State OKs major
hospital merger of
Kapiolani, Straub
and Wilcox

The 3 agencies are set to be
combined into Hawaii Pacific
Health in December

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By Lyn Danninger
ldanninger@starbulletin.com

The State Health Planning and Development Agency has approved the merger of Kapiolani Health, Straub Clinic & Hospital Inc. and Kauai's Wilcox Health System into a new organization known as Hawaii Pacific Health.

The approval of what will now be the largest health care system in the state was given several weeks ago. The move is likely to be formalized in a ceremonial signing of merger documents on Dec. 18, said Kapiolani spokeswoman, Pat Oda. But a federal review called for under the Scott-Hart-Rodino antitrust act and some internal reviews have to be completed before that date, Oda said.

The paperwork has already been filed for the federal review and the organization is now in the process of completing its own internal reviews, said Oda.

Under the terms of the merger, the parent holding company, Hawaii Pacific Health, will oversee all three systems even though each will retain their individual identities.

The merger will mean a full- and part-time work force of about 5,360 including physicians. The management team for the new organization will be headed up by Kapiolani Health president and chief executive officer, Roger Drue.

The board of Hawaii Pacific Health will be made up of representatives from each organization, physicians and the community for a total of 15 board members.

The merger helps to solve lingering financial problems experienced by all three hospital systems.

In its merger application, Wilcox projected it would lose $29.2 million over the next five years without the merger and $16.3 with the merger.

The merger will mean the new corporation will also pay $2.2 million to end a previous affiliation agreement with Queen's Health Care System.

For Straub, the merger will help settle outstanding debts incurred during its previous affiliation with PhyCor Inc. of Nashville, Tenn., and allow it to upgrade facilities and equipment.

Last year, Straub paid $30 million to sever its previous management agreement with PhyCor after the company got into financial difficulties. In merging its debts and assets with Hawaii Pacific Health, the new corporation will pay $5 million to settle the remains of the PhyCor debt.

While Hawaii Pacific Health indicated in the merger application that there would be no anticipated or planned changes to patient care staffing levels, it said the new organization would seek efficiencies of scale and cut down on duplication of services where needed.

Concern about what those efficiencies would eventually mean led some employees, especially those employed at Wilcox, to raise concerns that jobs would eventually be lost as more services as centralized. Another fear was that health care decision-making could be taken away from Kauai.

But Wilcox officials previously said if operations needed to be streamlined, any job cuts at the facility would be handled through attrition rather than layoffs.

Those remaining employment-related issues at Wilcox and the two other hospital systems have since been worked out or are in the process of being worked out, said Stephani Monet, director of education and practice for the Hawaii Nurses Association.

With the merger application now approved, the new corporation Hawaii Pacific Health is shooting for a start-up date of Dec. 23.

"We are working towards that date as the official launch so we're hopeful that it will be approved," Kapiolani's Oda said.