Hospitals' prognosis poor as facilities bleed $150M


POSTED: Thursday, October 23, 2008

Hawaii's health care officials got a heavy dose of bad news — none of it much of a surprise — at their annual membership meeting.

Overall, hospitals lost $150 million last year with patient care costs exceeding government and private insurance payments, according to a new Ernst & Young study for the Healthcare Association of Hawaii.

The total loss was about the same as in 2006 because of cost control and efficiency measures at the facilities and investment income at some hospitals, said Terri Fujii, managing partner of the accounting firm.

“;Information for 2008 will be a very different story,”; she pointed out. “;Investment income has turned completely around.”;

Describing effects of the foundering economy were University of Hawaii economist Carl Bonham and state Budget and Finance Director Georgina Kawamura.

Hawaii is not as bad off as the mainland, but construction, tourism and jobs are declining and the state is in a recession, Bonham said in a keynote address at the meeting yesterday at the Hawaii Prince Hotel.

A shrinking economy is expected by the end of the year, and the bottom is forecast for about mid-2009, said Bonham, a member of the UH Economic Research Organization and state Council on Revenues. “;Some markets will bottom sooner but they won't bounce back.”;

Consumer confidence is the lowest since 1979, with people shunning travel and other spending, he said.

Continued visitor and job losses and home foreclosures will affect medical providers, with delinquencies and late payments growing this year and next, leading to a decline in tax revenues and government and individual spending, he said. “;It feeds on itself until it gets to the bottom.”;

Stress, job losses and homelessness increase health problems, with people cutting back on doctor visits and medicine, he said.

The Council on Revenues' last forecast for fiscal 2009 was a 1 percent growth in tax revenues, and Bonham said he suspects it will be lowered when the council meets again next week.

The governor has asked state agencies to plan for reductions of 10, 15 or 20 percent in discretionary spending, which totals about $1 billion out of a $5 billion budget, Kawamura said.

Unlike in many other states, she said, Hawaii's governor has authority to spend or not spend money appropriated by the Legislature. The administration has been “;highly criticized”; for not releasing certain funds, but it cannot spend everything appropriated, she said. “;We are not being bad guys. We just don't have moneys.”;

Fujii said continued financial losses at Hawaii's health care facilities have reduced access to care and services, increased problems obtaining financing for new medical equipment, reduced the ability to attract and keep personnel, and increased the burden of caring for the uninsured.

“;Obviously, we are very concerned about the future of health care in Hawaii,”; said Richard E. Meiers, Healthcare Association of Hawaii president and chief executive officer. “;Some hospitals are in a tenuous financial condition. Whether they are able to withstand the financial onslaughts for another year remains to be seen.”;





Factors dragging down isle health care

        Highlights of “;Issues Impacting Hawaii's Hospitals, Nursing Facilities, Home Care and Hospice Providers,”; a 2008 report by Ernst & Young:


  » Hawaii's health care industry employs 43,430 people, about 9 percent of the state's work force, and contributes $4.1 billion (6.6 percent) of Hawaii's growth domestic product.
» Total net revenue increased the past three years primarily at large hospitals due to nonpatient revenue such as investment income and decreases in pension liability. But total expenses exceeded patient revenues for a cumulative loss of $30 million for eight years.
» About 45 percent of Hawaii's hospital payments are for Medicare, Medicaid and QUEST patients — expected to increase with the failing economy. Estimated losses totaled about $48.1 million last year.
» Costs of wait-listed patients — those in acute hospitals waiting for long-term care placement — exceeded payments by $60 million last year and $73.5 million so far this year. Medicare does not pay for these patients, and Medicaid pays only 20 to 30 percent of the cost.
» Uncollected payments for free care and bad debt averaged $116.2 million annually from 2003 to this year. The six-year total is $697 million.