Privatize Maui hospitals, officials implore

Officials with the Hawaii Health Systems Corp. are hoping the third time will be a charm for legislation that will enable a private entity to rescue the struggling public hospitals.

The House Labor and Public Employment Committee on Tuesday passed House Bill 1075, which would allow the Maui region of HHSC — including Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital — to transition into a new private nonprofit under Hawai‘i Pacific Health, the state’s largest medical provider.

The Maui region is facing a crippling $39 million deficit starting July 1, regional Chief Executive Officer Wesley Lo told lawmakers at a committee hearing Tuesday.

"Our need to find a public-private partner is not to obfuscate the challenges of a fiscally deficient system, but it truly is our last opportunity to find a solution, short of closing departments, restricting services and releasing employees," Lo said. "Maui has no private hospitals that provide these services. We are the option — the only option."

The Maui region is being affected by reduced reimbursements as a result of the Affordable Care Act, also known as Obama­care, and its main hospital has started reaching capacity, he added.

Maui Memorial has already been forced to close services, including its youth behavioral health division.

"We do not want to cut any more services, but the financial chasm continues to widen," Lo said. "We don’t have any ability to grow revenues."

Legislation would authorize the Maui hospitals to enter into a fixed long-term lease of no less than 25 years with a private entity that would lease, operate and manage the facilities.

"Unless the state addresses the financial challenges facing the Maui region, the repercussions will be detrimental to the entire state," said David Okabe, chief financial officer for HPH, which includes Kapiolani Medical Center for Women & Children, Pali Momi Medical Center, Straub Clinic & Hospital and Wilcox Memorial Hospital on Kauai. "We believe that a public-private partnership — which is not an acquisition, but partnering with the state of Hawaii and the Maui community — is the best approach to creating a sustainable health care delivery system on Maui."

The state would also subsidize operations and some of the cost of capital improvement projects for at least 10 years. Rent for the lease would be a nominal $1 per year, and the state would assume current liabilities including accrued paid time off, debt and capital leases and be responsible for collective bargaining contracts and the current outstanding retiree health benefits.

"We raise serious reservations and grave concerns over proposed legislation to rapidly privatize the safety net hospital system. It is a risky and dangerous proposition, which may cause irreversible harm to our community," Randy Perreira, executive director of the Hawaii Government Employees Association, said in written testimony to the Legislature. "Any type of private acquisition will rely heavily on taxpayers’ dollars to support the system, while the Legislature relinquishes its oversight on how those tax dollars are spent and cannot guarantee that the private operator will remain."

In 2013 two-thirds of HHSC’s roughly dozen "safety net" facilities on Maui, Lanai and Hawaii island were exploring a deal with Phoenix-based Banner Health to acquire some of the facilities.

"As a state agency we cannot be nimble enough to survive and thrive in this rapidly changing field," Dr. Nicole Apo­li­ona, medical director of Kula Hospital, told lawmakers, adding that HHSC is hampered by state bureaucracy. "This is the third year the Maui region has supported legislation to allow a private nonprofit partnership as a path toward sustainable quality health care. It is terribly difficult to recruit desperately needed physicians to a medical community in a fiscal crisis with an uncertain future. As each year passes our system is more stressed and becomes less and less attractive to a private partner."