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Future bright for Maui’s privatized hospitals

VIEWPOINT

Maui’s state-run hospital system was partially privatized last year, and the change seems to be resulting in better service while saving the state millions of dollars — and providing an example for hospital privatization efforts on other islands.

Previously, Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital were losing a total of $43 million per year in 2014 and 2015. Taxpayers made up the difference each year.

However, in 2016, the state Legislature and Gov. David Ige approved a law allowing for management of the hospitals to be turned over to a public-private partnership. In the summer of 2017, the hospital was fully transitioned to Maui Health System, an affiliate of Kaiser Permanente.

Unfortunately, Hawaii taxpayers will pay more temporarily to help with the transition: In fiscal 2017, there was a state subsidy was almost $60 million and a $30 million severance package for union hospital workers, for a total of about $90 million. In fiscal 2018, the subsidy is expected to be $70 million.

However, the subsidies are expected to fall to $11.5 million by fiscal 2022 — a reduction of more than 75 percent compared to the pretransition high in 2015.

If such budgeting remains on track, the new hospital management could save the state $27.3 million by fiscal year 2022, and eventually as much as $43 million a year (the 2015 high) if the subsidies ever are eliminated completely.

One of the biggest savings will likely come from control over labor costs. Previously, the hospitals were left out of negotiations with their union employees; instead, such talks were handled at the state level. Now the Maui Health System can, for the first time, negotiate directly with the United Public Workers and Hawaii Government Employees Association unions. This is expected to result in better use of the hospital staffs and a big cost savings.

In addition, the hospital is upgrading its technology and operations, which likely will save on costs and improve service.

Chastell Ely, Maui Health System communications director, said the hospitals have transitioned from paper to electronic filing and payroll. They also have a new patient portal that allows instant access to personal medical records via the internet.

The changes at the Maui Health System have been noticed by other Hawaii state hospitals, which also may be considering privatization as a model to save on costs and improve care.

The state hospitals on Hawaii island, for example, have been costing statewide taxpayers approximately $46.4 million every year.

Jay Kreuzer, CEO of the West Hawaii state hospital system, which includes the Kohala and Kona community hospitals, recently told Hawaii Business magazine that “Privatization is needed to provide the services in this community that we need.”

In the meantime, all eyes are on Maui to see if the partial-privatization model succeeds in helping local families get the care they need while lightening taxpayer pocketbooks.

* Joe Kent is vice president of research at the Honolulu-based Grassroot Institute of Hawaii, a public policy think tank dedicated to the “principles of individual liberty, free markets, and limited and accountable government throughout the state of Hawaii and the Pacific Rim,” according to its website.