Governor: Emergency funds fine, but larger fix needed

While Gov. Neil Abercrombie backs a proposed $14 million emergency appropriation to cover a projected shortfall for Hawaii Health Systems Corp., the governor maintains that such a cash infusion is a “Band-Aid approach” and wants a long-term strategy for the fiscal health of Hawaii’s public hospital system, the governor’s press secretary, Louise Kim McCoy, said Wednesday.

HHSC oversees state community hospitals in rural and Neighbor Island areas, including Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital.

The public hospital system needs the emergency appropriation to pay for rising labor costs and to cover losses from declining federal reimbursements for patient services, said Avery Chumbley, acting HHSC president and chief executive officer.

On Monday, Chumbley made the public hospitals’ case for the emergency appropriation to state lawmakers and to Bruce Coppa, the governor’s chief of staff, and Kalbert Young, director of the state Department of Budget and Finance.

“The administration has reviewed the situation with HHSC regarding their projected shortfall and their request for an emergency appropriation,” McCoy said in an email. “The governor has already decided that the administration will have to pursue an emergency appropriation next (legislative) session. However, as the governor has stated previously, HHSC’s financial stability has been a long-standing problem, and merely providing an emergency appropriation is only a temporary Band-Aid approach.

“We need a comprehensive, long-term strategy toward long-term sustainability of the system,” she said. “The governor does not oppose looking at public-private partnerships. However, we want to ensure that there is sufficient critical access to urgent services especially in rural areas, address employees with vested interests, balance cost sustainability for taxpayers, develop a more efficient system and weigh a need for the state to subsidize or provide ongoing funding.”

On Wednesday morning, Chumbley said that McCoy’s comments are consistent with the governor’s support for HHSC.

“I’m very encouraged by that,” he said.

The governor’s support for the emergency appropriation is vital because only the governor can propose such spending to the state Legislature. Legislators begin their 60-day lawmaking session on Jan. 15.

Also Wednesday, Randy Perreira, executive director of the Hawaii Government Employees Association, said he agreed that state lawmakers had not appropriated enough money to cover hospital workers’ negotiated pay raises, but he took strong exception to a number of comments from Chumbley, especially those tying the need for more money to higher labor costs.

Perreira said Chumbley’s comments in a Maui News story Wednesday were “dead wrong” in reporting that public hospital employees earn more than those in the private sector.

(Actually, the story published Wednesday on Page A1 and continued on Page A4 incorrectly stated Chumbley’s position on HHSC salaries. He did not say that HHSC pays higher salaries to its employees than those earned at private hospitals. In fact, HHSC employees have lower base wages than their counterparts in private hospitals, he said. Chumbley’s aim was to point out that when HHSC employee pay is combined with the overall costs of worker benefits and work rule restrictions, total labor costs are higher at HHSC than private institutions. The Maui News apologizes for the error.)

Also, it was “misleading,” according to Perreira, for Chumbley to report that public hospitals in Hawaii have labor costs of 76 to 77 percent of overall expenses while the national median is 51 percent for labor costs and 48 percent for private hospitals in Hawaii.

While Perreira acknowledged labor costs at public hospitals are higher as a percentage of the operating budget than other hospitals, the figures reported by Chumbley are exaggerated, he said, because private hospitals have higher overhead and depreciation costs that skew figures and make it appear that labor costs are much higher at public hospitals than they actually are.

Perreira agreed that public hospital employees have more vacation and sick time than their private hospital counterparts. (Public hospital workers receive 21 vacation days, 21 sick days and 14 paid holidays off.) He said that does mean that public hospitals need to hire more staff to cover for employees absent from work because of vacation, sick leave or holidays.

However, he said, the union has “long expressed a willingness to address the issue” with management, possibly by making base pay commensurate with private hospital workers.

Perreira said the figures reported by Chumbley as percentages of labor costs should not be taken as “absolute.”

“The figures make things look worse than they really are,” he said.

Chumbley stood by his percentage figures Wednesday, saying that they were derived from the independent Hawaii Health Information Center.

Perreira said that as HHSC officials seek to justify the need for the emergency appropriation, they have resorted to their “typical” blame-the-labor-costs tack.

“That’s not entirely true,” he said. “They try to make a scapegoat out of labor.”

When the state Legislature did not approve payment of the full amount of the public hospital employees’ negotiated pay increases, the HHSC was left to pick up that cost, Perreira said. He was critical of state hospital officials for not budgeting to cover the wage increase.

Other reasons for the hospitals’ operating budget shortfall include lower Medicare and Medicaid reimbursements and a much higher rate of uncompensated care at public hospitals than at private facilities, Perreira said.

“That’s a huge drain for them,” he said.

HHSC also spends an “inordinate amount of money” paying for “agency nurses” to make up for short-staffed facilities, he said.

Perreira said he found it “galling” for Chumbley to argue that a public-private partnership would lead to improved quality of care at public hospitals. He said that implied that current employees provide substandard care.

“To me, that’s a slap in the face to the employees of the HHSC that Mr. Chumbley is supposed to be overseeing as CEO,” he said. “That’s an insult to these employees.”

Chumbley said his comment was aimed at a public-private partnership providing additional improvements in overall quality of care through expanded services and upgraded technology that a larger system could provide. His comment was not meant to be demeaning to HHSC employees, he said.

“I’m very proud and pleased with the quality of care HHSC employees provide,” Chumbley said. “I never said their quality or performance was unacceptable.”

He said he found Perreira’s characterization of his comments “divisive” and “demeaning to employees themselves.”

Of HHSC’s more than 4,000 employees statewide, 89 percent are either represented by HGEA or the United Public Workers union, Chumbley said.

HGEA represents nurses, social workers, ward and billing clerks, dietary workers, and lab and radiology technicians, Perreira said. The UPW represents licensed practical nurses, housekeeping staff, grounds-keepers, cooks and other blue collar occupations, he said.

UPW chief Dayton Nakanelua was not available for comment Wednesday.

* Brian Perry can be reached at