are uninsured and we don’t get any of the FY17 DSH money? The voluntaries got their money. We’re not getting anything,” said Brezenoff.

About a third of the system’s patients are uninsured and large number of them are not eligible for insurance.

Brezenoff has already told staff that they will using attrition and drastic cuts to hiring to try and conserve cash. He said by the end of Friday they’ll have only $255 million, equal to 13 days of cash on hand.

“You can see just how precarious our situation is…We have begun painful process of adjusting our operations in ways that will almost certainly impact services to patients and put additional strain on our hard working employees.”

He said they will now be looking closely at each position that becomes open and deciding whether or not to fill it, and that those decisions could ultimately impact clinical staff and patient care.

“It is definitely conceivable that some physician positions will not be filled,” Brezenoff said.

They are also slowing down payments to vendors, which could impact future pricing and maintaining of supplies.

“The longer this goes on, it will require more and more difficult things to conserve cash. That’s the mode NYC H+H is in.”

Between last fiscal year and this one, NYC H+H is looking at a more than $700 million gap, including the currently withheld DSH funds as well as a possible $330 million cut for fiscal 2018 if Congress does not repeal the cuts.

Brezenoff said they have no plans to ask the city for more funds, as the traditional amount that comes from the city to NYC H+H is between $1 billion and $1.3 billion. The city is currently slated to contribute $1.8 billion, with commitment for $2 billion in their financial plan. NYC is facing their own $3.5 billion budget gap for fiscal 2019.

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