HHSC in talks with management company


Financial uncertainty in recent years is one of the motives behind Hawaii Health Systems Corp.’s recent discussions with an Arizona-based nonprofit health care system to take over management of eight public hospitals on the Big Island and Maui, said Avery Chumbley, HHSC’s board chairman.

Last summer, HHSC began exploring the possibility of a public-private partnership to run public hospitals in its Maui Regional System, which includes Maui Memorial Medical Center in Wailiku, Kula Hospital & Clinic in upcountry Maui and the Lanai Community Hospital. HHSC thought such a partnership would lead to long-term improvements to the quality and delivery of health care services on Maui. Its consultant, Bank of Montreal, contacted six to 10 larger health care systems, and Banner Health was the only one interested, Chumbley said.

Banner Health is one of the largest nonprofit hospital systems in the country. It owns 23 acute-care hospital and health care facilities in seven states and has more than 36,000 employees, according to its website. Bill Byron, Banner Health vice president of communications, could not be reached as of press time.

As the talks continued, the idea to go beyond Maui and include Big Island public hospitals came about. To date, HHSC and Banner Health have been in “serious and meaningful discussions,” but no official offers or agreements have been made, Chumbley said. He said it could take up to six months to reach a possible deal.

“We’re still trying to determine what the possibilities and roles might be,” Chumbley said. He also stressed that HHSC was not selling any public hospitals. It’s only interested in a public-private partnership to help manage them.

Chumbley said HHSC is “the safety net of the care system in the state,” and in many areas, the only provider of health care. It provides emergency services and other essential services to the uninsured, underinsured, those on Medicaid and others with special health care needs. Still, it continues to face an ever-changing and extremely complex health care environment. Such challenges include capital shortfalls, budgetary restrictions, declining government and third-party payer subsidies, and the inability to keep up with health care reform and new technologies.

Federal and state budgets are impacted by unpredictable forces like the fiscal cliff showdown, as well as are being crushed by the costs of programs such as Medicare and Medicaid, Chumbley said. Besides maintaining critical services, HHSC is under increasing pressure to be financially balanced, even as health care costs continue to rise and reimbursement rates decline, Chumbley said. As of June 30, 2011, HHSC reported its net assets were $512 million, and its revenue totaled $488 million.

HHSC has an immense and unsustainable reliance on annual subsidies from the state. It receives about $82 million in subsidies a year to fund all 14 public hospitals on five islands, Chumbley said. The partnership could help wean the facilities off state subsidies, he added.

“The intention would be that the state would continue to provide some subsidy on the front end for a short period of time, and then decrease over time,” he said. “Within seven to eight years, we would see the complete elimination of the subsidy.”

When asked about the future of existing labor contracts and the new Kona Community Hospital, Chumbley said both parties have not gotten into the specifics pertaining to these matters.

For decades, residents have said a new hospital closer to Kona International Airport and the area’s faster-growing neighborhoods is West Hawaii’s No. 1 priority. HHSC has hired a consultant to begin planning a replacement. Chumbley said Banner Health is interested in contributing in the project, but they have not determined how much. Banner Health would likely lease the hospital facilities from the state, he said.

HHSC has approximately 4,300 employees. If the partnership happens, Chumbley guessed a separate collective bargaining unit would likely be created to negotiate with the unions. He also stressed Banner Health officials have said they do not want to bust the unions and view the unions as “essential partners.”

Chumbley promised that HHSC will maintain “a robust and open dialogue” with employees, doctors and the general public throughout the process of developing a partnership.

“We do want this to be an open and transparent process that engages the communities,” he said.

Sen. Josh Green, D-North and South Kona, North and South Kohala, said legislation can begin being submitted Wednesday and any proposal, such as the private-public partnership, would have to go through the health committee, which he chairs. He suspects this will be the most important issue the committee addresses this year.

Green, an emergency room physician, has several questions about the partnership and its implications. He was surprised that Big Island hospitals were included, particularly because of the significant strides he said these facilities have made in providing better care, making structural improvements, declining use of subsidies, attracting specialists and balancing their budgets.

Green said he looks forward to hearing more about what Banner Health and HHSC is proposing, as well as seeing a formal deal. Although Banner Health has “a good reputation for doing good work on quality outcomes,” Green plans to make sure the company understands the challenges Hawaii hospitals face and have “a realistic plan to make meaningful changes that will last for several years.”

He vowed Monday to make sure everyone has access to health care and those services either stay the same or improve; affected employees are treated fairly and equitably; and any partnership makes sense financially.

He also plans to ensure all dialogue remains open, no backroom deals are made and public meetings are held.