New York City to Sue State for Withholding Funds for Public Hospitals

The city says that the state did not indicate that it would withhold funding for low-income and uninsured patients in public hospitals.

Mayor Bill de Blasio with Gov. Andrew Cuomo. (Photo: Bryan Thomas for Getty Images) Bryan Thomas/Getty Images

New York City is planning to sue the state next week on the grounds that the state has been withholding $380 million in Disproportionate Share Hospital payments — which supports low-income and uninsured patients — for the city’s public public hospitals.

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On Sept. 30, federal funding cuts to Medicaid DSH payments went into effect. The cuts directly affect New York City Health + Hospitals, SUNY Upstate Medical Center, SUNY Downstate Medical Center, Westchester County Medical Center, Nassau University Medical Center and Erie County Medical Center. The DSH payments reimburse hospitals through the Medicaid program for uncompensated health care costs.

Last week, Stan Brezenoff, Health + Hospitals’ interim president, sent a letter to the governor and New York State Health Commissioner Howard Zucker expressing concerns about what the lack of funding would do to the city’s hospitals. In response, state budget director Robert Mujica told Politico that the decision stemmed from possible federal funding cuts and that they were trying to determine “how we’re going to space out these funds across the appropriate time frame now.”

“The legal argument is that the federal government has already allocated these funds for New York City,” Freddi Goldstein, a mayoral spokeswoman, said during a press call on Friday afternoon. “The state has no role other than to be a vessel for these funds to go through.”

Brezenoff first announced that the city would sue the state on Friday in an interview with NY1. That day, Goldstein also announced it on Twitter. She said that the lawsuit will be filed in the coming days.

Goldstein noted that in an “ideal world,” the city hopes that the state realizes that it is its job to provide the city with the funding from the federal government but that they have “no illusion” and are “firing on all cylinders to make sure the city gets the money that it is owed.”

“We have been left with no choice but to move to sue the state and make sure we get the funding that the fed gov has rightfully allocated for us,” she continued.

She also said that the city would state whether the lawsuit will be filed in state or federal court as well as whether the federal government would be among the respondents next week.

Brezenoff told reporters during the call that the state has created a “major unforeseen, unforeseeable gap” in the city’s budget in the fourth month of its fiscal year and the seventh month of the state’s fiscal year. The federal government, he said, already approved the funds.

The city has had to take measures to respond as a result, he said, noting that the city has enacted a “further tightening” of hiring.

“We have begun the painful process of adjusting our operations in ways that almost certainly will impact the services to patients and put additional strain on our hardworking employees,” he said.

Dean Fuleihan, director of the city’s Office of Management and Budget, reiterated that the city did not receive any indication that the $380 million would not be coming to Health + Hospitals during calls with various stakeholders.

“For some unknown reason, the only payment that is being withheld is health and hospitals from the past fiscal year,” Fuleihan said.

In April 2016, de Blasio earmarked $160 million just to get Health + Hospitals through the fiscal year that ended on June 30, 2016 — on top of the $337 million he put into the 2016 budget that January.

Jason Helgerson, the New York State Medicaid director, said that the federal cuts will require hospitals across New York to find efficiencies and the sponsoring governments and institutions to offer help.

“The federal cuts to DSH have been pending for seven years and we are sure that all responsible CEOs of the state’s public hospitals have been accounting for these potential shortfalls in that time,” Helgerson said. “The suggestion that the state is somehow in a position to reverse federal cuts is willful political ignorance and a distortion of reality — only the federal government can possibly restore cuts they’ve enacted.”

The state, he said, is also retaining KPMG to carry out a fiscal analysis to figure out possible options on how to distribute the remaining funds effectively. Those options will be presented to the public for discussion and to the legislature for approval, and no decision will be made for months.

Dani Lever, a spokeswoman for Cuomo, dismissed the premise of the lawsuit.

“We know the city prefers political theatre to governing, but a more productive action would be to sue the federal government since they are making these devastating cuts, or if it actually cared about patient care, to use its funds to improve the hospital network that it owns,” Lever said in an emailed statement. “In the meantime, the state continues to call on Congress to restore this federal funding and the city should stop with the distractions and be part of the solution.”

New York City to Sue State for Withholding Funds for Public Hospitals