Path to privatization cleared

Maui Memorial Medical Center and two other state-owned medical facilities could be privatized under a bill given final approval by state lawmakers Friday night, clearing the way for a possible takeover by the nonprofit Hawaii Pacific Health or another operator.

The Maui Region of Hawaii Health Systems Corp. that operates the hospitals has exchanged information with Hawaii Pacific Health for about six months to prepare for a possible takeover, but the approved bill requires that other Hawaii hospital operators also be allowed to compete for the opportunity to operate the Maui facilities.

Lawmakers positioned dozens of bills for final passage before a key session deadline Friday, including measures to increase a state tax credit available to assist low-income residents, pursue a proposed state purchase of a downtown office building and provide $6 million to fund additional preschool slots for low-income children.

Bills that failed to advance and appear to be dead include measures to more strictly regulate payday loan companies, and a bill to conduct state elections by mail-in balloting. Lawmakers are scheduled to adjourn for the year Thursday.

The Maui hospital bill assigns Gov. David Ige the task of leading negotiations for the transition to a public-private partnership "with the assistance" of Maui hospital officials. The bill would cover Maui Memorial, Kula Hospital & Clinic and Lanai Community Hospital.

Last month, Ige intervened to delay a vote on the hospital privatization bill, House Bill 1075, which has been strongly opposed by the United Public Workers and the Hawaii Government Employees Association. Ige then proposed a revised draft of the bill, which lawmakers adopted Friday.

The state now pays about $100 million per year to support the hospital network operated by the Hawaii Health Systems Corp., including the Maui facilities, and lawmakers want to reduce those costs.

Hawaii Pacific Health already operates Kapiolani Medical Center for Women & Children, Pali Momi Medical Center, Straub Clinic & Hospital and Wilcox Memorial Hospital on Kauai.

"This is going into uncharted waters," said Rep. Marcus Oshiro, (D, Wahiawa-Whitmore-Poamoho). "I don’t think any of us know where this thing is going to end up. We hope that it does provide for the needs of both the citizens of the Maui region and those islands and those communities, as well as address the needs of the employees and workers."

Randy Perreira, executive director of HGEA, said some of the union’s immediate concerns were addressed in the new bill, but said that "we still don’t believe it is appropriate to be selling off public services."

HGEA has about 800 union members among the Maui Memorial employees and an additional 50 at the Kula facility.

HB 1075 guarantees there will be no employee layoffs for six months after any takeover, and Perreira said it "will ensure that the Governor’s Office and not partisan people from Maui … will be driving the conversation about if and how we move forward."

Assuming the process moves ahead, Perreira predicted lawmakers next year will suffer from "sticker shock" when they get a bill for the cost of the Maui privatization effort.

To move the Maui hospital employees into private-sector jobs, the union believes the state must pay $114 million to cash out the employees’ accrued leave benefits and compensatory time, and hundreds of millions of dollars more in pension and retirement medical costs. The entire package could cost the state $320 million, Perreira said.

"I don’t know where the state is going to find $320 million in its budget to do this or practically anything else, frankly," he said.

Sixteen members of the House and one member of the Senate — Sen. Brian Tani­gu­chi (D, Makiki-Tantalus-Manoa) — voted against the bill.

Here are highlights of other action at the Legislature.

» House and Senate negotiators tentatively agreed to increase the state tax credit to benefit low-income residents by offsetting the impact of the state excise tax on food. If approved in a final vote next week, it would mark the first time since 2007 that lawmakers have increased the credit.

The credit will cost the treasury $6.5 million, and Senate Ways and Means Chairwoman Jill Tokuda said lawmakers tried to restructure it to make it more helpful for working families.

Lawmakers are poised this year to extend the excise tax surcharge for rail, but Tokuda (D, Kai­lua-Kane­ohe) said they recognize the excise tax is regressive and weighs more heavily on lower-income people.

"We understand the need to offset those kinds of surcharges … and the impacts overall that all the decisions that we make here at the Capitol have on our families and the men and women out there who are struggling to get by," she said.

» Lawmakers approved a bill to set aside $500,000 to conduct appraisals to determine the value of Alii Place, a high-end 25-story downtown office building the state might buy to provide space for state workers.

Then money will also be used to study the potential costs of taking over the building, said House Water and Land Chairman Ryan Yamane (D, Mili­lani-Wai­pio-Wai­kele).

The state is in discussions with building owners Bristol Alii Holdings LLC of San Francisco to buy Alii Place for about $90 million. Lawmakers said that option would be far cheaper than an alternate proposal to pay $270 million to plan and construct a state office building in the Li­liha Civic Center area.

» Proposals to more tightly regulate the "payday lending" industry collapsed after lawmakers were unable to agree on whether to cap the allowable interest charges at an annual percentage rate of 36 percent. State senators argued for the 36 percent cap, but the House rejected it.

The state Department of Commerce and Consumer Affairs told lawmakers the 36 percent cap "would be consistent with a growing trend around the country of providing more consumer protections for these loans."

"Payday loans" are small, unsecured loans that borrowers promise to repay from their next paychecks or regular income payments such as Social Security payments. Critics say current Hawaii law is so lax, it allows payday lenders to charge fees that amount to the equivalent of an interest rate of 450 percent or more per year.

Senate Consumer Protection Chairwoman Rosa­lyn Baker (D, West Maui-South Maui) argued the changes the House proposed would continue to allow "anti-consumer, predatory lending."

"That is not acceptable to the Senate," she said.

Rep. Justin Woodson (D, Kahu­lui-Wai­luku-Puu­nene) replied that the House does not believe the 36 percent cap is "proper." He said the cap would put lending companies out of business, which would drive borrowers into even less regulated markets.

» Lawmakers gave preliminary approval Friday to a bill to require that Hawaii health insurers provide coverage for diagnosis and treatment for children with autism.

Officials with the state Department of Health testified the bill is "critically needed" by families and children with autism spectrum disorders, and will allow children with autism to receive effective treatments that have been shown to improve socialization and language skills.

The Hawaii Disability Rights Center told lawmakers that autism is occurring among children in "epidemic proportions," with 1 out of every 110 children — and 1 out of every 85 boys — born with autism. The center testified that treatments at an early age have been effective at reducing autism’s effects.

» A proposal to launch a system of mail-in balloting for state elections failed to win approval after the House and Senate committees that control appropriations declined to authorize spending of $50,000 per year for the next two years that had been requested for the initiative.

» Legislators deferred and therefore killed a measure that would have regulated ride-hailing companies such as Uber and Lyft for the first time in Hawaii.

The bill would have imposed new insurance requirements for the companies, mirroring a recent agreement between Uber and several national insurance companies. It also would have required stringent background checks on any Uber drivers.