Editor’s note: What follows is testimony made to the state Senate earlier this month in support of a resolution directing State Health Planning and Development Agency to hold public hearings on Kaua‘i as part of its fact finding and independent due diligence on outcomes of the
Hawai‘i Pacific Health/Wilcox merger in 2001.
I live on Kaua‘i in Wailua Homesteads, an area served by Wilcox Hospital and Kauai Medical Clinic, both acquired by Hawaii Pacific Health in 2001. Anywhere you live on Kaua‘i you could make that statement since Wilcox and KMC are the primary providers of health care services on Kaua‘i.
I serve on the executive committee of an informal group, Citizens for Kaua‘i’s Health Care Future. My opinions today do reflect a consensus of that group. Some of you may know one of this group’s co-chairs, Mary Thronas. The other co-chair is Dr. Peter Kim. It is worth noting that Dr. Kim founded Kauai Medical Clinic, one of the HPH subsidiaries we are discussing today.
I would like to very briefly review some of the serious, material violations of the 2001 Certificate of Need by Wilcox/KMC under HPH management.
• Reduction to the Commitment to Provide Health Care to the Disadvantaged, Uninsured, and Underinsured.
In violation of the 2001 CON and in violation of 323D-77(2)A, HPH/Wilcox has reduced its commitment to provide health care to the disadvantaged, uninsured, and underinsured.
— Lack of Commitment
In 2003 HPH hired ECG Management Consultants and instructed them to find ways to change the payer mix of Wilcox Hospital and reduce free care and patients covered by low paying insurance. The action of committing resources to this study shows an inherent reduction in its commitment to provide health care to the disadvantaged, uninsured, and underinsured.
— Restricting Access
HPH has structurally limited disadvantaged, uninsured, and underinsured patients’ access to Wilcox physicians. A Wilcox/KMC primary care doctor divulged to our group under a promise of anonymity that he has been directed by his Wilcox/HPH supervisor to limit his appointments of Medicaid and Medicare patients because of the low reimbursement rates which these insurance plans provide.
• Failure to Promote Improved Health Care and Reduced Direct Patient Care Services.
Wilcox/KMC have reduced primary care and health maintenance in violation of the 2001 CON and in violation of 323D-77(2)B and 323D-82.
— Reducing Number of Primary Care Physicians
Since the merger, the offices of nine general internists have closed in the Kauai Medical Clinic. Four family practitioners have left the medical group and two pediatricians’ practices have closed — in the past three years 26 physicians have left, along with three midwives and a nurse anesthetist. This is a much higher level of turnover than occurred historically at Wilcox prior to the merger.
The majority of physicians explain that they have left because of financial pressures from HPH: the onerous work conditions, the high overhead that is imposed on their practice by HPH, and the inability to practice medicine in the Wilcox system.
Such turnover has greatly disrupted continuity of care and stifled any attempt to implement prevention programs.
Inherent in such a significant numerical reduction in primary care physicians is a reduction in patient care and health care within the community.
— Changing Primary Care/Specialist/Emergency Physician Ratio
HPH administration, expressed in internal documents that the ratio of specialty care to primary care physicians on Kaua‘i should be changed, reducing the number of primary care providers who traditionally provide the majority of care to the disadvantaged, uninsured and underinsured (a violation of 323D-77(2)A and 323D-82) and who are necessary for health maintenance (a violation of 323D-77(2)B and 323D-82).
Prior to the merger the ratio of specialty care to primary care physicians heavily favored primary care. Under the new HPH/Wilcox physician policy ration, primary care has virtually vanished and the majority of internal medicine specialists have left Wilcox. HPH has hired additional emergency room physicians to fill the void of the primary care providers. But emergency care lacks preventive health measures and follow up and continuity of care that is provided by primary care physicians. In addition, emergency care is more expensive than primary care, and hence reimbursement rates to the hospital are higher. But while benefiting HPH, this provides significant economic harm to the payer, whether it is the patient, their family, the insurance company or Medicare or Medicaid, in violation of language throughout the 2001 CON and in violation of 323D-77(1), (2), and 323D- 82.
• Reduced Safeguards Assuring Continued Access to Affordable Care.
In violation of almost every requirement in the 2001 CON and in violation of 323D-77(1), HPH is operating Wilcox in a manner that has decreased the safeguards which assure continued access to affordable care.
Continued care depends on the continued financial integrity of Wilcox/KMC. The current operating methods and decisions of HPH create the certainty that unless these operating methods are changed, Wilcox/KMC will fail financially and some other entity (most likely the State of Hawai‘i) will have to assume ownership and operate it.
The accounting and cost allocation methods, methods in violation of the 2001 CON, imposed by HPH on Wilcox create financial losses. When those losses are spread across Wilcox divisions, divisions that had previously contributed positively to margins appeared to be operating at a loss. HPH sold off the clinical laboratory and long-term care using these apparent operating losses as justification. However, the unallocated HPH expenses charged to Wilcox didn’t diminish just because these divisions were gone; in fact, it gets worse on paper as the HPH unallocated expenses are now divided among the fewer Wilcox divisions making each look like an even larger source of financial loss. This cycle continues to play out with HPH trying to sell off more of Wilcox.
