A projected $15 million shortfall will force Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital administrators to consider cutting patient services or laying off employees next fiscal year, said Wesley Lo, Maui region chief executive officer of Hawaii Health System Corp.
"Everything is on the table," he said Friday. "We're looking at all things. There is no sacred cow."
HHSC administrators, who oversee the state's mostly rural and Neighbor Island hospitals, sought $150 million from state lawmakers this year, but they were granted $102 million, or about two-thirds of what they requested.
And legislators didn't agree to allow state hospitals to seek partnerships with private entities. State hospital administrators and others favoring privatization pointed to partnerships as a cure for hospitals ailing from a lack of cash, hamstrung by public employee contracts and weighed down by systemic inefficiencies.
For Maui County facilities, the state subsidy is estimated to be about $15 million short of just maintaining the status quo, Lo said.
Finding ways to make up the shortfall conjures up a number of unattractive alternatives, he said.
If the hospital were to lay off workers, then they would have a number of rights, including the right to "bump" less senior employees, creating a domino effect that could last months before being sorted out, he said. If the hospital were to stop or cut back patient services, that would simultaneously choke off badly needed income. And cutting a service would require a public hearing first, Lo said.
"Some of these things take more than a year to save even a dollar," Lo said.
Alice Hall, HHSC's acting president and chief executive officer, said that public hospital labor costs make up 76 percent of expenses, while the national average for hospitals is somewhat more than 50 percent, she said.
"We have very high labor costs," she said.
Nevertheless, HHSC values its labor force, recruits and trains employees and doesn't want to resort to a reduction in the workforce, Hall said. Still, "we have to pay our bills."
Randy Perreira, executive director of the Hawaii Government Employees Association, has taken exception to HHSC claims in the past of a 76 percent labor cost, calling it "misleading."
Perreira has maintained that private hospitals have other nonlabor costs (that public hospitals don't have) that skew figures and make it appear that labor costs are higher at public hospitals than they actually are.
Hall said it's challenging to staff a hospital with public employees because managers need to take into account hospital workers getting 21 days of sick leave, 21 days of vacation and more than a dozen paid holidays.
Rigid union work rules exacerbate matters, she said. For example, if a public hospital has empty beds or even an empty floor, labor contracts require hospital administrators to fully staff a unit, she said.
Private hospitals staff their facilities based on the number of patients in beds, Hall said. So, if there's a low census with empty beds, then some employees are sent home, saving labor costs for hospitals.
Government employees in hospitals are salaried, not hourly workers, she said.
Perreira said he's aware that public hospital administrators want to pay employees by the hour, instead of as salaried workers, but he said that government workers pay more for health insurance than private hospital employees.
The union is not opposed to changes, he said. "We're more than willing to engage in some kind of bargaining with them. . . . The employees are ready to do their part," Perreira said. "But it can't be a one-way street where everything comes off their back."
Perreira said Lo could consider taking a cut in his $240,000 annual salary, and he questioned MMMC spending "hefty" sums of money on a contract with the Disney Institute to improve the hospital's "corporate culture."
Lo responded that he doesn't earn $240,000. He said that he makes $211,000 annually, after he took a 10 percent pay cut that wasn't restored after other employee pay was returned.
"I'm making less than I did five years ago," he said.
He defended the Disney contract as an initiative to improve hospital working conditions, although he said it hadn't started, and he didn't immediately have details about the program.
The proposed bill to privatize public hospitals also is a point of contention between Lo, an advocate of the measure, and Perreira, who said that the bill oversimplified the complexities of delivering health care services in Hawaii.
The bill advanced by Senate Health Committee Chairman Josh Green proposed to have the state partner with or sell its hospital facilities to Hawaii Pacific Health, The Queen's Health System or Kaiser Permanente Hawaii, all based on Oahu.
Perreira challenged the idea that one of those entities would "start throwing money into expanding services at Maui Memorial."
"Realistically, that's not going to happen," he said. "They're misleading people, frankly."
Hall said that when HHSC was created in 1996, the plan was that the public hospital system would eventually be privatized.
Public employee labor contracts and state laws that dictate how HHSC does business make it "very difficult for (public) hospitals to compete in the health care market," she said.
It's also more difficult to bring in outside capital, achieve economies of scale, obtain health care industry expertise or adapt to changes brought by the Affordable Care Act, Hall said.
Dr. Melvin Burton, chief of staff at MMMC, said that every year the Legislature needs to provide HHSC with an emergency appropriation as a "stop-gap measure."
"People put a Band-Aid on to keep us going," he said, but what's needed is a "more durable solution."
Burton opposed an amendment in Green's bill that would limit HHSC's partners to only those in Hawaii.
While such a move might make economic sense, it makes "zero sense" for patients on the Neighbor Islands who'd face a greater likelihood of being flown to Oahu for treatment if an Oahu-based partner were to acquire HHSC, he said.
Maui patients should be able to stay on their home island while they're being treated at the hospital, allowing their family members to visit them after work or in the evening, Burton said.
"That's the way health care should be," he said.
Burton said there should not be two levels of patient care in Hawaii - a fairly high level on Oahu, and shrinking, scaled-back services on the Neighbor Islands.
"We believe we should be trying to elevate the standard of care in these Neighbor Islands," he said.
MMMC has shown what can happen by providing patients with cutting-edge cardiovascular and trauma care, he said.
"That's what happens when you empower a community and allow it to make decisions," Burton said.
When lawmakers this session heard only a public-private partnership bill providing for locals-only partners, "we felt as if we had zero say in what was going to happen," he said.
Hall said that she saw "pros and cons" to the locals-only provision for an HHSC partnership. While it would be logical to have an "open playing field" allowing Mainland entities to be partners, local entities already have a vested interest in Hawaii, she said, and they're "not going to run back to the Mainland."
And, because the local entities would acquire facilities such as MMMC, they would still use them, except for services better provided on Oahu, she said.
Green said that the political reality at the Legislature was that the only bill that would be heard was the one providing for locals-only partners.
A bill providing for a private Mainland partner "would have been killed in the first five minutes," he said.
Green said he worked hard in building a consensus on the bill but eventually it couldn't withstand "very strong special interests" that "didn't feel comfortable enough to let it go."
"I think the inclination for inertia was greater than people's understanding that we need to change," he said. "The bill was clean as could be, clean as a whistle. I hoped that people would see it as more important to solve the problem than to kick the can down the road another year."
West and South Maui Sen. Roz Baker, vice chairwoman of the Senate Health Committee, said that the bill was complicated for lawmakers.
"There is still a knowledge/understanding gap with a number of legislators," she said in an email. "We need to keep meeting, talking and educating" until next year's lawmaking session.
"Hopefully, we'll be in a better place next session," Baker said.
* Brian Perry can be reached at email@example.com.