Legislature snubs hospital owner on aid

Hawaii Medical Center wanted a tax waived as buyer of St. Francis

Lawmakers agreed to restore state oversight of health insurance rates, but a proposal to help the financially troubled Hawaii Medical Center died without being heard in the final two weeks of the session.

Senate Bill 12, giving the state insurance commissioner final say over health insurance rates, essentially restores a law that expired last year.

The proposal to help Hawaii Medical Center, formerly St. Francis hospitals, was crafted in recent weeks after it was learned that the financial situation the new owners inherited was worse than initially believed. Senate Bill 11 would have exempted HMC West in Ewa Beach and HMC East in Liliha from paying the 4.5 percent general excise tax on Oahu.

Some lawmakers balked at the proposal, saying it amounted to the state subsidizing a for-profit entity at a cost of about $8 million a year.

"We didn't believe that it would make a lot of sense," said Senate Health Chairman David Ige (D, Aiea-Pearl City). "From our perspective, we're just concerned about the fact that it is dealing with a for-profit, and it would definitely change what the current public policy is."

HMC converted the hospitals into a for-profit business from nonprofit status when it finalized a $68 million deal in January with St. Francis Healthcare System of Hawaii. In doing so, however, the new owners put themselves into a position of having to pay the state excise tax.

HMC officials also said their business plan was based on June 2006 information filed in December with the State Health Planning and Development Agency. By the time HMC took over, the financial situation had worsened.

The future of the medical centers was not immediately known.

There was no immediate comment from HMC officials yesterday. Earlier this month, lawmakers said they were told that the financial burdens could force the centers to close within six months.

House Majority Leader Kirk Caldwell said recent discussions with HMC officials indicated some of the fiscal bleeding is being stemmed, and he is confident in the new ownership's ability to turn things around based on its track record elsewhere.

"I think it's our hope that they can do the same thing with (HMC)," said Caldwell (D, Manoa). HMC is 51 percent owned by Wichita, Kan.-based CHA LLC, formerly known as Cardiovascular Hospitals of America, and 49 percent owned by the 130-member Hawaii Physicians Group.

Although no measure is truly dead until next week's close of the regular session, Caldwell said it would take "extraordinary" measures to revive the HMC bill.

Meanwhile, the insurance rate regulation bill was crafted after a week of negotiations between House and Senate members.

The compromise restores previous law that would prohibit health insurance rates that are excessive, inadequate or unfairly discriminatory, and gives the state insurance commissioner final approval power. The new proposal would not expire and also requires the commissioner to decide on rate submissions in a more timely manner.

Jennifer Diesman, director of government operations for the Hawaii Medical Service Association, said that while the industry did not think regulation was necessary, the new proposal is "efficient and streamlined."