Now that the state House has scrapped a widely criticized plan to put rural public hospitals back under the Department of Health, lawmakers have a better chance of crafting a last-minute compromise that helps the struggling facilities.

The earlier push to abolish Hawaii Health Systems Corp., which operates 13 hospitals, most on the neighbor islands, had caught senators by surprise and ignited a public outcry.

Health Director Chiyome Fukino described the idea as “;catastrophic,”; and it was clear from other opposition testimony that some health care workers felt like collateral damage in a political bid to get rid of Thomas M. Driskill Jr., HHSC president and chief executive officer.

The bill, SD 1673, is now in conference committee, with a critical deadline looming tomorrow night.

Rep. Ryan I. Yamane (D-Waipahu, Mililani), chairman of the House Health Committee, said yesterday that the House would no longer seek to return the hospitals to the Department of Health, that a desire to fire Driskill never drove the aborted plan, and that the House remained committed to improving patient care and fiscal accountability.

“;We are willing to compromise as long as our concerns are addressed,”; Yamane said, noting that by backing off the DOH plan House members were heeding “;concerns raised by both management and the people in the various communities”; that dismantling HHSC would disrupt medical care.

Members remain determined, however, to address “;well-documented problems”; in HHSC, including in financing, management, procurement and morale, said Yamane, adding that he would like to see more authority given to regional boards that help govern the system “;because they are closer to the communities”; they serve.

The HHSC was established by the state in 1996 as a public benefit corporation to operate the public hospitals, which were then under the Department of Health. The rural hospitals may provide the only acute care available for miles. Requests for emergency funding as some facilities run up deficits have intensified calls for a management overhaul.

Driskill on Tuesday said he was committed to “;working with anyone”; to improve the system and expressed support for private-public hospital partnerships, a major thrust of the Senate bill.

While acknowledging feeling some heat, he noted that the global swine flu outbreak “;does drive home a very simple point ... that we all have to work together on providing”; basic needs such as health care.

Sen. David Ige (D-Pearl City, Aiea), chairman of that chamber's health committee, welcomed Yamane's willingness to compromise and expressed optimism that issues could be worked out in conference committee.

“;We knew that moving them back to the (Department of Health) was a huge step backward, so this is welcome news,”; Ige said yesterday.

Like other private and public hospitals throughout the U.S., the Hawaii system is crippled by low reimbursements by Medicare, Medicaid and private insurers that fail to cover the cost of care.

The original Senate bill sought to increase insurance reimbursements, reduce the cost of labor and promote private-public partnerships as a way to lower taxpayers' financial burden. A later version also would limit any facility's ability to cut direct patient-care services.

Dr. Barry Blum, medical director of Kona Community Hospital and a member of HHSC's West Hawaii Regional Board, hailed House members yesterday for scrapping the bid to return the hospitals to DOH oversight.

He was among those who had implored lawmakers not to destabilize the entire health care system in an apparent bid to fire Driskill.

“;To even think that putting HHSC back in the Department of Health would have been considered a reasonable plan is hard to comprehend,”; Blum said yesterday. “;We are deeply gratified that the House has further explored this matter and come to this conclusion. Now we look forward to getting on with what is truly vital, which is keeping the hospitals open.”;