Saturday, July 31, 2004

St. Francis, Hawaii
Pacific Health enter
partnership discussions

St. Francis Healthcare System of Hawaii, the state's largest kidney dialysis provider, and health-care conglomerate Hawaii Pacific Health have told employees that the two organizations are having discussions about new opportunities for partnerships.

Both sides, however, said talks are preliminary and wouldn't speculate on whether the discussions could lead to a merger.

Sister Beatrice Tom, chief executive officer of St. Francis, said in a letter to its 2,500 employees that the 121-year-old health-care system -- which has battled for several years to cut costs and reduce overhead -- historically has sought partnerships to provide care while reducing the duplication of costly medical services.

Tom said St. Francis was approached by Hawaii Pacific Health to explore synergies between the two organizations.

"As we explore these possibilities, our main focus will be to ensure that any collaborative activity brings value to our patients, employees, physicians and community," she said. "Every decision made will need to meet our values and commitment to our mission of caring for those in greatest need."

Hawaii Pacific Health was formed in 2001 by the marriage of four Hawaii hospitals, including Kapiolani Medical Center for Women and Children, Kapiolani Medical Center at Pali Momi, Straub Clinic & Hospital and Wilcox Memorial Hospital on Kauai. Hawaii Pacific Health said in a letter to its 5,434 employees that the reason for the discussions was to improve accessibility, quality and cost effectiveness of the overall health care delivery system in Hawaii.

"This process has just begun and ... many steps are required ... which will include input from both within our organizations and externally," Hawaii Pacific Health said. "At any point, it is possible that Hawaii Pacific Health or St. Francis may decide that it is not in our best interest to pursue this further."

A Hawaii Pacific Health spokeswoman, who declined to be identified, said it would be inaccurate to read too much into the talks. "It's not really an unusual, unprecedented situation to have health care systems talking to each other about options for business partnerships," she said.

St. Francis spokeswoman Teri Tanaka also brushed aside merger speculation as being "not accurate" and said St. Francis is always investigating opportunities.

"Right now, everybody is focused on the business on hand, and that is our commitment to mission," Tanaka said. "Our goal is to be viable and stay focused and to continue our commitment to mission."

Bill Richter, a board director of the Hawaii Nurses Association's collective bargaining organization, said he doesn't have any information about the talks other than what he's read in the letters. "Coupled with the fact that St. Francis Healthcare System has been experiencing some financial difficulties over the last several months to a year, it can't be ruled out that the potential for a merger or acquisition exists," he said.

St. Francis Medical Center, according to its annual filings with the Internal Revenue Service, eked out a gain of $578,141 in the fiscal year ending June 30, 2002, after losing nearly $17.5 million in fiscal 2001. Its fiscal 2003 financial statement isn't available yet.

Tanaka said St. Francis is not the only health care provider in the nation that has had to make adjustments because of the federal Balanced Budget Act, which reduced Medicare and Medicaid reimbursements.

"We are operating business as usual, but all hospitals nationwide are responding to the lower reimbursements," she said. "About 70 to 80 percent of our patients are covered by Medicare and Medicaid."

Hawaii Pacific Health

St. Francis Healthcare System


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