Public hospitals ask for emergency cash

The Hawaii Health Systems Corp. tells legislators the crisis "is the worst ever"

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Hawaii's public hospitals, hemorrhaging money in large measure due to Medicaid/Medicare losses, are asking the Legislature for a $25.4 million emergency transfusion.

The Hawaii Health Systems Corp., which runs Maui Memorial Hospital, Hilo Medical Center and 13 other facilities, has slowed payments to suppliers because its fiscal condition has reached a "crisis point," administrators say.

"The pressures are increasing," said Thomas Driskill Jr., HHSC president and chief executive officer. "Everybody is underpaid by Medicare and Medicaid. ... The more patients you see, the more money you lose."

Driskill said HHSC managers are working with the administration, legislators, unions and the community to re-evaluate how the state hospital system operates and produce a corporate strategic plan by June 30.

"We're not talking about cutting or closing, but we need to look at everything we do," he said, adding that creative and innovative approaches are needed.

For instance, he said, a joint venture is planned between Kona Community Hospital and Hawaii Pacific Health to open a $3.5 million outpatient surgery center in Kona.

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The agency that operates Hawaii's 15 public acute and long-term care facilities, mostly in rural areas, needs $25.4 million to pay bills and keep the system operating.

Facilities Need Millions The Hawaii Health Systems Corp. operates 15 public hospitals, mostly in rural areas. The top dollar amounts in its emergency appropriation request are for the system's three largest hospitals: Maui Memorial Hospital $10.7M Hilo Medical Center $7.9M Kona Community Hospital $5.3M

How long the Hawaii Health Systems Corp. can maintain services without an emergency appropriation "depends how long vendors will carry us," said Kelley Roberson, chief operating officer and chief financial officer.

HHSC slowed payments to suppliers because of an "unbudgeted cash deficit," it reported to legislators. "However, the ability to manage these costs has now run out, and the cash situation for the organization has reached a crisis point."

The HHSC's financial problems are not new, but "this is the worst ever," Roberson said last week in a briefing to the Senate Health Committee.

The corporation received nearly $54 million as a general fund subsidy in advance of its budget in November because it could not pay expenses.

An operating cash flow deficit of more than $49 million is projected, and the corporation has a $57 million supplemental budget request for 2008-2009, which includes the emergency amount it says is needed now.

Even with supplemental funding through June 30, 2009, more belt-tightening will be needed, Roberson said.

"We're going to continue to be severely challenged like this until the state as a whole is able to do something about the greater heath care crises."

Among them: a physician shortage, particularly on the neighbor islands; below-cost Medicare/Medicaid and third party reimbursements, and patients wait-listed in acute care for little or no reimbursements because of lack of long-term care placements.

HHSC calculates an $28.5 million loss from inadequate Medicare/Medicaid payments in 2005-2006.

"We were woefully behind starting this year ... and the pressures are increasing," said Thomas Driskill Jr., HHSC president and chief executive officer. "Everybody is underpaid by Medicare and Medicaid ... and the more patients you see, the more money you lose."

About 60 percent of patients in the state's hospital system are covered by Medicare/ Medicaid compared with an average 50 percent in the private hospitals, he said.

Driskill said HHSC is "still losing ground but putting forth a huge effort to recruit, hire and contract physicians" to replace those who are leaving and provide on-call services at the rural hospitals.

The on-call costs -- about $15 million this fiscal year and $16 million next year -- are a big chunk of the supplemental budget request, HHSC said.

The biggest money problems used to be at the smaller rural hospitals, but the federal critical access hospital program, launched to help such hospitals survive, has changed the picture, the HHSC leaders said.

Critical access hospitals include Hale Ho'ola Hamakua, Kau Hospital and Kohala Hospital on the Big Island; Kauai Veterans Memorial Hospital and Samuel Mahelona Memorial Hospital on Kauai; Kula Hospital, Maui; and Lanai Community Hospital. Kahuku Hospital on Oahu, being added to the HHSC system, also is a critical access hospital.

Meeting federal criteria for acute care and 24-hour emergency access services is difficult, but Medicare pays 101 percent of costs for patients in these hospitals, Roberson said.

Cost-based Medicaid reimbursements also are provided under a state law. "It was a very wise decision," enabling the state to get matching federal dollars, Roberson pointed out.

The critical access hospitals still are losing $10 million to $15 million a year, but they are "sustainable losses," he said.

Driskill said the HHSC managers are working with the administration, legislators, unions and community to re-evaluate how the state hospital system operates and produce a corporate strategic plan by June 30.

"We're not talking about cutting or closing, but we need to look at everything we do," he said, adding that creative and innovative approaches are needed.

For instance, he said, a joint venture is planned between Kona Community Hospital and Hawaii Pacific Health to open a $3.5 million outpatient surgery center in Kona.

Besides cash problems, Hawaii's public hospitals are among some of the oldest in the country, and "like the university, we need substantial capital reinvestment," Roberson told legislators.

HHSC has a 10-year, $900 million capital improvement plan for the system. A $90 million request for capital improvements for 2008-2009 was pared to $11.2 million in the governor's budget.