Tuesday | April 21, 2015
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Labor costs, hospital growth constraints top KCH requests to legislators

Kona Community Hospital CEO Jay Kreuzer on Tuesday laid out a laundry list of physical needs hospital officials hope the state Legislature will address.

But members of the Senate Ways and Means Committee and other Senate leaders, who toured the hospital Tuesday morning as part of a daylong West Hawaii visit, seemed especially interested in some of the labor woes Kreuzer and fellow administrators described, asking several follow-up questions about the situation.

Chief Nurse Executive Pat Kalua offered the senators one recent example, a person hired who worked one day, then never returned. Under the state’s civil service laws and the union-negotiated contract, the hospital wasn’t allowed to replace that employee or initiate disciplinary actions until the 15th day the worker failed to show up. At that point, the hospital could issue a warning letter and had to wait a few more weeks before terminating employment. That left the hospital short that staffer for a month, Kalua said.

In the meantime, other hospital employees are called in to work overtime and cover shifts, leaving those employees overworked and exhausted, too, she said.

Dean Herzog, regional chief financial officer, said he would like to see the Legislature “work with unions to get our own bargaining unit. (There are) so many built-in rules that create overtime. It doesn’t really apply to hospitals.”

From an employee’s first day on the job, he is eligible for 21 sick days, 15 holidays and 21 vacation days, Herzog said. He and Kreuzer estimated their inability to craft work schedules that reflect the hospital’s patient census and avoid some of the automatic overtime — if an employee misses lunch, for instance, the hours worked after the scheduled lunch break are overtime, and the hospital pays the worker $10 for the missed meal — is costing Kona Community Hospital $3 million a year.

Hilo Medical Center is twice as big as Kona, so Herzog estimated the costs there are closer to $6 million, and Maui Memorial, three times larger than Kona hospital, likely loses $9 million a year because of those rules. Those rules cost the state, which provides some funding to the Hawaii Health Systems Corp., nearly $20 million a year, Herzog added.

Looking at next year’s budget, Kreuzer said officials are anticipating a $3 million loss, mostly because of changes in Medicare reimbursements and the impact of federal sequestration. That comes after the hospital’s two best financial years ever, Kreuzer said. The only way to make up for next year’s anticipated losses, he said, is by lowering labor costs. The hospital will do that next year, Kreuzer said, by eliminating 20 positions through attrition.

Senators also wanted more information about the hospital’s plans for a new facility.

Ways and Means Chairman David Ige said he understands the need for an upgraded hospital. But he said other neighbor islands, and even rural Oahu, has some of the same needs as West Hawaii, and it’s the Senate’s job to balance those needs.

“The challenge for us, there’s a need for a whole new courthouse, which will cost $90 million,” Ige said, adding senators are also looking at West Hawaii legislators’ requests for funding for the University of Hawaii’s Palamanui project and the hospital. “Those three alone are $500 million.”

But he also acknowledged the limitations Kona Community Hospital faces. Kreuzer started Tuesday’s tour in his office, which overlooks the hospital’s sewage treatment plant. The plant is capable of processing 45,000 gallons of water daily, and the hospital creates just that much already.

“We can’t add another toilet or a single drinking fountain,” Kreuzer said.

The hospital doesn’t have any more room to expand, either. That isn’t limited to the ability to build more space. Kreuzer said they have the patient volume to justify bringing in another oncologist, but no room for the doctor to work. Thanks to successful recruiting efforts at Alii Health Center, a separate but subsidiary corporation, the hospital has seen surgery volumes increase significantly the last few years, from about 150 surgery cases a month the last two years to 250 cases a month now. That has maxed out the hospital’s three operating rooms, though, Kalua added.

Kona Community Hospital provides about $1 million in subsidies to Alii Health, but in return sees about $7 million in additional hospital revenue, Herzog said.

Kreuzer said even representatives of Banner Health, the mainland-based health organization which last year expressed interest in partnering with several HHSC hospitals, praised Alii Health as one of the best practices those officials had seen.