A federal appeals court issued an order Friday allowing the state to resume the transfer of three public hospitals on Maui and Lanai to Kaiser Permanente Hawaii, but closing the deal is still barred.

Kaiser, the state’s largest health maintenance organization, was scheduled to assume control of Maui Memorial Medical Center, Kula Hospital & Clinic and Lanai Community Hospital on July 1. But the 9th Circuit Court of Appeals on May 17 stopped the transfer as it considered claims from the United Public Workers union that its members would be hurt by the change.

The uncertainty has become a critical issue for the hospitals, which have seen their workforce shrink almost 4 percent, while it had stopped hiring permanent workers in anticipation of the transfer.

“It continues to be a precarious situation. We still don’t have a date for any transition, so from that standpoint nothing’s really changed,” said Wesley Lo, Maui Memorial’s chief executive officer. “We have to figure out if we should expend resources to sustain operations or towards a transition. We still don’t know from the courts if the transition will be allowed. You have to make a lot of decisions based on some unknowns.”

Scramble to fill gaps

Maui County hospital executives said many of their 1,100 employees are using vacation and sick days in anticipation of ending employment under the public hospital operator, Hawaii Health Systems Corp. As many as 50 hospital workers are taking leave daily, leaving executives scrambling to hire temporary workers to fill the gaps.

The hospitals also are slated to end contracts with a number of physicians who provide on-call emergency and specialty services, as well as vendor agreements for computer systems, medical equipment such as MRIs and CT scans, and supplies, including IV fluids and medications. Contracts for anesthesia coverage, pathology, pediatric services and 30 or so hospitalists and travel nurses are scheduled to be canceled.

“Allowing transition activities to resume is the best way to give everyone involved adequate time to prepare and minimize disruption in services,” state Attorney General Doug Chin said in a news release.

Gov. David Ige and the United Public Workers union representing 1,400 unionized employees at the Maui County hospitals filed a status report two days ago acknowledging that the parties are moving forward with productive negotiations to resolve a lawsuit brought by the union to stop privatization of the hospitals. UPW did not oppose the governor’s request to allow transition activities to resume.

“We are pleased that the 9th Circuit Court made the injunction less restrictive. We’re reviewing the implications of this less restrictive injunction and how it may affect our transition activities,” said Kaiser spokeswoman Laura Lott. “If the injunction is fully lifted and the legal dispute is resolved, we estimate that it will take a minimum of eight weeks to complete transition preparations, which includes installations and rescheduling training sessions. We’re firmly committed to investing in the people, processes, services, facilities and technology that are essential to delivering world-class care and exceptional service to the people of Maui and Lanai.”

In 2015 the state Legislature passed a law allowing a private operator to take over operations at the financially troubled Maui County hospitals. On Jan. 14, HHSC’s board signed an agreement to transition to a new Kaiser entity called Maui Health Systems. UPW sued to stop it, arguing that the agreement violates the contracts clause of the U.S. Constitution and interferes with collective bargaining agreements that remain in effect until June 2017.

On Feb. 19, U.S. District Judge Helen Gillmor ruled in favor of the state. UPW appealed to the 9th Circuit Court, which ordered the state to temporarily stop all activities related to the transition until Sept. 30.

“Today’s order documents the parties’ agreement that while negotiations continue, the state will not unilaterally change the status of UPW’s members affected by this transition, or close the transaction,” Chin said. “Other transition activities, however, may resume. Ultimately we all just want an orderly and safe transition to Kaiser’s operation of the Maui region hospitals.”

The appeals court has asked for another joint status report on June 30.