Maui hospitals in ‘preliminary’ talks with HPH

Hawaii Pacific Health is exploring a partnership with or purchase of the Maui Memorial Medical Center.

Wesley Lo, chief executive officer of the Maui region of Hawaii Health Systems Corp., told staff Friday the region — which includes Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital — is entering into "preliminary discussions" with HPH, which operates Kapiolani Medical Center for Women & Children, Pali Momi Medical Center, Straub Clinic & Hospital and Wilcox Memorial Hospital on Kauai.

HHSC is hoping to negotiate a deal to rescue the state’s troubled public hospital system, which is facing a massive deficit after the state Legislature cut the hospitals’ $150 million budget request to $102 million for the fiscal year that began July 1. The budget shortfall is projected to grow to around $70 million the following year.

The Legislature would have to change the rules governing the state-financed hospitals before HPH could purchase Maui Memorial, Kula and Lanai hospitals.

"Hawai‘i Pacific Health has publicly been in support of statewide legislation that would allow HHSC to privatize or form some type of public-private partnership," Ray Vara, HPH president and chief executive officer, said in a statement. "In the absence of such legislation, our discussions have continued and are intending to be ongoing. The talks are very preliminary and exploratory. They are conducted in the spirit of ensuring that all people of Hawaii have continued access to high quality, local care."

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

"We are caught in this situation where we think it’s hard to get anything approved unless you have a deal, and yet it’s hard to find partners who are willing to expend resources and money and go on this path," Lo said. "Hawaii Pacific Health is willing to open discussions, and we want to be very transparent about it. Most mainland companies wouldn’t even bother negotiating with us because there’s no legislation right now. (We’re hoping) to create a transaction that might be considered by the Legislature. We feel this is a necessary first step in planning for a sustainable future."

This is not the first time Maui Memorial has sought privatization. In 2012 the Wai­luku-based hospital began talks with Phoenix-based Banner Health on a public-private partnership, but without legislation nothing came to fruition.

Lawmakers, attempting to find a solution for the financially strapped public hospital network, have begun a series of statewide briefings with members of HHSC’s various regional boards who are each coming up with their own cost-cutting plans.

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.

Maui Memorial said Friday it plans to close its adolescent behavioral health unit to save more than $1 million annually. HHSC recently announced plans to close its Kala­­­heo primary care clinic on Kauai’s South Shore in September, citing inadequate funding and rising medical expenses, while Hilo Medical Center said it is eliminating at least 30 positions.

"There has to be some changes. It is starting to reach that tipping point," Lo said. "Maui may be able to make it through this next year, but we can see the future. The dynamics are wrong. If expenses are going up and revenues aren’t and the state is having trouble funding us, we’ve got to look for other options. You don’t want to get to the point where you can’t pay the bills. It’s obvious in some regions we’re starting to see that."