Auditor finds fiscal
laxity at community hospitals

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By Bruce Dunford
Associated Press

The quasi-private agency operating Hawaii's state-owned community hospitals needs tighter fiscal and procurement procedures, state Auditor Marion Higa said in a report released yesterday.

Hawaii Health Systems Corp.'s control over procurement and contract spending has worsened since a 1999 audit and may be costing taxpayers millions of dollars, the report said.

"Substandard procurement practices, questionable discretionary purchases and other serious deficiencies reflect laxity at the corporate level," Higa said.

In response, corporation President Thomas Driskill acknowledged that many of the audit's findings are accurate and that its recommendations are reasonable, although he disagrees on some points.

He said the corporation's centralized negotiation of contracts and control of purchases have resulted in savings of millions of dollars over the past four years and have received national recognition.

"This is reflected in the fact that the corporation has held the cumulative increase in expenses over the past four years to only $3 million, less than 1 percent, while offering more services and serving more patients, as evidenced by an increase in average daily census from less than 1,000 to almost 1,100 and an increase in cumulative operating revenues by over $130 million," Driskill said.

State lawmakers killed a bill early this month that would have eliminated the 6-year-old agency and broken up the community hospital system into four county regions.

At the same time, however, lawmakers scolded administrators of the health system, which handles a more than quarter-billion-dollar special fund to operate 12 community hospitals, mostly on Kauai, Lanai, Maui and the Big Island.

Higa said the audit found a need for tighter control of HHSC's key financial operations, weakness in its billings and collections, and a lack of control over bills it receives from others.

However, consultants hired by the auditor, Meaghan Jared Partners Inc., a firm with expertise in health care systems, determined "the corporation is working with an organizational structure that approaches efficiency and effectiveness given the political constraints it operates under," but "operating performance is mixed when viewed as an entire system and compared against other health facilities in Hawaii," Higa said.