Raising Cane
By Rob Perez
Queen’s hospital reins in
A sampling
its community donationsAt a time when Queen's Medical Center was making cuts to cope with mounting financial problems, the hospital and its affiliate nonprofit companies were doling out tens of thousands of dollars in the late 1990s to charitable groups that had no clear link to health care, the primary mission of Queen's tax-exempt empire.
While the state's largest hospital was cutting positions and laying off workers, the organization was donating money to environmental groups, symphony associations, museums, religious entities, recreational outfits and other non-health-care institutions, according to the medical center's tax returns.
The practice has since stopped, but looking at whom it benefited helps illustrate the reach of one of the state's largest -- and politically connected -- employers.
The contributions went to a diverse cross-section of Hawaii's nonprofit world, ranging from $1,000 to an Episcopal church for an organ to more than $315,000 to Friends of the Future, a Big Island group headed at the time by a top Queen's executive.
One year Queen's even gave $55,000 to an arts foundation to help underwrite Edgy Lee's documentary film, "Waikiki."
All the while, the hospital, which typically takes in $300 million-plus a year in revenue, was cutting jobs in response to a sluggish state economy and reduced levels of federal Medicare reimbursements. Since 1996, it has eliminated 503 positions and laid off 214 workers, mostly in areas not directly involved with patient care. The medical center currently employs more than 2,600 people.
The practice of giving to non-health-care organizations wasn't illegal, tax experts say, but it raised questions about the wisdom of diverting resources from Queen's main mission during tight fiscal times.
In fact, the practice was largely stopped about two years ago after new leadership took over and decided to focus on Queen's core purpose of providing health-care services, according to spokeswoman Lynn Kenton.
Only a trickle of such donations were reported on the hospital's most recent tax return, which covers the year ended June 30, 2001.
Two examples: the medical center, on behalf of its parent company Queen's Health Systems, gave $1,000 to the University of Hawaii Foundation for a farewell dinner for UH President Kenneth Mortimer and $420 to the Honolulu Japanese Chamber of Commerce for a golf tournament.
To put the practice in perspective, the bulk of Queen's donations the past several years went to charitable groups that were in the health-care arena. Organizations such as the Waikiki Health Center, Hospice Hawaii, Hana Community Health Center and the American Heart Association benefited from its largess.
But Queen's made enough of the fringe contributions to groups such as the Hawaii Opera Theatre, Protect the Planet, Unity House, the USS Missouri Memorial Association, Girl Scouts and a YWCA cafe to raise the ire of hospital employees facing cutbacks.
Mel Kahele, president of the Teamsters, which represents about 680 hospital workers, said the union questioned the practice during contract talks several years ago. "It was raised at the bargaining table many times," he said.
The union believed such giving ran counter to the charter that established the hospital in the late 1850s. Queen Emma and King Kamehameha IV were the founders.
"Apparently those rules were broken," Kahele said.
But Kenneth Brown, who was chairman of Queen's parent company for a decade before retiring in 1999 and was largely responsible for the controversial practice, defended the policy. He said he tried to broaden Queen's focus beyond just health care, embracing a more holistic approach that also considered the physical and spiritual well-being of Hawaii's people.
"If your soul is miserable, your body is miserable," Brown said. "I wanted Queen's to become a major participant in enhancing the overall well-being of the people of Hawaii. That's what the queen had in mind."
Brown's fondness for a holistic approach and for Native Hawaiian causes was underscored in a deal involving a Queen's subsidiary he oversaw. In the last year of his watch, Queen Emma Community Health paid the Polynesian Voyaging Society $277,000 in consulting fees before the subsidiary was shut down in mid-1999, a victim of Queen's downsizing.
Brown said he resisted those within Queen's who wanted to curb outside donations because of poor financial results in a given year. The family of Queen's enterprises, he said, was wealthy enough to take a longer-term view and to embrace a broader focus.
That approach didn't come without controversy.
During the final two years of Brown's chairmanship, Queen's gave nearly $317,000 to Friends of the Future, a nonprofit organization in which he served as chairman and president, according to the hospital's tax documents and state records.
Asked if he considered his dual roles in those transactions a conflict, Brown said, "No, because they're both benign organizations. I have no problem with that."
