Hawaii Pacific Health mulling purchase to rescue Wahiawa General Hospital

Hawaii Pacific Health, the state’s largest medical provider, is exploring a purchase of all or part of the financially struggling Wahiawa General Hospital.

HPH — which operates Kapiolani Medical Center for Women & Children, Pali Momi Medical Center, Straub Clinic & Hospital and Wilcox Memorial Hospital on Kauai — has signed a nondisclosure agreement that gives it access to the financial records of the 160-bed rural hospital.

"This is an opportunity for both organizations to explore the potential benefits of a future relationship," HPH spokes­woman Kristen Bonilla said Thursday. The two are in preliminary discussions that could lead to an affiliation, Bonilla said.

"I don’t think that Wahiawa will survive without becoming a partner with one of the major health care systems in Hawaii. All the rural hospitals in Hawaii are financially distressed," said Don Olden, chief executive officer at Wahiawa General. "We’re in jeopardy of missing payroll. We’ve already laid off people. The risk (of closure) is way higher at this point than I’m comfortable with."

Over the past nine months, Wahiawa General was forced to restructure funding of its Family Medicine Residency Program, cancel its Home Health and Physical Therapy outpatient programs and reduce total staffing by the equivalent of about 80 full-time positions. It is still running large monthly cash-flow deficits, Olden said.

Wahiawa General is the only acute-care hospital serving Central Oahu and the North Shore between Kahuku Medical Center to Pali Momi Medical Center.

The facility has been struggling to boost admissions, which dropped to 150 per month from 240 per month last year, and to reduce expenditures. It lost 18 percent of patient revenue when the Queen’s Medical Center-West Oahu opened in May at the site of the former Hawaii Medical Center-West in Ewa.

The loss of patients, combined with more than $4 million in cost increases driven by the Affordable Care Act as well as physician shortages and higher employee health insurance premiums, has exacerbated the hospital’s financial woes.

Wahiawa General said it lost about $2.6 million in the first six months of the fiscal year that started July 1. The hospital expects to take in about $48 million in the fiscal year ending June 30, while expenses are projected to exceed revenue by roughly $5 million, Olden said.

"Such a large revenue drop would have caused most small hospitals to close, and (Wahiawa General) is experiencing serious negative cash flows and dangerously low operating cash balances," he said.

An affiliation would give the hospital a cash infusion and result in a more efficient operation, said Olden, adding that small stand-alone facilities are unsustainable in the existing health care environment.

A deal could include 28 acres of land to expand Wahiawa General at the site of the proposed Koa Ridge residential development project. Castle & Cooke set aside the land years ago for a replacement of the aging Wahiawa hospital.

"The Koa Ridge Project has been delayed for over a decade and the delays have contributed to the financial stress of (the hospital)," Olden said in a Feb. 27 letter to the Legislature appealing for financial support.

An affiliation has strategic value to HPH and others due to the hospital’s patient services and the potential for developing the Koa Ridge project, he said.

"We never looked at it as a go-alone project. (Koa Ridge) was something that we hoped would attract other health care providers," said Rep. Marcus Oshiro (D, Wahiawa-Whitmore-Poa­moho). "We didn’t have the financial means or capital to do the loan. Going back 15 to 20 years, we’ve been looking to partner with a local health provider. This is important. It’s a larger story that doesn’t just affect the Wahiawa community. It affects the entire community at large."

The discussions come as Hawaii Pacific Health is aggressively seeking to expand its presence in the islands.

It is also in negotiations to rescue three Maui hospitals that are part of the state’s troubled public hospital system, known as Hawaii Health Systems Corp. Lawmakers moved a step closer this week to authorizing a private entity to take over Maui Memorial Medical Center and Kula and Lanai community hospitals, passing legislation through the House Finance Committee.

"From our expertise with Pali Momi Medical Center, we understand the importance of having a solid health care system and accessible locations for the people of West Oahu," HPH’s Bonilla said. "As the state’s largest health care provider, our mission has always been and always will be to provide the highest level of care for all of Hawaii."

If a sale or affiliation doesn’t come to fruition, Olden said an alternative is to try to become part of the state-owned HHSC, which itself is barely staying afloat with millions of dollars in taxpayer subsidies.

Wahiawa General is asking for $2.5 million from the Legislature to offset charity care, bad debt, and salaries and wages, and "help Wahiawa stay alive until we can put something together," Olden added. "For several years, rural Hawaii hospitals have been incipient financial failures except for subsidies."

Oshiro said lawmakers are concerned about losing another hospital serving such a large area of rural Oahu. Hawaii Medical Center closed two hospitals in Li­liha and Ewa in 2012, placing a significant strain on patients and Oahu’s other medical facilities.

"Wahiawa is a stand-alone community-based hospital that, like most hospitals, has been struggling with reimbursements, increased service costs and attracting and retaining qualified physicians, nursing and technical staff. It’s similar to what neighbor islanders face," Oshiro said. "Unless we see state subsidies and support, it would be hard for us to maintain the level of services and provide for the needs of the community."