Privatization under the microscope
HILO — Bills paving the way for a turnover of the state’s public hospitals on Maui and Hawaii Island to a private nonprofit were sponsored six months after one particular nonprofit, Banner Health, began talking to Hawaii Health Systems Corp. about the possibility. The Senate version of the bill would apparently allow HHSC to contract with Banner without putting the multimillion-dollar transaction out for competitive bids.
But officials with HHSC and Banner Health say an HHSC-Banner Health marriage is far from a done deal.
“This legislation is not about Banner Health or the specifics of any transaction that may eventually be negotiated with Banner following passage of the bill,” said Banner Health Executive Vice President Ronald Bunnell in testimony to the Legislature. “We cannot emphasize too strongly that this legislation would be needed for any privatization transaction to occur, whether with Banner Health or with another private health care organization.”
Phoenix-based Banner Health began talking to HHSC in July about taking over operations of the Maui, West Hawaii and East Hawaii regions. That includes Kona Community Hospital, Hilo Medical Center, Kohala Hospital, Ka‘u Hospital and Hoola Hamakua on Hawaii Island and Maui Memorial Medical Center, Lanai Community Hospital and Kula Hospital in the Maui HHSC region.
The bills, SB 1306 and HB 1483, are currently wending their ways through their last committees, with decisions scheduled today on the Senate bill in the Ways and Means Committee and the House version in the Finance Committee.
If passed by their respective houses, the bills then cross over to the other house for consideration.
HB 1483 is the more conservative measure, calling for a task force to study the feasibility of such a move, while SB 1306 would allow all HHSC regional boards to transition their facilities to a nonpublic status. The chairmen of the Health Committees of both houses, however, agree that a lot of questions need answering before the bills become law.
Senate Health Committee Chairman Josh Green, a Kona Democrat who is also a practicing physician, said he added language to SB 1306 to require any transition be approved by both houses of the Legislature. When asked if he thought bills should also require a formal bid process, Green said he’d likely add it when the House bill comes over to his committee.
“This is definitely the most impactful health care bill we have this legislative session,” Green said. “Nothing else comes close.”
HHSC is the fourth-largest public health system in the nation, with $279.9 million in balance sheet capital assets and $512.2 million in net cash and accounts receivable. Its 12 facilities provide most of the acute health care on the neighbor islands, and the system, with 4,300 public-sector employees, relies on $82 million in state subsidies annually.
Rep. Della Au Belatti, an Oahu Democrat who’s chairwoman of the House Health Committee, said she sponsored HB 1483 at the request of Maui House members. She also admits to some concerns about the bills.
“Our public hospital is an important asset, and we need to move very carefully,” Belatti said. “I sponsored the bills as a courtesy. We were never approached by Banner. To my knowledge, that has never happened.”
Neither Belatti nor Green, nor bill sponsors Sens. Gilbert Keith-Agaran, Rosalyn Baker and J. Kalani English, all Maui Democrats, show any campaign contributions for the past two years that could be attributed to Banner Health, according to Hawaii Campaign Spending Commission records.
Banner Health tax documents for 2011, the most recent available, show the company spent $563,802 for lobbying overall, of which $317,114 was direct contact with legislators, staff and government officials. It spent no money on travel or entertainment for federal, state or local officials, according to its IRS Form 990.
Wesley Lo, chief executive officer of HHSC’s Maui Region, points to a 2009 independent evaluation of the state’s health system that recommended HHSC partner with another entity to create greater economies of scale and improve health care services while cutting costs.
Based on that recommendation, HHSC Maui has been talking about striking up public-private partnerships with entities including Banner Health.
“We have not come to any definite agreements with Banner Health,” Lo said in testimony. “I am concerned that as hospital services erode and patient volume decreases, Maui Memorial Medical Center will have no choice but to proportionately size its employee base to match diminishing hospital operations and declining budgets.”
HHSC Board Chairman Avery Chumbley said the hospital board is “on pins and needles,” waiting to see what the Legislature will do with the bills.
“It’s an important step in the process,” Chumbley said.
Kalbert Young, director of the state Department of Budget and Finance, said his concerns about the Senate bill deal with clauses that have the state picking up all liabilities and all collective bargaining contracts while continuing to provide a private entity with operating subsidies and capital improvement money.
He also questioned the possible financial ramifications of transferring buildings previously financed with tax-exempt municipal bonds to a private entit.
Hawaii health care workers and their union have come out in force against the bill, citing concerns over their jobs.
A former Banner Health employee in Alaska,while praising the company, told West Hawaii Today on Tuesday that the company concentrated on quality, and set all raises based on annual employee evaluations, with a “1” on a five-point scale earning a 1 percent raise, a “2,” a 2 percent raise and so on. No employee would be given a 5 on an annual evaluation so as to have something to strive toward, the employee said.
United Public Workers State Director Dayton Nakanelua points to Hawaii Supreme Court interpretation of the state constitution in a Kona lawsuit over privatizing the landfill, where the court ruled that government services “historically and customarily” performed by civil service workers can’t be privatized.
“This is a union-busting measure that should be shelved,” Nakanelua told the Legislature.