He said the Friends group, which was established to "enrich the quality of life" in Big Island communities and serves as coordinator for charitable organizations in the Kohala area, played a role in the development of a hospital in North Kohala.
Brown is no stranger to that area. According to state records, he is a director and chairman of the for-profit Mauna Lani Resort Inc., which runs a luxury hotel on the Kohala Coast.
Brown also was a board member of the nonprofit environmental education group Protect the Planet when it was formed in 1999 and received a $5,000 donation from Queen's, state and hospital records show.
Interestingly, in the first year Brown was off the Queen's board, neither Friends of the Future nor Protect the Planet received any contributions from Queen's, likely reflecting the company's changed perspective on outside donations.
Robert Oshiro, a longtime Queen's board member who replaced Brown as chairman of Health Systems, could not be reached to comment on the contributions to the Brown-linked organizations.
Dr. Gary Okamoto, the parent company's chief executive, said he couldn't comment on specific contributions. But he said board members and management carefully scrutinize any sizable grant requests for non-health-care proposals.
Okamoto was part of the new leadership team that took the helm of Queen's Health Systems two years ago. Under the gun financially, the team helped steer the company's focus back to its newly restated mission of providing quality health-care services and of improving the well-being of Native Hawaiians and others in Hawaii.
"The clear reality was that Queen's simply could not continue doing business as it had been for years," Okamoto said. "We couldn't be everything to everybody."
Toward that end, Queen's dramatically pared its overall donations, which dropped to roughly $50,000 in the year ended June 2001, compared with $1.2 million the previous year and $2.7 million the year before that, the tax returns show. The hospital also finished slightly in the black the past two fiscal years.
Okamoto said Queen's still intends to be a good corporate citizen and will support local fund-raising efforts to honor community leaders, even some with no direct ties to health care.
But the days of doling out tens of thousands of dollars to organizations far removed from Queen's main mission are over.
In tough financial times, that strategy makes perfect business sense.
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Here are some of the non-health-care groups that benefited from the largess of Queen's Health Systems and its family of nonprofit companies even as its hospital, Queen's Medical Center, was trimming positions: A sampling of donations
Year ended June 1998:
>> Kawaiahao Church, $500
>> Maryknoll School, $1,000
>> Outdoor Circle, $300
>> Associated Chinese University Women, $600
>> Hawaii Youth Hockey, $100
>> Great Aloha Run, $20,000
>> Hawaii Youth Symphony Association, $1,000
>> Honolulu Symphony, $9,818
>> Hawaii Nature Center, $3,000
>> Kualoa-Heeia Ecumenical Youth, $40,000
>> Central YMCA, $300
>> Unity House, $500
>> Friends of the Future, $150,000
>> YWCA Cafe Laniakea, $4,000
>> Fund for the Pacific Century, $450
Year ended June 1999
>> Carole Kai Charities, $10,000
>> Hawaii Opera Theatre, $3,500
>> Hawaii Youth Symphony Association, $2,000
>> Honolulu Theater for Youth, $2,000
>> Oahu Interfaith, $5,000
>> Protect the Planet, $5,000
>> WEFS tourism report, $1,000
>> Bishop Museum, $500
>> The Environmental Foundation, $3,500
>> Pacific Arts Foundation, $55,000
>> Friends of the Future, $166,566
>> Christ Church Episcopal, $1,000
>> Public Relations Society of America, $250
>> Interfaith Ministries of Hawaii, $1,000
>> UH Foundation, School of Architecture, $2,000
Year ended June 2000
>> Hawaii Youth Symphony, $1,000
>> Girl Scouts Council, $3,000
>> Winners at Work, $1,125
>> USS Missouri Memorial Association, $1,500
>> Hawaii Youth Symphony Association, $1,000
>> Executive Women International, $250
>> Hawaii Food Bank, $500
>> Native Hawaiian Chamber of Commerce, $1,600Source: Queen's Medical Center tax returns
Star-Bulletin columnist Rob Perez writes on issues
and events affecting Hawaii. Fax 529-4750, or write to
Honolulu Star-Bulletin, 500 Ala Moana Blvd., No. 7-210,
Honolulu 96813. He can also be reached
by e-mail at: rperez@starbulletin.com.
