Council Chair Tasco and members of the City Council, I am Ken Braithwaite, Regional Executive of the Delaware Valley Healthcare Council of HAP (DVHC), and Senior Vice President of The Hospital & Healthsystem Association of Pennsylvania (HAP). HAP represents and advocates for the nearly 250 acute and specialty care hospitals and health systems across the state and the patients they serve. DVHC advocates for 100 health care facilities in southeast Pennsylvania, including acute care hospitals and health systems and facilities providing inpatient behavioral health services and rehabilitation.

My remarks today will focus on Bill No. 090016, which would amend the City Code to reduce or eliminate the discounts for water, sewer and stormwater bills for charitable institutions and the Philadelphia Housing Authority.

I appreciate the opportunity to present the views of Philadelphia’s hospitals and health systems on this important issue. We are all contending with the worst economic environment in more than thirty years. We very much appreciate the difficult circumstances that the Council confronts in addressing the City’s budget crisis.

As City and state governments struggle to balance budgets, the hospital community urges lawmakers to preserve the funding and other economic protections that help maintain the hospital safety net for the most vulnerable among us. We are facing an unprecedented state budget deficit. As I speak today, hospitals stand to lose $130 million through cuts to Medical Assistance statewide, including $34 million in cuts to hospitals in Philadelphia. We urge the Council not to add to the economic challenges facing the hospital community by eliminating the current water rate discount.

At this time, I would like to share with you a summary of the many economic pressures hospitals are already facing, and the important role hospitals play in the economic life of the City and region.

In fiscal year 2007, hospitals contributed $24 billion to the economy of southeastern Pennsylvania. They supported one in ten jobs. In both the City and the region, five of the 10 largest employers are hospitals. Philadelphia hospitals directly employ 40,000 people. In fiscal year 2007, these employees provided more than $80 million in wage taxes to Philadelphia. By any measure, hospitals, academic medical centers, and medical schools are a crucial part of Philadelphia’s economy.

Historically, hospitals have struggled to maintain the minimum margins needed to maintain long-term sustainability and reinvest in staff, services, technology and infrastructure. Now the economic crisis is threatening to turn even these modest margins from black to red.

As of December 2008, nearly half the region’s hospitals had already reported a moderate-to-significant negative impact on the day-to-day financial operation of their facilities. The overwhelming majority of hospitals forecast a moderate-to-significant negative impact on the financial stability of their facilities through December 2009 ... a prediction of prolonged economic downturn that we see continuing now.

While hospitals struggle with these financial challenges, they face additional challenges in serving their patients and communities. As layoffs and job losses mount, more people find themselves without health insurance or the ability to pay for health care. Hospitals are providing more charity care and financial assistance and assuming more bad debt as patients cannot afford to pay for needed health care. As of December 2008, 50 percent of hospitals had already seen an increase in this uncompensated care. In fiscal year 2007 – before the current economic turmoil – the region’s hospitals were already providing nearly $260 million in uncompensated care, up nearly 15 percent from 2006.

Tough economic times also bring increases in the number of patients whose health care is covered by Medical Assistance, Pennsylvania’s government-sponsored health insurance for low- income people and families. Patients with Medical Assistance receive the very best of health care at Philadelphia’s many excellent hospitals, and this is as it should be. Unfortunately, Medical Assistance reimburses hospitals only 75 percent of the cost of care provided to its beneficiaries. In other words, for every dollar of care, in cost, provided to patients with Medical Assistance, hospitals receive only 75 cents. For fiscal year 2007, 20 percent of all payments to Philadelphia hospitals came from Medical Assistance. With every dollar of these payments representing a 25-percent loss, you can imagine what this does to hospitals’ financial sustainability.

Philadelphia’s hospitals are a crucial component to the wellbeing of the economic fabric that is Philadelphia. The difficult economic environment is severely stressing several of our hospitals. Any additional economic burden could produce drastic results, such as increased staff reductions, the closing of service lines, and perhaps even the closing of entire institutions.

Conclusion

Your constituents count on health care being there when they or their family members need help. Our member hospitals and health systems provide care to patients 24 hours a day, seven days a week, and make every effort to treat all patients with dignity, respect, and compassion. We are very much the safety net for a growing population of residents.

In order for us to keep providing these essential services, we need to have cost certainty with our budgets, and this includes preserving our water rate discount at the current rate of 25 percent. We are aware that Councilman DiCiccio has introduced an amendment that would phase out the charity discount over several years. While I would strongly recommend the committee not alter the current discounted rate, DVHC would be proud to work with the Council to find an amenable end for all interested parties.

Thank you for the opportunity to testify and I would welcome any questions at this time.

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