Financial reality of Hawaii Health Systems Corp.
Hawaii Health Systems Corp., Banner Health, our governor and the state Legislature are much in the news these days. There is talk of a public-private partnership to replace the present state health care system. The Legislature is considering enabling legislation to permit changes to the state health system structure. There is rampant speculation on the possible effects on the quality of health care and the careers of loyal HGEA employees who work in the state health care system.
You might ask about all of this activity, “If it ain’t broke, don’t fix it.” Unfortunately, that statement is not true in regards to the HHSC. The standard for labor costs in well-functioning hospitals in this country is now between 45 to 50 percent of revenue. When I joined the West Hawaii Regional Board three years ago, the labor cost for the HHSC was 70 percent. Now, only three years later, the labor cost for HHSC is 75.3 percent. There would be no public hospital system today without a large ($73.4 million in 2012) state subsidy.
Amazingly, the average compensation for HHSC employees is below national averages. If the HHSC employees are undercompensated, how can labor costs be so high? It is not the fault of the hospital employees, but the result of a “one size fits all” HGEA labor contract totally unsuited for the operation of a 24/7 hospital with highly variable occupancy rates. For example, the hospital must have the same number of staff on duty regardless of whether the hospital is 100 percent full or if only 40 percent of the beds are occupied.
In an era of declining revenue, hospital CEOs struggle to find efficiencies that might shave a percent or two off total costs. There is no way, under the present system, to compensate for labor costs 51 to 67 percent higher than the norm. This financial crisis is real. The state cannot continue to fund ever increasing operating losses and plans to decrease the state subsidy in future years. The present system is unsustainable.
It is the responsibility of everyone associated with HHSC to explore every possible alternative to our financial dilemma. At the same time, we must maintain the goal of ensuring the best possible health care along with the highest possible quality of life for HHSC employees.