Public hospitals to cut services to make up $48M shortfall

The hope of a private entity rescuing the state’s troubled public hospital system was crushed after lawmakers shelved a privatization bill in a key committee on Friday.

Instead, the Legislature granted Hawaii Health Systems Corp. $102 million for 2015, though the organization had requested $150 million, leaving a $48 million shortfall, mostly due to unfunded collective bargaining increases, said Alice Hall, HHSC’s acting president and chief executive officer.

The financially struggling 12-member system, which acts as the safety net for communities where medical care is lacking, had hoped for legislation to partner with or be purchased by a local nonprofit provider such as Hawaii Pacific Health, The Queen’s Health Systems or Kaiser Permanente Hawaii.

HHSC officials say it can no longer sustain the increasing costs of health care and continue providing the same level of services.

"The state can’t afford to come up with more and more money and we can’t absorb these costs," Hall said. "We’re going to have to explore all plausible ideas on how to cut expenses which may include cutting services and reductions in force. We believe all our services are essential but we must examine all options in order to make up for the huge deficit that we’re anticipating for next year."

The public hospitals are particularly challenged this year with the rollout of the federal Affordable Care Act, which places a greater demand on providers as patients increase due to more people gaining health insurance. 

The organization is already under pressure because of lower reimbursements from many of its patients covered by government insurance programs, Medicare and Medicaid, and private insurers shifting payments from volume based to quality based, as well as new regulations.

HHSC’s facilities, some of which are more than a century old, also need an estimated $1 billion in capital improvements, she said. 

"The way our system is set up right now is not sustainable," Hall said, adding that HHSC will ask for an emergency appropriation for 2015. "We did come up with what we think is the best solution, but then it died at the last minute. These are major changes and it takes a long time for people to be comfortable with major changes."