Big Isle hospitals in acquisition talks

Castle Medical Center’s parent company is considering an acquisition of three public hospitals on the Big Island in East Hawaii.

California-based Adventist Health, the nation’s 10th-largest health system, is in “preliminary” talks with Hilo Medical Center, Ka‘u Hospital and Hale Ho‘ola Hamakua, the state-owned hospitals operated by Hawaii Health Systems Corp.

“Our board, as responsible stewards of our commitment to health care, has set a very high priority on the examination of several potential options to better provide for the needs of our community,” Kurt Corbin, board chairman of HHSC’s East Hawaii region, said in a statement. “The prospect of a strategic alliance with another health care organization is one of these options that merits a serious evaluation.”

Facing a $7 million shortfall, the Hawaii island hospitals cut 87 workers, or about 7 percent of the region’s workforce, earlier this year. The region has roughly 1,300 employees.

“Recent service cuts and staff reductions at Hilo Medical Center, Ka‘u Hospital and Hale Ho‘ola Hamakua, while necessary in the short run, are contrary to the best interests of our patients, staff and community,” HHSC said in a news release.

“Our finances have been shaky. The fundamental issues that caused that have not been resolved,” said Dan Brinkman, HHSC’s East Hawaii regional CEO. “We’re very concerned there will be additional deficits in the coming years.”

The region serves a rural community, with a population consisting of 75 percent Medicare and Medicaid recipients. Reimbursements from those government payers don’t cover the cost of providing care, Brinkman said. The region also is facing infrastructure needs, as well as rising costs for supplies, medical equipment and labor, he said.

“The last few years have been pretty tough financially. Our revenue and our funding have not been able to keep pace,” he said. “We need stable and consistent finances to deliver good health care and we need to figure out how to get that.”

Adventist has operated the Kailua hospital for more than 50 years. The company owns and operates 20 hospitals, 230 clinics and several home health agencies in California, Oregon, Washington and Hawaii.

“There actually have been no discussions up until this point. The initial conversation is taking place later this week, so it’s very preliminary discussions at a very exploratory stage,” said Rita Waterman, an Adventist spokeswoman based in California. “Any number of scenarios are possible, so I wouldn’t begin to characterize it at this stage. There are a number of different working relationships and lots of different arrangements are being created. This is not particularly unique because it’s happening all across the United States.”

Brinkman said Adventist is the first organization that has contacted the East Hawaii hospitals, which are unionized, to explore public-private partnership options.

Maui Memorial Medical Center, Kula Hospital and Clinic, and Lanai Community Hospital are considering privatization as a way to stop the bleeding at those state-owned facilities. The hospitals received legislative approval this year to move forward with privatization, clearing the way for a possible takeover by Kaiser — the state’s largest health maintenance organization — or Hawaii Pacific Health, parent company of Kapiolani Medical Center for Women & Children, Pali Momi Medical Center, Straub Clinic & Hospital and Wilcox Memorial Hospital on Kauai.

“If you cut services on Oahu, there are many other hospitals that can step in and take over that load,” Brinkman said. “In East Hawaii, we’re the only acute hospital. There’s no other place to go for 115,000 people.”