LIHUE — At the end of a recent corporate board meeting of the Hawaii Health Systems Corporation, one thing was clear: Kauai is likely now in the strongest position of all the regions as it enters the 2016 fiscal year on July 1.
“Now, that’s not to say we’re out of the woods, but we’re certainly not facing the financial turmoil that we were facing 17 months ago,” said Scott McFarland, who steps down today as interim HHSC Kauai Region CEO.
Peter Klune will take over as the region’s first permanent CEO in nearly seven years.
McFarland said he’s happy to leave the island’s hospitals in a better financial state. But getting Samuel Mahelona Memorial Hospital and Kauai Veterans Memorial Hospital — as well as the whole statewide corporation — back on track was an uphill battle.
“I often lead in troubling situations,” McFarland said about his decision to guide the state-funded public hospital system about 17 months ago. “It’s something that people often look to me to do, and I’m not sure why — I guess I’m unconsciously competent at it.”
But he was not selected to stay in the post.
McFarland confirmed that he was one of the more than 70 local and Mainland applicants who applied for the position last year.
“We do not disclose who applied for the job — that could create problems for those working somewhere else but who applied for this position,” HHSC Kauai Regional Board Chair Pat Gegen wrote in an email. “We also would not give info regarding why we did not choose someone.”
Gegen did, however, defend the 11-member board’s decision to select Klune.
“There were local candidates who made it through the screening process to the final round, but the board felt that Mr. Klune has the proven past experience of working with hospital systems who were experiencing financial difficulties and successfully helped turn them around,” Gegen said. “We are hoping that with his varied experienced in other systems he will have a perspective that can help guide the Kauai region forward in a stronger position than we are in today.”
Rep. Daynette “Dee” Morikawa, D-Koloa, Niihau, said she has seen “a tremendous improvement in the Kauai region” during McFarland’s tenure at HHSC.
“From the outside looking in, I think he did a good job because he made some tough calls,” Morikawa said. “I think he made a lot of people angry, but I think that comes with being efficient — you’re going to have to do things that are not popular, but he was brave enough to do it.”
Rep. Derek Kawakami, D-Wailua, Hanalei, said McFarland “really brought private-sector experience into the public sector arena.”
“When Scott began his tenure at HHSC, he really brought back accountability, and as far as improving the financial stability of our hospitals, he did a great job,” Kawakami said. “I’m actually sad to see him go because of all the improvements he made in a relatively short period of time.”
‘It was up to us’
McFarland co-owns Kauai Athletic Club and briefly served as the community outreach manager for Dow AgroSciences on Kauai. Before moving to Kauai, he served as the president of wellness at Cleveland Clinic in Ohio and the vice president of innovation, product development and product management for Healthways, a Tennessee-based well-being improvement company.
When he first came on board with HHSC, there was only $11,000 in a checking account for regional operations and about $10 million in bills that needed to be paid.
Administrators from the public health care system, as well as state lawmakers, were criticizing the Kauai region for exorbitant operational costs and the scant plans in place to bring them into line.
“When I come into a difficult situation, I often back into it so I can keep my eyes focused on all of the interdependencies and all of the stakeholders,” McFarland said. “I need to ease into the situation, keeping my eyes on everything because I understand the interdependencies, particularly in health care and medical care delivery.”
But the overall problems, he said, were not just limited to what was happening on Kauai.
“What I walked into Kauai was systemic — there were things that needed to be improved in all areas,” McFarland said.
What resulted was a road of tough decisions, including a mixture of cost cutting, workforce reduction and efficiency-driven measures — all while improving communication with all stakeholders, including patients and the broader community.
“He was always open and proactive as far as communicating with his legislators, management teams and workers — I think they all looked up to him,” Kawakami said about McFarland. “Whenever I saw people who actually worked in the hospitals, they had nothing but good things to say about him.”
At one point, McFarland said he even suggested that the region explore bankruptcy options — an idea that was later abandoned because of its legal complexity in Hawaii.
“In terms of the number of options that were available for HHSC, this was the most challenging role I’ve ever had professionally,” McFarland said. “Literally, it was up to us. Every one of us — employees, families and people who depend on us — had to do a real bootstrap effort and get behind saving these hospitals and we did.”
It’s one of the reasons why he eventually drafted plans to eliminate vacant positions and lay off employees rather than cut services.
“I’m proud of the decision,” he said. “I’m going to stand by it.”
With a new budget in the works, McFarland believes the region, and the public health care system as a whole, is heading in the right direction.
On Kauai, revenue targets were met for seven of the last eight months, and expenses are below past projections. About $2.5 million sits in the bank for Kauai region operations as of Jan. 31, according to HHSC financial records.
“To use a coaching analogy, you want to transition when you’ve got an organization that’s hitting its stride and ready to go to the next level, so I feel incredibly good about that,” McFarland said. “I have confidence in the people, the stakeholders and the community to really support where these hospitals need to go.”
McFarland said he plans to remain on Kauai and advise health care providers on a consultant basis.