LIHUE — Officials from Hawaii Health Systems Corporation, which operates the island’s two public, critical-access hospitals and three primary care clinics, said they will institute a round of layoffs system wide as the struggling state-subsidized health provider seeks to offset its projected $48 million budget shortfall this fiscal year.
“HHSC values its employees and this decision was an extremely difficult one to make,” Six HHSC corporate officers, including Kauai Region Interim Chief Executive Officer Scott McFarland, wrote in an Aug. 22 letter and email to all HHSC employees and physicians. “The current financial condition of Hawaii Health Systems Corporation is dire. The 2014 legislative session was a very challenging and disappointing one for HHSC — several key requests for additional funding were denied.”
All HHSC employees will be officially notified on Sept. 2, if they will be laid off. After that date, laid-off employees, officials said, will be able to hold their jobs for another 90 days.
McFarland said he and other board members are in the process of developing official numbers on how many employees will be affected. Those numbers, he said, should be available late next week.
WorkWise Kauai, along with representatives from the state Unemployment Insurance Division, Kauai Community College, and Alu Like, Inc., a private, nonprofit organization that assists native Hawaiians, will visit Samuel Mahelona Memorial and Kauai Veterans Memorial hospitals in two weeks to provide assistance for affected workers.
“There were rumblings on the news about layoffs, but they were never firm — they just talked about the possibility of having some layoffs, and so this all of that happening at once,” said Eric Nordmeier, the Workforce Development Division branch manager at WorkWise Kauai in Lihue.
Calls to the Hawaii Government Employees Association, the labor union representing HHSC employees, were not returned by press time on Wednesday.
“Be assured that HGEA will scrutinize the HHSC in how positions are being identified and hold them accountable in complying with the collective bargaining agreement,” HGEA officials wrote in an Aug. 14 unsigned email bulletin.
In all, McFarland said the public health system received about $16.6 million in state subsidies during the last year alone for regional operations on Kauai, including about $9.7 million in emergency appropriations and about $6.9 million in additional money from the state’s general fund.
The HHSC Kauai region, however, is still facing an $11 million shortfall for the upcoming 2014-2015 fiscal year, which began on July 1 — a fraction of the $48 million shortfall affecting the entire statewide corporation.
Officials from the cash-strapped public heath care system wrote, in the company wide announcement to employees, that “every region is examining internal operations on a comprehensive basis from productivity management to work flow processes.” Programs, they added, are also “being examined more closely.”
All regional boards, they said, are developing contingency plans to meet the projected shortfall — some of which included managing overtime costs and reviewing all job vacancies system wide. Some of these measures have been taken already to reduce contract staffing and eliminate some positions through attrition.
“Each region looked thoroughly at every possible option to address the shortfall with the care of our patients, residents and employees at the forefront on every decision,” HHSC officials wrote. “Unfortunately, the current financial condition in some regions is not sustainable without significant changes.”
Between the 2013 and 2014 fiscal years, operating revenues for the Kauai region grew from $44.6 million to $47 million, an estimated 5.4 percent increase from year to year, according to unaudited HHSC financial reports. Expenditures, meanwhile, increased from $57.5 million to $60.2 million from those same years.
This trend, in turn, caused the company to report a $261,000 loss.
“Overall, expenses are trending upward, far exceeding our revenues,” HHSC officials wrote.
“There is a union process that they all need to go through, so I’m not sure what the whole net effect is and what opportunities we may have to see what we (lawmakers) can do to certainly minimize the impact on our employees and community,” Sen. Ron Kouchi, D, Kauai-Niihau, said by phone on Wednesday shortly after the layoffs were made public.
When a round of public meetings were held in June and July by the state House Committee on Health, HHSC Kauai Regional Board Chair Wade Lord said a reduction in workforce, coupled with a cut in current service lines, may be needed to make up for the projected budget shortfall.
County of Kauai Spokeswoman Beth Tokioka wrote in an email on Wednesday that county officials are still gathering information about the layoffs and declined to comment until that process is complete.
Rep. James “Jimmy” Kunane Tokioka, D, Omao-Wailua Homesteads, who is up for re-election this year, said Kauai lawmakers have worked hard over the past two years to fund HHSC services on Kauai. But higher service costs and declining reimbursements from the federal government because of sequestration has hindered efforts to upright HHSC over the years.
“We just have to figure out a way that we can continue to provide good health care services to the residents of Kauai as well as not overspending the resources that we have,” Tokioka said.
The public health system’s Kauai region, McFarland said, will be hurt by “it’s lack of cash and cash reserves.”
“It would be great if the region could be focused during the 2015 fiscal year on aligning with medical and health partners that could help it maintain and finance all the service lines it currently operates; however, that is not our legislative reality at the present time,” McFarland wrote in an email to Kauai regional board members. “We have some difficult decisions ahead of us, but I am confident we come through the 2015 fiscal year in a stronger, more sustainable position, and will hopefully have a productive legislative session that will allow the region to innovate in ways that improve health care and the quality of life here on Kauai.”
Rep. Daynette “Dee” Morikawa, D, Koloa-Niihau, who is also up for re-election this year, said HHSC officials could have downsized non-union employees and provided the state Legislature with more information during the last legislative session.
Though state lawmakers did not want to see services or the workforce reduced, she said some state lawmakers did not think it was prudent to give HHSC officials the full amount of their requested appropriations until the Legislature received solid, cost-cutting plans.
“We all knew that it was going to come, but I was hoping that they would resolve their financial issues — at least hold off everything until next session began because, if they need more money, they could have come to the Legislature and we can get a run down of what’s going on,” Morikawa said by phone Wednesday. “Evidently, they feel that they have to start doing the cuts now. The thing is, when they came to us for emergency appropriations earlier in the year and late last year … and they had come to us with a solid plan, then we would have probably had more trust in funding them, but it’s hard to fund them and give them free reign to do what they want with millions of dollars and not know how accountable they are.”