Isle health facilities $571.2M in the red
A steep decline since 2000 has officials looking for answers
HAWAII'S HOSPITALS and nursing facilities have lost $571.2 million since 2000 because of bad debt and charity care, according to a study for the Healthcare Association of Hawaii.
Expenses have exceeded hospital revenues with continuous losses, said Terri Fujii, partner in the accounting firm of Ernst & Young, which examined finances of the hospitals and nursing facilities.
"How can they survive?" she asked, presenting the report at an association meeting yesterday at the Hawaii Prince Hotel. Hospitals can operate with cash flow, but "this can only go on so long," she said. "How long is another question."
The facilities eventually will have to figure out how to deal with the losses or consider options, she said.
For instance, she asked, will financially distressed hospitals join St. Francis Medical Center in putting themselves up for sale, or will they close their doors, unable to provide service?
"It's not like the airline industry," Fujii added, noting she also works with that financially ailing industry. "If one airline decided not to fly any more, what does that mean vs. a hospital closing its doors?"
Cathy Tanaka, administrator of St. Francis Medical Center-Liliha, summed up the reaction of health care executives to the firm's study: "No surprise."
They have received the same dismal financial news about the $3 billion health care industry, Hawaii's second largest private industry, since the association initiated the studies in 1999.
"It just reflects the consistency of the problem in terms of costs and reimbursements," said Art Ushijima, the Queen's Medical Center president and chief executive officer.
"Medicare and Medicaid are not covering the full costs," he said. And given the high costs of the Iraq war and terrorism, the health care budget is probably the biggest target for cuts, he added.
CONGRESS IS considering additional Medicaid cuts and further Medicare cuts are expected in 2007, Ushijima said.
Losses arise from medical services to patients unable to pay. From 2000 to 2005, they averaged $95.2 million a year, the accounting firm said.
The Balanced Budget Act also has significantly affected the industry, reducing payments for hospital, outpatient and nursing facility services by more than $29.6 million from 1998 to 2003, Fujii said.
The total net revenue of the hospitals last year was $1.727 billion, while expenses were $1.756 billion.
Ushijima said the challenge is to maintain community programs that don't cover costs if no other funding is available.
He said the hospitals are more efficient, reducing programs where they can and seeking more reimbursements from third-party payers. "But there is a limit as to how much you can get out of third-party payers."
Also impacting the hospitals and nursing facilities are increases in personnel costs, drugs and medical supplies, insurance premiums, and new federal regulations.
"I don't think anyone knows where the end point is," Ushijima said, pointing out that all hospitals are nonprofit and "committed to the mission of serving the community."
STAN BERRY, chief executive of the North Hawaii Community Hospital on the Big Island, said the study provides "the big picture of what's happening in Hawaii. We have the same issues." His hospital "makes it up on donations because we lose money every year," he said.
Rich Meiers, the Healthcare Association's president and chief executive officer, said the financial study shows a continuing trend that "is not good for Hawaii's health care system.
"As we know, the St. Francis system was in trouble financially and soon will have new owners, and we have other hospitals in trouble also."
In September, Meiers noted, $16.1 million in federal aid was distributed to the state's 15 private hospitals and 12 public hospitals to offset some costs of treating uninsured and needy patients. "We hope that continues in the next few years," he said.
THOMAS DRISKILL, JR., president and chief executive officer of the Hawaii Health Systems Corp. and Healthcare Association board chairman, said the Ernst & Young studies have been one of the organization's best investments in understanding the impact of the Balanced Budget Act on hospital operations in Hawaii.
"It's kinda scary when you look at it, six years now," he said, recalling that Fujii asked how many Hawaii businesses could withstand such huge accumulated losses.
Still, he said, "we are so much better off than the rest of the country. ... We are able to do things in Hawaii that many other places in the country, if any, cannot.
"The bottom line is real simple," Driskill said, stressing that health care is "absolutely essential" and all concerned parties must work collectively to do what's necessary to ensure provision of care.