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In the midst of an extremely difficult financial environment for healthcare organizations, Yale New Haven Hospital has continued to put any money it earns right back into patient care, President Richard D'Aquila said during his latest open forum video.

But cuts to state reimbursements and the growing hospital tax are prompting YNHH to find alternate ways to save and invest money to fulfill its commitments to excellent care, destination hospital programs, community engagement and workforce stability.

"If we were an organization that was cutting or eliminating staff, that would have a negative impact on patients and a negative impact on the people who are part of our organization," he said. The video, the second of four this year, is being shown at hospital departments' quarterly staff meetings.

In the video, D'Aquila discussed three components of YNHH's finances: the budget, payments to the hospital and operating margin and investments. Most of the budget – 83 percent – is spent on patient care, he said. While concerns have been raised in the media about pay for hospital leaders, executive compensation, including benefits, accounts for less than 1 percent of YNHH's budget.

In discussing payments to the hospital, D'Aquila noted that the state and federal governments' reimbursements to the hospital for the care of Medicaid and Medicare patients do not cover the hospital's costs. Payments from private payers such as insurance companies help make up for those reimbursement shortfalls.

"We all pay for that cost shift," D'Aquila said. "It's not sustainable."

YNHH's growth, cost and value activities and programs such as clinical redesign have also helped offset those reimbursement shortfalls and cover state tax increases. Despite being not-for-profit, Yale New Haven Health System is the biggest taxpayer in the state, D'Aquila said. Hospital tax increases and the state's cuts to Medicaid reimbursements will cost YNHH an estimated $514 million in 2016, up from $334 million in 2013.

Growth and cost-saving measures not only helped cover the reimbursement cuts and tax increases in 2015, they helped YNHH generate a $112 million operating margin. However, D'Aquila emphasized, while for-profit companies distribute profits to shareholders, as a non-profit organization, Yale New Haven reinvested all of its operating margin – and spent more – on new operating rooms, the Center for Musculoskeletal Care, Newborn ICU and other projects that enhance patient care. "We spend more than we take in," D'Aquila said. "Every penny of what we make is invested back into this organization."

D'Aquila ended with another key message for employees: Yale New Haven Health System is the third largest employer in Connecticut, and Yale New Haven Hospital's more than 12,000 employees positively impact the economy in Greater New Haven.

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