Public hospitals fix can’t wait

Officials overseeing the state’s public hospitals and clinics, particularly those on the neighbor islands, have run out of time to chart a less disruptive course toward a more efficient health-care delivery system.

The result is starting to manifest on Kauai, an island with particularly difficult operating deficits, with the approaching shutdown of the state’s clinic in Kalaheo.

This was all but inevitable, given the funding shortfall faced by the Hawaii Health Systems Corp., the agency that manages the system’s state-funded acute-care hospitals clinics and long-term care facilities.

The HHSC had requested $150 million in the budget during the past legislative session but secured only $102 million for 2015. The $48 million shortfall will require reduced services and other drastic measures.

Corporation officials have anticipated the possibility of reductions in force, although the Kalaheo clinic staff affected by this closure will be transferred elsewhere.

The agency is developing plans for navigating through the next year with these cuts, with the first draft due by mid-June, said Alice Hall, HHSC acting president and chief executive officer. Labor costs present the greatest challenge, Hall said, especially because of retirement benefits and work rules that don’t neatly fit the requirements of a 24/7 operation like a hospital.

This problem demands a solution, so it’s hard to rationalize the failure of Senate Bill 3064 during session. The measure would have authorized HHSC and its subsidiary regional systems to transition to a new management system with private partners, organized as a nonprofit corporation or public-benefit corporation.

Disagreement between the House and Senate stymied the bill’s progress through the conference committee.

Proposed amendments reflected various concerns: Some rightly observed that the transition committee should not be too constrained in conducting negotiations, and that there should not be barriers against considering any potential partner.

Those who opposed the bill outright included the unions that represented the majority of employees in the system; they did not seem to recognize the urgency of the situation.

"We believe the Legislature should address concerns with the current governance of the Hawaii Health Systems Corp. as opposed to having new providers come in and manage the system," said Randy Perreira, executive director of the Hawaii Government Employees Association in testimony.

However, that would be akin to moving around the deck chairs on the Titanic. The fiscal crisis of the system is already well understood.

And reorganizational fixes around the edges have already been tried but have not corrected the problem, Hall told lawmakers in April. She cited a state-commissioned 2010 report on the system that estimated labor savings from privatization of the workforce at $50 million annually.

She and other regional officials also correctly reference another strength of a public-private partnership: access to private capital for needed facility renovations.

For example, Maui’s aging facilities need rehabilitation, and capital costs have been compounded in the near term by the information technology upgrades required under the Affordable Care Act, said Wesley Lo, regional CEO.

The various regions are now in the process of making some hard choices about what the state can afford to deliver to residents over the coming year, and it’s plain that the Legislature will have to face the unrelenting realities of rising labor costs. Simple math suggests the problem will not go away.

That’s why the closure of Kauai’s Kalaheo clinic ought to provide a wake-up call for state elected leadership that the status quo in management of rural acute-care and long-term care needs is completely unsustainable by taxpayers. A new model of operations is a critical need. With or without legislation, strategic planning for such a change needs to begin now.