Hawaii hospitals are projected to lose $3.3 billion between 2010 and 2024 as a result of Medicare cuts and underpayments for more than 100,000 beneficiaries, a new study shows.

The report by the Hawaii Health Information Corp., a nonprofit that analyzes the state health industry, estimates reductions to Medicare’s fee-for-service payments will cost state hospitals $838 million in the 15-year period, while underpayments — reimbursements that don’t cover the cost of care — are expected to total $2.5 billion.

"We’re certainly feeling the pinch," said Wesley Lo, regional chief executive officer of the state-owned Hawaii Health Systems Corp., which includes Maui Memorial Medical Center. "Unless you are able to invest appropriately to mitigate these things, lower your cost or change your product base … it’s impossible (to survive). Every single penny counts right now."

Declining government payments to providers is one of the main drivers of hospital consolidations nationwide. Gov. David Ige recently authorized HHSC to enter into negotiations for a public-private partnership for three Maui hospitals.

"It is exacerbated in the state of Hawaii because we’re also seeing other costs, particularly in the public hospitals," Lo said. "There’s going to be further and further consolidations because the smaller hospitals just can’t survive."

Since 2010, Washington has enacted Medicare payment cuts for hospitals to offset the federal deficit and program costs. The cuts helped pay for expanding insurance coverage under the Affordable Care Act, commonly referred to as Obamacare, according to the report titled "Ouch! Mounting Medicare Cuts Hurt."

"For every dollar expended by Hawaii’s hospitals to provide care, the federal government reimburses the hospitals 86 cents," said Peter Sybinsky, HHIC president and CEO. "It provides a significant loss of revenue for Hawaii’s health care system. We are a low-cost state and because of that, these cuts are going to affect us probably more than in states where there’s a lot higher expenditures per patient."

The underpayment of services by Medicare, the government health insurance program for seniors, is one of the industry’s largest challenges given the anticipated growth in beneficiaries, said Paul Young, senior director for reimbursement and public policy at the Healthcare Association of Hawaii.

"Hawaii hospitals must simply do more with less and yet continue to provide high-quality care to our state’s residents and visitors in spite of these challenges," Young said.

The cuts are particularly challenging for standalone and rural facilities and puts "more pressure on those hospitals to determine how to continue to basically make ends meet," added David Okabe, chief financial officer of Hawaii Pacific Health, parent company of Kapiolani Medical Center for Women & Children, Pali Momi Medical Center and Wilcox Memorial Hospital on Kauai.

"If the government payers are not covering the cost of care provided to Medicare and Medicaid patients, for hospitals to be able to survive, somebody has to offset that," he said. "That’s the expectation on the commercial side. Basically the entire community is chipping in to make sure the hospitals are there for the communities to provide the care they need. Ultimately who picks up that load is all of us."