Lawsuit dismissed, clearing the way for transfer of hospitals

The Maui News and Associated Press

A last legal hurdle has been cleared to make way for the July 1 transfer of Maui Region hospitals from the Hawaii Health Systems Corp. to Kaiser Permanente-affiliated Maui Health System.

On Tuesday afternoon, the state Department of the Attorney General announced that the Employees’ Retirement System and the HHSC had agreed to dismiss a lawsuit to block implementation of a 2016 law that provided for public Maui hospital employees a choice of a severance payment or a special retirement benefit following the transfer of the hospitals to Kaiser.

The lawsuit was filed because the employee deal threatened the tax-exempt status of the ERS fund, according to the announcement. Later, the law was repealed.

It was replaced by Act 18, which authorized the payment of state general funds for a one-time lump sum cash bonus severance package to Maui Region hospital employees. The severance is expected to cost the state $30.6 million.

The severance amount will be calculated at the rate of 5 percent of the employee’s annual base salary for each year of service up to and including July 20, 2016. It cannot exceed 10 years or total more than 50 percent of the employee’s annual base salary.

“With the end of this lawsuit, there are no further cases related to the transition of the three county hospitals from public to private management and control,” Attorney General Doug Chin said.

Meanwhile, Kaiser Permanente Hawaii plans to spend more than $50 million to expand Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital.

Kaiser’s Maui Health System will expand services, update technology and aim to improve patient care after it takes over the hospitals.

“The public is generally excited and anxious for this transition to take place, not necessarily because Kaiser’s going to become this great thing on Day 1 but because we’ve been in this process for so long,” said Avery Chumbley, Maui Region board chairman for the hospitals. “This is a significant transaction. It’s transformational in many ways because this is the single largest move from public employees to private employees in the history of the state.”

Kaiser, Hawaii’s largest health-maintenance organization, is working to fill hundreds of positions left vacant during the uncertainty about ownership. The transfer of the hospitals was delayed because of a series of setbacks, including lawsuits by employee union United Public Workers to stop the privatization because of existing collective bargaining contracts.

Kaiser said it is committed to improving access to care in Maui County, so that patients have the ability to get care where they live instead of having to be transferred to Honolulu hospitals.

Kaiser also has promised to keep the facilities open to the public, including non-Kaiser members and doctors, and operate as community hospitals.

The health care provider and insurer is recruiting trauma and orthopedic surgeons, critical care doctors and specialists including gastroenterologists and neurosurgeons, said Dr. David Ulin, chief medical director of Maui Health System, the operating company for the hospitals.

“Recruiting on Maui is still very difficult,” Ulin said. “Maui has a shortage of about 100-plus doctors, about a 25 percent deficit in the amount of physicians we should have.”

Kaiser extended about 1,500 job offers to current hospital staff, 97 percent of whom have accepted the positions, said Jean Melnikoff, Kaiser’s vice president of human resources.


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