DiNapoli: NYC Health + Hospitals Confront Tough Fiscal Outlook as Washington Moves to Cut Health Care Spending

New York City Health + Hospitals (H+H) will see pressure on key sources of revenue as Medicaid and low-income patients that rely on federal support lose health insurance, while reimbursement rates for health care programs are cut by Washington, making it harder for the largest public health system in the country to reach its financial goals, according to a report released today by State Comptroller Thomas P. DiNapoli.

“Federal legislation and regulatory changes — and how the state reacts — could significantly alter the level of support H+H receives,” DiNapoli said.  “Cuts in reimbursement rates and payment delays across Medicaid, the state’s Essential Plan and Medicare will hurt the agency’s bottom line, even as a growing uninsured population is likely to push more patients into its facilities.  As that happens, H+H may be forced to revisit its cost-cutting plans, leading to difficult decisions about the services it provides.”

H+H provides health care through 11 acute care hospitals, five post-acute care (i.e., skilled nursing) facilities, and over 30 patient care locations in the city’s five boroughs.  It provides health and mental health services to a large portion of city residents that receive subsidized care through Medicaid, Medicare, and the Essential Plan, the New York state free or low-cost insurance plan for adults with low incomes who do not qualify for federal Medicaid.  The agency faced structural budget challenges prior to the pandemic, including the declining use of services, reduced federal funding, and a large share of patients without health insurance.  In 2016, the city and H+H implemented a Transformation Plan, renamed in city fiscal year (FY) 2022 as Strategic Initiatives, to address recurring deficits and stabilize H+H’s financial situation.  H+H continues to face fiscal challenges as a safety net institution, including Medicaid and Medicare reimbursement rates that don’t cover costs for low-income patients.  In FY 2025, Medicare and Medicaid patients made up 84% of all H+H hospital discharges and 62% of all outpatient visits.

DiNapoli’s report found that H+H targeted $2.2 billion in savings from strategic initiatives for FY 2024 but achieved just over $1.1 billion.  Most of this (96%) came by improved billing, coding and documentation practices, renegotiating higher rates with managed care providers, attracting new and retaining current patients, receiving additional supplemental Medicaid payments, and increasing efficiencies.  Supplemental Medicaid payments are made to providers that provide care to Medicaid and uninsured patients and are subject to changes in federal, state, and local policy choices.  H+H actively pursues supplemental Medicaid payments such as Disproportionate Share Hospital (DSH), Upper Payment Limit (UPL), and UPL conversion payments to help supplement Medicaid base payment rates that fall short of the costs of providing care to uninsured patients.  These payments are a volatile source of revenue as they require ongoing approvals and depend on the annual state and federal budget process that can result in revised and delayed payments.  H+H’s Preliminary FY 2025 Plan released in February 2024 anticipated the receipt of $1.1 billion in UPL revenue.  However, by the time H+H finalized revenue and expenses for FY 2024, it had only achieved $170 million of what it anticipated receiving in February 2024.  H+H revised the amount of UPL revenue it expected to receive and pushed the anticipated receipt of these funds to FY 2025.  It had planned to reduce costs by consolidating consultants and departments, centralizing some services, and implementing more efficient lab practices.  But those initiatives generated only $45 million in savings, 4% of the total savings achieved in FY 2024.

By the time H+H released its February 2025 Plan, it lowered its strategic initiative revenue targets by approximately $556 million in FY 2025, $412 million in FY 2026, $480 million in FY 2027, and $549 million in FY 2028, although H+H has suggested it still anticipates it will receive some portion of these funds.  The February 2025 Plan also removed an average of $116 million annually from an undefined strategic initiative, as well as cost savings tied to restructuring, service cuts, and department consolidations that were valued at $90 million in FY 2025 and rising to $420 million by FY 2028.  Because of improved billing, coding, and documentation practices and additional revenue from supplemental payments, particularly by New York City, H+H has not yet had to move forward with any major restructuring.  In May 2025, the city and H+H released the H+H FY 2026 Executive Financial Plan, which reflects total strategic initiative savings of $1.5 billion in FY 2025, $939 million in FY 2026, and an average of $2.4 billion annually in FY 2027 through FY 2029.  The success of this plan is reliant on the anticipated receipt of UPL revenue, funded with 50% federal and 50% city funds, which the city has budgeted for in its financial plan.

DiNapoli’s report finds several areas of risk for H+H in the next few years.  New federal law (H.R.1) imposes community engagement or work requirements and more frequent eligibility determinations for certain non-disabled adult Medicaid enrollees.  This is expected to result in fewer people becoming eligible and maintaining eligibility for Medicaid.  The law also redefines eligibility for legally residing noncitizens to access Medicaid, the Children’s Health Insurance Program, and Medicare, as well as subsidized coverage through the state’s health care marketplace, which includes the Essential Plan.  As of September 2025, the NYC Department of Social Services estimated that 950,000 individuals in the city will lose coverage (800,000 from Medicaid and 150,000 from the Essential Plan).  H+H is expected to see an increase in uninsured residents using H+H facilities.

Federal DSH cuts were originally scheduled to be implemented in federal fiscal year 2014, but were repeatedly delayed by federal legislation until October 2025.  Without federal action to further delay these cuts, hospitals will bear their impact, with further cuts scheduled in federal fiscal years 2027 and 2028.  H+H has reflected the federal DSH cuts into its financial plans at up to $622 million.  The state fiscal year (SFY) 2024-25 Enacted Budget included a reduction of $57 million annually in funding designated to offset some of H+H’s costs for providing care to Medicaid and uninsured patients.  The total impact to H+H is $114 million annually, inclusive of the federal matching rate.  Since the release of its May 2025 Plan, the U.S. Centers for Medicare & Medicaid Services approved the state’s proposal for H+H to receive state directed payments that are higher than H+H has budgeted for, providing it with some financial relief in the short term.  Whether H+H will continue to receive approvals for these payments over the next several years is uncertain.

Report

NYC Health + Hospitals: Strategic Initiatives

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