Hospitals to again seek privatization

WAILUKU – Next year, Hawaii Health Systems Corp. will again ask the Legislature to pass enabling legislation to allow private-partnership options for the state’s community hospitals.

Such options will be sought to deal with rising medical costs and improve infrastructure and expand services, officials said at a meeting Wednesday.

Public worker unions opposed a privatization measure earlier this year.

The HHSC also will seek millions of dollars in emergency appropriations. For Maui facilities, the additional funding would cover employee collective bargaining costs and financial shortfalls from federal sequestration, said Wesley Lo, HHSC Maui Region chief executive officer.

He commented on privatization and emergency appropriations after a meeting Wednesday afternoon of the Maui Regional System board of directors at Maui Memorial Medical Center.

Although its request to lawmakers has not been finalized, the HHSC is expected to request at least $18 million to $20 million for community medical facilities statewide.

The corporation manages and operates Neighbor Island public hospitals including Maui Memorial, Kula Hospital and Clinic and Lanai Community Hospital. It also manages and operates three facilities on Oahu.

Last fiscal year, it is estimated that the Maui Region had an operating loss of $46.7 million and overall HHSC had an estimated operating loss of $163.9 million. It is forecast that operating losses at MMMC will be $36.6 million for fiscal 2013.

In fiscal 2012, the Maui Region saw a larger operating loss at $49.5 million, and HHSC overall had an operating loss of $143.4 million. Maui Memorial’s operating loss came to $39 million.

Lo, Maui Memorial’s chief executive officer, and Clay Sutherland, chairman of HHSC’s Maui Regional System board of directors, said HHSC has been receiving $82 million from the state annually for the last several years, but it’s not enough as costs continue to rise. They say a public-private partnership can help ease the state’s losses on its medical facilities.

“We see the stress on the state. We know its going to be hard for them to fund us,” Sutherland said after the meeting.

Last legislative session, a hospital privatization bill died in a conference committee. At the time, HHSC board members had been in discussion with Arizona-based Banner Health, one of the country’s largest nonprofit hospital systems.

But talks came to a standstill after the legislative bill died. Public union leaders and hospital employees, including nurses and clerks and hospital technicians, were among those alarmed that privatizing hospitals could jeopardize current and future employees.

Currently, HHSC is not in talks with any potential private partners, Lo said, adding that the first step would be to get privatization enabling legislation through the state Legislature. Public worker unions would be part of privatization discussions, he said.

Next year’s legislative session begins Jan. 15, and Lo said he wasn’t sure how lawmakers would handle the privatization issue and emergency appropriations.

West and South Maui state Sen. Roz Baker, vice chairwoman of the Senate Health Committee, agreed that HHSC’s current structure needs to be examined and legislation to do so should be put forward.

“I think it’s really clear that HHSC and the various regions can’t go forward the way it is,” Baker said. “When we created HHSC, we took the hospitals out of being a division of the Department of Health. Now I think it’s time to take a look at the structure and see how we can give them a little more flexibility in being in a public-private partnership that will bring more resources to the hospitals; give us access to additional staffing, doctors and specialists” that “small systems” have to have, she said Thursday. “Clearly with the trend in health care, you need to have greater volume,” she added “We have to have a bill so we can discuss the topic and then we can see what it might end up looking like.”

Baker said she would support emergency funding needed by the hospitals to pay for changes in contracts and deficits because of declining federal dollars.

“I would have done it in special session,” she added. “It’s something we have to do. We have to take care of our hospitals, and we have to take are of the people that work there.”

Lo said during his meeting presentation that if privatization legislation were passed and talks could start with private entities, HHSC would be selective about its potential partners and make sure the companies or organizations pass certain criteria. Those would include they would fit into the community, ensuring the organization would administer “culturally appropriate” care as well as have a sound information technology infrastructure and data capability.

“We aren’t going to just do this for the money thing,” Lo said.

Lo and Sutherland said after the meeting that if more funding were not provided, hospitals would be forced to scale down their services, an unwelcome prospect.

Sutherland praised Lo and Maui Memorial Medical Center for trying to provide more services to the community as well as increase revenues. For example, the hospital’s relatively new cardiac department now allows Maui County residents to have open-heart surgeries and other types of cardiac care without needing to fly to Oahu.

* Melissa Tanji can be reached at