WAILUKU - Gov. Linda Lingle has agreed to provide a $10 million loan to Maui Memorial Medical Center.
The hospital's chief executive officer, Wesley Lo, requested a $20 million loan a few months ago with anticipation of shortfalls in operational expenses and no new revenue expected to make up for losses.
The island's only acute-care hospital needs government help to pay down vendor bills that have been delinquent for more than three months. The operating subsidy would also be used to cover a cash-flow deficit that averages $2.5 million a month, while the money for late bills would reduce the accounts payable delay to about 45 days.
Lo had no comment Thursday regarding Lingle's decision to grant just half of what the hospital requested. He had said in a previous interview that he was aware of the budgetary challenges faced by the state and would be appreciative "with even $15 million."
Lo emphasized that Maui Memorial is still seeking a private-public partnership that would make it less dependent on state funding while allowing the medical center to improve its delivery of health care services.
He said he was confident that Maui Memorial could pay the state back and that a private-public partnership would help.
"This is a loan we're asking, not a handout," Lo said.
On March 25, Lingle laid out the details of her third financial plan to close a revenue shortfall and said she would grant Maui Memorial's request for a loan.
Lingle also announced that her financial plan would include $14 million in federal funds for state community hospitals on Kauai and in Kona and Hilo. The money is supposed to be used to reduce the hospitals' past due accounts and ensure that vendors continue to deliver medical items and other supplies.
Maui Memorial is not included in the $14 million assistance. Lo said vendors have not denied his facility any supplies due to delinquent payments.
Russell Pang, chief of media relations for Lingle, said loan documents for Maui Memorial are being worked on. No other details were available as of Thursday.
Maui Memorial officials have told the state that the loan could be repaid by the sale of all or a portion of the medical facility to private investors, or if necessary, by extensively downsizing services, both of which, state officials say, would require approval from the Legislature.
Lo has been lobbying lawmakers for a legislative measure to enable Maui Memorial to seek a private-public partnership so that it can bolster itself financially plus improve overall health care services.
Lo said he believes the financial situation facing Maui Memorial goes beyond budget challenges.
"It's not just about the hospital. It's above the overall health care system and how we fund it," he said.
Lo has met with potential partners on the Mainland who have indicated interest in Maui Memorial, but the parties cannot move forward without the required legislation.
Maui County state Sens. Roz Baker, Shan Tsutsui and J. Kalani English all supported the hospital's efforts to establish a public-private partnership by co-sponsoring the legislation Lo seeks.
Baker, a Senate Health Committee member, and Tsutsui, vice chairman of the Senate's Ways and Means Committee, also support Maui Memorial's request for a state loan.
Baker said all the Maui senators are working with their colleagues on Oahu on longer-term solutions to the hospital's financial situation.
"The acute-care facilities on the Neighbor Islands cannot be allowed to close down or decrease services," Baker said.
If the Hawaii Health Systems Corp. were to fail as a system, the hospitals on Oahu would not have the capacity to handle cases from Maui or any other Neighbor Island, she said.
"It would be a catastrophe," Baker said.
In the short term, Tsutsui said Maui Memorial would not last through this fiscal year ending June 30 without the state loan.
For the long term, the hospital will need more autonomy and a partner that can boost it financially, Tsutsui said.
A House version of the enabling partnership bill calls for transferring the state's community hospitals from the Hawaii Health Systems Corp. to the state Department of Health, which was administratively in charge of hospitals up until 1996.
The changes to the legislation stem from arguments by other state lawmakers that the Hawaii Health Systems Corp.'s oversight of community hospitals is not working. HHSC has asked for a $60 million emergency appropriation to help all of its 13 hospitals.
HHSC Chief Executive Officer Tom Driskill has said he would support Maui Memorial's efforts to seek a public-private partnership.
Last year's legislative session provided Maui Memorial with more autonomy from the state health oversight agency by allowing Maui County public hospitals to form a regional board that would have direct oversight in finances.
In 2008, investment banker JP Morgan arranged for $130 million in interim and long-term financing for Maui Memorial. The hospital received $11 million and then gave half of it to cash-strapped community hospitals.
Lo said he agreed to share the money from a bond sale before the financial markets collapsed last year.
"I was just trying to help the system," he said.
Maui Memorial was expecting at least $19 million more in private financing, but that has not come through, he said.
"Credit markets . . . just disappeared," Lo said.
Lo said the hospital is continuing to work with JP Morgan, but it will be months, maybe even a year, before it can acquire private financing.
* Claudine San Nicolas can be reached at claudine@mauinews.com.
