The transfer of three state-run Maui County hospitals to Kaiser Permanente is expected to proceed following a Friday announcement by Gov. David Ige that he had reached a settlement with a union representing more than 500 blue-collar hospital workers.
The United Public Workers sued the governor last year to stop the privatization of Maui Memorial Medical Center, Kula Hospital and Clinic, and Lanai Community Hospital, arguing that it would hurt workers who have contracts in place that run through June 30, 2017.
The agreement, signed by Ige and UPW Director Dayton Nakanelua, ensures that workers remain governed by their contracts, while allowing the state to complete the transfer to Kaiser — though no sooner than Nov. 6.
So while hospital workers will be supervised by Kaiser, their state contracts, which lay out terms such as wages, work hours, sick leave and holidays, will remain in effect through June.
Kaiser must also offer the union workers jobs for at least six months after the expiration of their contracts, according to the terms of the agreement. The union covers employees who work in areas such as maintenance, food service and laundry.
Ige and the UPW will also jointly ask the 9th U.S. Circuit Court of Appeals to lift its injunction halting the transfer and dismiss the union lawsuit.
Ige said he was “elated” to have reached a settlement, which ends weeks of negotiations.
“The agreement provides certainty to people of Maui County that they will continue to have access to high-quality health care,” he told reporters during a news conference announcing the settlement.
Nakanelua did not attend the news conference. But in a statement, he said the governor “has recognized and addressed the concerns of our members,” adding, “He is honoring the process and the existing collective bargaining agreement.”
Nakanelua didn’t return a phone call seeking further comment.
House Speaker Joe Souki (D, Waihee-Waiehu-Wailuku) issued a statement applauding the settlement.
“I want to thank the governor and UPW Director Dayton Nakanelua for their commitment to work through some very complicated issues and negotiate this historic settlement,” he said. “I also commend the Maui delegation and other members of the House and the Senate who initiated and supported HB 1075. Their commitment to preserving benefits of state workers and to ensuring health care services for the people of Maui was an important element throughout this transition process.”
In June 2015, Ige signed Act 103, formerly House Bill 1075, into law, initiating the transfer of the three hospitals. The Hawaii Health Systems Corp., the state agency that has operated the facilities, supported the measure, arguing that bringing in a private owner could increase efficiencies and reduce costs. The state agency argued that revenues weren’t keeping up with expenses, which have increased, in part, due to federal health care reform and efforts to reduce payouts for Medicare and Medicaid.
UPW argued in its lawsuit that the privatization plan violated the U.S. Constitution’s contract clause because the administration was seeking to complete the transfer before contracts expired. The U.S. District Court of Hawaii rejected that argument. But UPW appealed to the 9th Circuit Court, which in May issued a temporary halt to proceedings to give the parties time to work out a settlement. Judges expressed concern about the harm the transfer could have on workers.
Ige said that the expectation is that all the hospital workers will be picked up by Kaiser. However, union leaders have emphasized that there is no guarantee that there won’t be future staff reductions.
While the settlement is expected to end the UPW lawsuit, additional legal challenges remain.
Earlier this week, the Employees’ Retirement System filed a lawsuit in Oahu Circuit Court to block a law passed this year that provides severance benefits to union workers who lose their state jobs, even if they are hired by Kaiser. Qualifying workers can choose between a lump sum payout, based on their salary and years of experience, or an early retirement offer.
The Hawaii Government Employees Association, which represents roughly 900 additional hospital workers who will be affected by the transfer, strongly pushed for the legislation.
Ige vetoed the measure, however, arguing, in part, that it could put at risk the tax-exempt status of the ERS, a defined public pension plan. The Legislature overrode the governor’s veto last month.
The ERS lawsuit seeks a court injunction, halting the implementation of the law until the ERS can get a ruling from the Internal Revenue Service as to whether the terms of the severance benefits would indeed result in the pension plan losing its tax-exempt status.
If this were to happen, the lawsuit claims, it could be “catastrophic” to the ERS and its 120,000 members, which include current and retired state and county workers.
Government employees would no longer be able to defer the payment of taxes on employee retirement contributions, according to the lawsuit. The contributions would be included in the employees’ income and taxed as normal wages.
Employees could also lose the ability to roll over their retirement contributions, tax-free, to other retirement plans, such as IRAs, according to the complaint.
“I am not willing to put at jeopardy the pension system,” Ige said on Friday. “We want to be clear that any action does not put at risk that situation.”
Ige also indicated that the transfer of the Maui County hospitals to Kaiser could be a harbinger of future privatization efforts on other islands.
The Hawaii Health Systems Corp. operates nine other medical facilities across Kauai, Hawaii island and Oahu, according to its website.
“I do think that each community needs to engage in helping us determine what is the best way to provide quality health care,” Ige said.