Bill allowing partnership for HHSC advances

The state Senate Ways and Means Committee has advanced a bill to allow management of the state’s struggling public hospitals, including Maui Memorial Medical Center, to be shifted from the Hawaii Health Systems Corp. to a nonprofit hospital corporation.

Senate Bill 3064 underwent major revisions before it reached the Senate’s money committee, which further amended the bill to change its effective date from Jan. 1, 2015, to July 1, 2050. The measure still needs to pass the full Senate before it can cross over to the House of Representatives.

“The current structure of HHSC is not sustainable for the long-term delivery of health care services for residents, especially those on the Neighbor Islands,” said Wesley Lo, chief executive officer of the Hawaii Health Systems Corp. Maui Region, in written testimony submitted in favor of the bill, although with revisions.

Maui Memorial is continuing to struggle with funding shortfalls and is working on updating its budget, Lo said.

“We may be forced to consider possible reductions in medical services, inventory of supplies and pharmaceuticals, availability of services and/or number of employees,” he told lawmakers.

In an interview Friday, Lo said such cutbacks are being considered only as a last-resort backup plan if HHSC doesn’t either get more money from the Legislature or the ability to seek a private partner.

“It depends on what comes out of the Legislature,” he said.

In his written testimony, Lo said the hospital’s aging facilities are in need of major updating for the safety and well-being of employees and patients.

“Facility infrastructure and grounds continue to deteriorate resulting in more costly repairs and increased difficulty with recruiting qualified staff,” Lo wrote. “Growing losses by community hospitals will inevitably affect services, accessibility, staffing and the ability of MMMC to remain competitive in quality and costs. If not resolved, this may result in facility closures and loss of jobs, which will negatively impact communities that MMMC serves, especially low-income (residents) and the elderly.”

Lo pointed out that Maui Memorial is HHSC’s largest acute-care facility and the only full-service hospital in Maui County. And, it’s the only hospital in the state with a 24/7 stroke prevention program and the only Neighbor Island hospital that provides comprehensive cardiovascular services, he said. With 1,400 employees, including 200 doctors, Maui Memorial is one of the largest employers on Maui. Many hospital employees are represented by the Hawaii Government Employees Association.

Lo said a public-private partnership would reduce Maui Memorial’s dependence on government subsidies and provide access to private capital that, among other things, would:

* Provide greater access to quality health care and lower costs.

* Address facility repairs, maintenance and upgrades.

* Create efficiencies of scale and increased resources.

* Enhance information technology infrastructure.

* Offer private-sector compensation packages to attract and retain qualified medical personnel.

HGEA Deputy Executive Director Wilbert Holck Jr. submitted testimony opposed to the bill because it doesn’t provide for an employee bargaining process or “ensure protection of the rights and benefits of the affected employees.”

And Holck raised concerns about a requirement for the nonprofit hospital to provide equivalent services for at least five years. “As written, the proposed legislation does not provide for any long-term assurances that communities will continue to receive needed health care services,” he said.

HHSC acting President and Chief Executive Officer Alice Hall testified that the corporation’s board was in strong support of the bill, although with revisions.

She pointed out that HHSC’s operating loss has grown from $97.2 million in 2010 to $139.3 million in 2013. Meanwhile, the corporation’s subsidy from the state has gone from $96.7 million in 2010 to $71.9 million in 2012 and $84.6 million in 2013. Net income loss in 2013 was $53.4 million, Hall reported.

Hall said HHSC has been losing money from growing expenditures for infrastructure maintenance and upgrades; rising costs for recruitment, retention and training; unfunded collective-bargaining mandates and liabilities including health fund and retirement systems; and declining Medicare and state subsidies.

“In order to maintain the existing level of services at its facilities, HHSC will need an estimated $1 billion in capital improvement funds over the next 10 years,” she said.

Now, there’s only $40 million available for the entire HHSC system to cover an estimated $189 million needed for capital improvement projects and life-safety needs, she added.

While Senate Bill 3064 proposes outlines for a basic framework to switch public health facilities to a private entity, HHSC recommended adopting the language of House Bill 2192, Hall said.

That bill, introduced by House Speaker Joe Souki of Wailuku, “more fully addresses the issues and eliminates some of the legal concerns raised about the current language” in the bill, Hall said.

According to Hall, House Bill 2192:

* Sets forth partnership guidelines to ensure that the transition from state to private management protects employees, the state and communities served by the facilities.

* Provides for existing employees by requiring that they be given earned retirement benefits and the same or better compensation than they currently receive.

* Outlines a collaborative process that includes input from medical and hospital staffs, affected communities, boards, the Legislature, the attorney general and the state budget director.

“We submit that this is a good plan and presents a valid alternative to either cutting services or increasing subsidies for HHSC,” Hall said.

House Bill 2192 has been referred to three committees, including the House Finance Committee but, as of Friday, has not been scheduled for a hearing.

* Brian Perry can be reached at