This HPH approach can never improve the financial situation at Wilcox because it doesn’t address the real problem — lack of compliance with the 2001 CON financial model. And in fact, the approach makes things worse by reducing the synergy between parts of the health care system that used to be Wilcox.
For example, the sale of the Wilcox long-term care beds has actually increased costs for Wilcox. Previously, patients who were no longer in need of acute care but were unable to be discharged to their home were admitted to the Wilcox long-term care facility. This saved money for Wilcox Hospital by reducing length of stay that was reimbursed by a fixed payment schedule. In addition, by freeing up the beds, new patients could be admitted to the hospital, while there was continuity of care in the hospital’s long-term care facility. As a result of the sale, patient transfer to the long-term care unit (now called Garden Island Healthcare) is less fluid thus reducing continuity of care. Because of a stricter long-term-care admission policy which does not accommodate free care or low paying patients, stay of such patients in Wilcox Hospital has been prolonged and transfer to the long-term care facility has been delayed or disapproved. This has cost Wilcox more money under the fixed payment DRG system, delayed or interrupted patient rehabilitation and prolonged convalescent recovery. Before the sale of the facility, and under Wilcox management, the long-term care census showed 91-94 percent occupancy. Since the sale admission has been restricted, occupancy has averaged 83 percent.
• Degraded Benefits to the Affected Community to Promote Improved Health Care.
Inherent in SHPDA reliance on sub-area-councils is the belief that local community decisions are necessary for good community health care. The application states on Page A-6 that the, “priorities for Kauai Sub-area included local control…”
The management by HPH is in direct opposition to the statements made by HPH in the 2001 SHPDA application and in violation of 323D-77(2)B.
There are numerous examples of the autocratic, non-local HPH management style riding roughshod over local Wilcox managers and health care providers. One of the more egregious, representative examples of this is the dissolution of the KMC Physicians’ Advisory Group (PAG). HPH dissolved the KMC PAG because it voted 95 percent no-confidence in the KMC Medical Director.
• HPH/Wilcox Has Violated the CON Financial Model.
Almost every bad decision that has degraded the services provided by Wilcox/KMC has been justified by HPH as a result of financial pressures and therefore out of their control. They have asserted they are doing the best they can in the difficult rural health care environment.
On its face, this lacks credibility. Wilcox/KMC had positive financial margins nine of 10 years preceding the merger and during that time was singled out as one of the 100 best hospitals in the nation.
In fact, the financial pressure on Wilcox is a canard resulting from accounting methods used by HPH that were not disclosed to Wilcox or SHPDA prior to the 2001 merger. The CON application included a financial model predicting financial results of the merger. Of course, no one can predict financial results with certainty. But that financial model can and should present with certainly how you expect to account expenses. The financial model presented in the CON application did not include ANY structural charges to Wilcox/KMC for unallocated expenses. There was no line item; there was no dollar figure, nothing. In fact, each year HPH charges Wilcox millions of dollars for these unallocated expenses; in fact, the unallocated expenses each year total a much larger number then the savings predicted in the financial model HPH used to justify the merger.
We are not disputing that it sometimes is an acceptable business practice to allocate these unallocated expenses. We are arguing that it is unacceptable to do so in this case when a different financial model was used to justify the acquisition.
That good work’s value depends on these laws enforcement and ultimately on the people taking those laws seriously.
Previous legislatures wisely codified the criteria SHPDA must use to evaluate certificates of need, criteria like:
— Sufficient safeguards to ensure continued access to affordable care
— A commitment to provide health care to the disadvantaged, uninsured, and underinsured
— Provide benefits to the affected community to promote improved health care
— Not substantially reduce or eliminate direct patient care services
Those are the State of Hawai‘i’s words, in HRS323D-77 and 323D-82, not mine. Previous legislatures wisely gave SHPDA statutory authority not just to issue Certificates of Need, but to ensure applicants’ compliance under threat of revocation.
On page 5 of the CON document, SHPDA itself states “Non-implementation of a project as described in your application may result in a fine and/or withdrawal of the Certificate of Need.”
I strongly support this resolution precisely because it directs SHPDA to take seriously the statutory authority you have invested in it, to engage in a process with public hearings and testimony and independent due diligence to determine HPH’s compliance with your laws.
I believe HPH management of Wilcox/KMC has violated almost every requirement of the 2001 CON. I believe HPH is operating Wilcox/KMC in violation of §323D-77 and §323D-82. I believe these violations are clear, unambiguous, material, and serious. I believe these violations put the health care future on Kaua‘i in jeopardy.
Please, use this vehicle to direct SHPDA to make a determination for the State of Hawai‘i.
• Walt Barnes serves on the executive committee of an informal group, Citizens for Kaua‘i’s Health Care Future. He lives in Wailua Homesteads.