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‘Running on empty’ — Many bumps and stalls in hospital management transition

By Staff | Aug 11, 2016

WAILUKU – The transition of Maui’s public hospitals to private management by Kaiser Permanente Hawaii hit another bump on July 29. At that time the parties in an ongoing federal lawsuit brought by the United Public Workers (UPW) against the state issued a fourth joint status report. The document pushes the date to reach an agreement back to Aug. 18. If the parties can agree by then, it would lift an injunction set by the Ninth Circuit Court of Appeals delaying the transfer.

A July 1 date was initially set for Kaiser to assume the management role. It was later extended to Aug. 1, pending the resolution of the legal dispute, and now has been further extended until the 18th.

“The parties expect this will be the last and final extension and do not at this time expect to ask for another,” the joint statement said. In addition, the lawyers for the state and the UPW requested that other conditions set by the court remain in place pending the filing of the fifth, and presumably final, status report.

Calls to Dayton Nakanelua, state director of the UPW, to the state attorney general’s office and to the law firm of Takahashi & Covert (representing the UPW) requesting clarification were not returned.

“I find the new delay very troubling,” said state Sen. Rosalyn Baker (D), who represents West and South Maui. “If they can’t get an agreement by August 14, Kaiser Permanente Hawaii feels they won’t be able to do the transition until next year,” she said, adding, “Since the end of May we have been told by the Ige administration that we were very close to a settlement with UPW. Before the recent special session began in July, they told us they had a deal… Nothing happened! What’s going on?”

“I sent a strong letter expressing concern and asking the governor to make this a personal priority. If we don’t get agreement, and soon, it will seriously impact hospital operations. The (Ige) administration has the dates, and knows that it will take eight weeks. We need to make the transition by November before the holidays and cold and flu season sets in.”

The legal action further delays the transition of three public hospitals employing about 1,500 workers to management by Kaiser Permanente Hawaii. They are Maui Memorial Medical Center (MMMC), Kula Hospital and Lanai Community Hospital. MMMC, a 213-bed facility, is Maui’s only acute care hospital and has experienced severe financial difficulties in recent years. Until the transfer is completed, all three continue to be administered by the Maui Region of the Hawaii Health Systems Corporation (HHSC), a semi-autonomous state agency that oversees Hawaii’s 13 public hospitals.

Many of the other HHSC hospitals have also experienced serious financial problems stemming from lack of legislative funding or appropriations that have been inconsistent and insufficient. The sea of red ink on Maui led to a multi-year legislative push for more stable private management that could provide broader medical resources and more access to necessary capital.

After efforts failed in the 2014 session of the state legislature, a new bill was introduced in 2015 to allow a move to private management. These efforts culminated with Act 103, a law enabling a transfer that was signed by the governor in January 2016. It authorized a long-term management lease for a nonprofit health care provider to operate the three county health care facilities.

All of the assets remain public property and are not included in the lease. Several Hawaii nonprofit health care providers expressed interest. Kaiser Permanente Hawaii was selected as the new management group after an extensive review of proposals.

Although the law set July 1, 2016 for the transfer, a federal suit filed by the UPW, a union representing about 500 of the estimated 1,500 workers in the system, delayed the transition. The union objected on the grounds that it has a valid existing labor agreement that does not expire until June 30, 2017.

“We’re running on empty,” said Wes Lo, the MMMC CEO who had previously resigned effective July 1 but remains in charge until a resolution can be reached. In an Aug. 1 interview, Lo said given the current impasse, significant cuts in staff and services are being contemplated.

In an Aug. 3 e-mail, Laura Lott, director of communications for Kaiser Permanente Hawaii, wrote, “… It will take a minimum of eight weeks to complete the transition and assume management of the facilities.” She added, “We are very disappointed that the state and union have not yet been able to resolve this issue.”

Meanwhile, on Aug. 3, the Maui Region’s HHSC board held an executive session meeting to review their options. In a phone conversation following the meeting, board Chair Avery Chumbley said the hospital is “losing money,” but he also expressed optimism that the impasse is near an end.

Chumbley said that he had personally spoken with Hawaii Gov. David Ige, who assured him that preliminary settlement documents had been drafted and were waiting to be put in appropriate legal form – a process Chumbley said could take “days.” He declined to be more specific on a timetable.

He also acknowledged that the board had discussed “Plan B” – possible cuts in services and staff – if a timely settlement was not forthcoming and the transition either did not complete on the new schedule, or failed to complete at all.

Last year when “Plan B” was discussed prior to the passage of Act 103, the hospital faced a $25 million shortfall in the current fiscal year, and areas of possible cuts and layoffs mentioned then included oncology, behavioral health and ob-gyn. Chumbley declined to say if these cuts were discussed again. He said that the board took no action and stressed that “our primary concern is patient safety.”

“I wasn’t at the meeting,” Sen. Baker commented, “but the information I get is the chair wants to remain optimistic, but members of the board are not so optimistic… because they know the same time frame that Kaiser has given the (Ige) administration. They also know we’ve heard this ‘we’re close to a deal’ before.”

She added that some of Kaiser’s transition team will be retiring at the end of the year and others are being reassigned because there is no final date yet. Baker said that of five doctors Kaiser had recruited to come to Maui, “four have accepted other jobs, because they cannot wait around for a start date. I don’t want to give anyone the impression that Kaiser is bailing. They are not. They are firmly committed.”

A reliable source close to the ongoing negotiations said that the delays are costing Kaiser $500,000 every two weeks – a number that could not be independently verified. Kaiser spokesperson Lott did acknowledge a substantial sum has been spent in transition to a new electronics medical record system. She said that Kaiser’s initial proposal pegged their technology investment amount at $40 million, and a substantial amount has already been spent on “IT readiness.”

The insider also said a form of “employee leasing” is being contemplated as a way out of the stalemate. Such a plan would transfer the UPW employees to an unnamed third party who in turn would lease them for the duration of the contract to Kaiser. Using this scenario, the terms of the UPW contract would remain in effect through June 30, 2017, but workers would perform their duties in conformance with Kaiser rules.

Those who do not have confidence in the governor’s ability to negotiate a timely settlement are also dubious about “employee leasing.” It is an idea that has been “kicked around,” said one elected official who asked not to be identified, “but in my opinion it would require enabling legislation. It’s not something the governor can do on his own.”

In the meantime, according to Lo, “frustration reigns” as the future remains uncertain and it is “difficult to know who’s in charge.”

HHSC Maui Region Board Chair Chumbley acknowledged that the regional board had not been consulted during negotiations. Lo also said that the existing management is not involved in any of the ongoing talks.

According to Lo, while the governor and the union hash it out, “We can’t recruit. We can’t plan.” He said MMMC has hundreds of openings, some of them filled by temporary or travel staff. On the medical side, “high-level people are leaving daily. There’s only so long they’re going to work for a place where they don’t know what’s going to happen.”

Said Sen. Baker, “My constituents want to know what’s going on. I am very frustrated.”