Ailing Hawaii Health Systems Corp. will cut dozens of jobs

Hawaii Health Systems Corp. will eliminate around 35 positions, mostly on Kauai, as early as mid-December in the first round of cuts intended to offset an anticipated deficit this year.

The state’s quasi-public hospital system, facing a $48 million shortfall for fiscal 2015, announced the impending cuts Thursday after an extensive review of operations at each of its 12 facilities.

"We value our employees tremendously and we really tried to avoid this," Alice Hall, HHSC’s acting president and chief executive officer, said in a press release. "Unfortunately, the current financial situation in some regions is not sustainable without significant changes, some of which have resulted in cost-saving measures that include a reduction in force."

HHSC has 4,500 full- and part-time employees and said further reductions may occur later in the year. There are no staff reductions on Oahu or in Hilo, and a "handful" on Maui and Kona on Hawaii island, she said.

The company said it will notify employees by Tuesday whether their positions will be cut. The notification begins a 90-day process in which affected employees may choose to be placed in vacant positions. If none exists, workers can exercise the "bumping" process as part of collective bargaining agreements.

The process, which allows workers with more seniority to take a less senior employee’s position, could take up to nine months.

HHSC facilities are bracing for decreased state subsidies and health insurance reimbursements as operating costs and the need for health care in rural areas continue to rise.

The state Legislature cut the hospitals’ $150 million budget request to $102 million for the fiscal year that began July 1. The shortfall is projected to grow to around $70 million the following year.

So far the company has identified ways to reduce the deficit to $27 million, but Hall said HHSC "will not have enough cash to make it through the fiscal year in some of the regions."

HHSC said it hasn’t been filling open positions that were budgeted and has laid off some non-civil-service employees, as well as temporary workers, and is delaying payments to vendors.

The layoffs and unfilled positions totaled close to 100 people in the past several months, Hall said, adding that the entire range of employees is affected, including office personnel, clinical workers (nurses, dietitians, nurses aides, therapists, physicians) and maintenance people.

Several assistant administrators and other positions also were impacted, such as compliance officer and information systems personnel. Savings for those already laid off or positions that were budgeted but not filled totaled between $3 million and $4 million, she said.

The workforce reductions occurring next week will result in about $1 million in savings.

"We do not have definite plans for future cuts, but due to the fact we are still facing a deficit of around $27 million from what was requested from the Legislature, it is likely there will be another one (round of layoffs) after the first of the calendar year," she said. "The regions have not given us the numbers for the next phase as of yet. They are still analyzing the impact on services, whether or not any services may need to be cut."

HHSC relies on state money for 15 percent to 20 percent of its annual $650 million budget, with the bulk of the money coming from patients and their insurers. Public funding through the general fund tripled to $120 million in 2014 from $35 million in 2004.

HHSC acts as a "safety net" for the state’s neediest population — many of the poor and chronically ill. Its aging facilities are in a unique situation with nearly all HHSC patients on Oahu — 92 percent — on Medicaid, which does not cover the entire cost of care, Hall said.

Part of HHSC’s financial problems stem from its facilities in rural communities that are unable to generate sufficient revenue to support operations.

HHSC had hoped to partner with a private entity to rescue the hospitals. Earlier this year lawmakers explored legislation that would have paved the way for either a public-private partnership or the sale of some facilities to the private sector, but the bill stalled in the closing days of the session.

In addition to the shortfall in the state appropriation, Medicare reduced payments by 2 percent to providers nationwide. Roughly 65 percent of HHSC’s patients are covered by Medicare or Medicaid, the company said.

The dire situation has already forced HHSC — the largest provider of health care in the islands — to begin cutting services and staff on the neighbor islands.

It recently announced plans to close its Kalaheo primary care clinic on Kauai’s South Shore in September, citing inadequate funding and rising medical expenses. Hilo Medical Center announced earlier this year that it is eliminating 30 positions and is facing an estimated $9 million deficit this year. Maui Memorial Medical Center also is closing its adolescent behavioral health unit to save more than $1 million annually.

The state hospitals are called "safety net" facilities because they are often the only alternative for health care in their geographic area and serve everyone in need of medical attention regardless of a patient’s ability to pay.