Kaua‘i’s state hospitals project $3.5M deficit

Still, no cuts planned

by Blake Jones – The Garden Island

Executives from Kaua‘i’s state-run hospitals defended the region’s future plans for growth, despite a projected $3.5 million deficit, at an informational briefing with state legislators Monday in Lihu‘e.

Members of the Senate Ways and Means Committee and House Finance Committee pressed for details about how the region, which includes Kauai Veterans Memorial and Samuel Mahelona hospitals, is dealing with the shortfall in the absence of service or staff cuts.

The meeting was the fourth on as many islands over the last week as lawmakers dig deeper into the larger financial crisis facing the state-run hospital system.

Hawai‘i Health Systems Corp., the state-subsidized network of 12 hospitals serving mostly the Neighbor Islands and rural areas, is expected to come up $62 million short this year.

The hospitals’ regional boards have been asked to trim deficit spending, resulting in layoffs on the Big Island. In addition, HHSC has asked for additional funding from the Legislature.

End-of-year deficits are nothing new for Hawaii Health Systems, which received emergency funding from the governor last year but was denied a bigger budget from the state.

Hawaii Health Systems takes in about $400 million in annual revenues from Medicare, insurance companies and patients, but it is also supported by about $58 million from the state’s general fund.

That hasn’t been enough to make ends meet, and next fiscal year could be more challenging if spending continues at its current pace. Prompted by a shrinking general fund, Hawaii Health Systems faces a 4 percent budget reduction in the next fiscal year.

Kaua‘i’s HHSC leaders said the region’s problems are not a result of uncontrolled spending, as it’s been trimming the fat from budgets for years.

Kaua‘i Chief Financial Officer Michael Perel said under-reimbursement from third-party payers has contributed to the deficit. He estimated that Hawai‘i’s largest insurer, HMSA, shorts the Kaua‘i region $5 million a year on the cost of care.

Public and private hospitals alike are suffering as private insurers and government programs like Medicare fail to fully compensate for services. They are also burdened by rising costs, bad debt, and the growing cost of treating those without health insurance and the means to pay for their care.

Still, the Kaua‘i region is faring much better than others, such as West Hawai‘i and Maui, which are responsible for the majority of HHSC’s losses.

Perel estimated that the Kaua‘i region can continue until February or March of 2009 without additional funding, but at that point will need help from the state.

“I’m confident we can scrimp and squeeze to see how much of this (deficit) we can knock off, but we will have to come back to the state or our vendors will cut us off,” he said.

Norman Akita, chair of HHSC’s Kaua‘i regional board, said cutting services, particularly the long-term in-patient care or the Mahelona psychiatric unit, is a last-resort option that would not serve the community. Those areas have traditionally lost money, but provide a safety net of service on the island, he said.

In spite of aging infrastructure and limited funding, the Kaua‘i region painted an optimistic picture of its services and staff. Hardly shrinking under the shadow of HHSC’s financial crisis, the Kaua‘i region told legislators that it’s focusing on growth, renovations and recruiting.

Akita outlined a four-point plan to get the region back on track, which includes more resources to the billing department, increased recruiting for new positions, adding clinics on the island and an $80 million expansion of KVMH.

Akita and the rest of the board agreed that a long-term strategy of enhancing care and facilities will further Kaua‘i’s financial independence. For example, Mahelona added an emergency room in 2005, and now sees about 5,000 acute patients a year. In six years, an improved KVMH could start seeing profits, the Kaua‘i board estimated.

“We reject the status quo,” Akita said. “We must follow the successful national trends.”

Sen. Gary Hooser, D-Kaua‘i, told The Garden Island yesterday that he has the “utmost confidence” in the Kaua‘i region leadership and believes it is doing all it can to “operate fairly lean.”

But the optimism didn’t quite catch on with all the legislators.

“I don’t know if we’re going to be able to get away with hoping that things are going to get better,” said Sen. Rosalyn Baker, D-Maui.

“Kaua‘i has a vision of where it wants to go,” Baker continued, “but we want to see the details on how it’s going to get there.”

The Ways and Means Committee chair pushed for details on how the hospitals would make it through the next six years. Asked if the Kaua‘i region can continue to expand and not cut critical services, Baker said, “I don’t think they can.”

After hearing from all four regions, Hooser said, “It’s clear that there needs to be a significant restructuring for the long-term operation of the state hospital system.”

He said safety net services, such as long-term care and the psych unit, have to be protected and state-subsidized, while the more profitable acute services should stand on their own. Chronic under-reimbursements from private insurance companies also must change.

At the meeting Kaua‘i Rep. Roland Sagum, D-16th District, suggested a third-party audit of HHSC regions, and Rep. Robert Herkes, D-Big Island, called for “specific numbers” from Kaua‘i about the financial condition of the operation.

While the Legislature cannot appropriate in the fiscal year without a determination of emergency by the governor, the group of senators and representatives will review information from the briefings, possibly ask more questions, and then submit a report to leadership by the end of summer.

• Blake Jones, business writer/assistant editor, can be reached at 245-3681 (ext. 251) or bjones@kauaipubco.com