A public hearing will be held Friday as part of the special legislative session to deal with a bill seeking an emergency appropriation to keep two Kauai rural hospitals afloat.

House Bill 3 requests $7.3 million in stopgap funding to sustain Hawaii Health Systems Corp.’s Kauai regional health care system through next spring. The hearing will be held by the Senate Health and Ways and Means committees.

House Health and Finance committees passed the bill earlier this week and approved increasing funding to $7.3 million from $2.5 million after system officials testified that more money is needed for services on Kauai.

In written testimony, the health system’s Kauai Regional Board of Directors stated that the funding is desperately needed to allow Kauai to sustain operations and pay off obligations as well as reduce accounts payable to 30 days from more than 110 days.

The system’s Kauai region operates Samuel Mahelona Memorial Hospital, which houses the only inpatient psychiatric unit on the island; Kauai Veterans Memorial Hospital; and three physician clinics in Waimea, Kalaheo and Port Allen.

Alice Hall, acting president and chief executive officer, said among the state’s 14-member rural hospital systems, the Kauai region is contending with the most urgent financial needs. "It’s in the worst situation," said Hall.

Kauai was due to receive $2.5 million to help offset costs for treating Medicaid patients, but the money never materialized, she added.

Adding to the debt is about $3.4 million in general funding allocations already spent, $2 million borrowed from the Maui region and $2 million in systemwide obligations owed to the corporate office. The corporate office pays for systemwide contracts, such as information technology and insurance and allocates those amounts to various hospitals, according to Hall’s written testimony.

"If one region does not pay its share, the burden falls on the others to make up for it. Unfortunately, none of the hospitals have the extra cash to make up for Kauai’s shortfall," she said. "If the corporate office cannot pay the bills, the systemwide contracts for services and supplies will become further behind, thereby affecting the hospitals’ ability to treat patients."

Kauai region’s antiquated billing system, lack of follow-up procedures and the large number of empty beds at the long-term care facility at Mahelona Memorial Hospital are contributing factors to the financial woes.

Hall noted Kauai might be forced to cut services if lawmakers do not approve the funds. "They’re not going to make it through spring without the money," she said.

The corporation also requested a $9 million loan from the state Department of Budget and Finance.

Jerry Walker, regional director of the two hospitals, said the emergency appropriation is critical. Mahelona hospital serves about 7,000 emergency room patients a year as well as 15 long-term care patients and about four psychiatric patients a day. Kauai Veterans Memorial Hospital also serves 7,000 emergency room patients a year, 20 long-term care patients a day and about 14 acute patients a day.

Rep. Della Au Belatti, chairwoman of the House Health Committee, said, "These are critical services on Kauai. We just can’t see them shut down."

Although the bill focuses on Kauai’s financial problems, Hall stressed the troubles are systemwide. With a drop in reimbursements, rise in costs and minimal funding on hand, other regions will soon be in the same position as Kauai unless the system receives more funding.

The health system has formed a committee to look into public-private partnerships to determine how it can deal with long-term financial solutions.