State warns it might yank OK of hospitals' new owners
The state is reviewing whether Hawaii Medical Centers violated pre-sale agreements with layoffs
The state is examining whether layoffs of more than 100 employees at the Hawaii Medical Centers violated conditions required for state approval of the hospitals' sale by St. Francis Healthcare System of Hawaii.
The State Health Planning & Development Agency, which regulates health-care projects and acquisitions, and the Attorney General's office are reviewing the layoffs at the Liliha and Ewa hospitals.
If the state determines that the layoffs are in violation, it could withdraw its approval of the sale, rescinding authorization of the new owners to operate hospitals in Hawaii.
The state is reviewing whether staffing cuts at the Hawaii Medical Centers have violated conditions that were required for state approval of their January sale by St. Francis Healthcare System of Hawaii.
The State Health Planning & Development Agency, which regulates health-care projects and acquisitions, and the Attorney General's office are reviewing the layoffs by the new owners, who initially said they would retain the 1,634-member work force at the hospitals, formerly called the St. Francis Medical Centers.
"We need to decide if the project being implemented differs substantially from that authorized in the (certificate of need)," said Darryl Shutter, the state agency's regulatory branch chief. "If there's not substantial compliance, the rules allow us to withdraw their CON ... so they would no longer be authorized to be the provider."
Separately, the Attorney General's office has asked Hawaii Medical Centers for information about the decision to lay off about 10 percent of the hospitals' work force and what efforts were made to retain staff, said Hugh Jones, deputy attorney general.
The state OK'd the $68 million sale of the hospitals late last year to a local group of physicians and Wichita, Kan.-based CHA LLC, formerly known as Cardiovascular Hospitals of America.
Shortly after the sale closed, the group notified 210 full- and part-time employees that their jobs were being eliminated or reclassified as part of a systemwide restructuring designed to improve the financial health of the Liliha and Ewa facilities.
Only some 112 workers were actually laid off, including nurses aides, technicians and support staff, HMC said.
In five separate references in its certificate of need, HMC said it would hire all existing employees. It also said it would "use reasonable efforts to retain them for at least one year."
"I'm not happy about what has been happening, and I'm very disappointed," said Sister Beatrice Tom, former chief executive officer of St. Francis Healthcare System, who negotiated the deal.
If the state were to withdraw its approval, it is unclear how HMC would reverse the sale of the hospitals, for which St. Francis provided the bulk of financing -- $40.2 million -- with HMC paying $342,000 a month on the loan.
The state agency, in a Feb. 15 letter, requested that HMC provide information on the numbers and types of staff to be reduced, staffing ratios by department and the impact on patient care.
In response, CEO Danelo Canete said that during negotiations the group had told St. Francis it could hire only enough workers to sustain daily operations in order to improve the finances of the hospitals.
Canete said St. Francis had assured HMC that staffing levels would be reduced by the time the sale closed, since the hospitals typically experienced an attrition rate of about 25 full-time employees per month.
However, St. Francis subsequently filled positions as attrition occurred, he said.
"We thus ended up inheriting a staff that was at a much higher staffing level than we had anticipated," Canete told State Health Planning & Development Agency administrator David Sakamoto in a Feb. 22 letter. "Our commitment to hire all existing employees and to use reasonable efforts to retain them for at least one year was very sincere, but contemplated different circumstances based on assurances given us by (St. Francis) ... the layoffs were absolutely necessary to prevent the hospital from catastrophic failure and closure."
Malcolm Tom, St. Francis' chief operating officer, said the organization did cut back on staffing and tried not to fill vacant positions, though it was forced to hire in critical areas to maintain patient care.
"We would not jeopardize the quality of care of our patients," he said. "We're surprised because of the verbal assurances they gave SHPDA that they had no plans to lay off anybody after the sale."