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Hawaii Health Systems lobbies for public-private partnership

Pacific Business News; February 11, 2014; Jenna Blakely

Hawaii Health Systems Corp. could benefit significantly from legislation that would allow a public-private partnership between nonprofit hospitals and state-owned facilities.

Hawaii Health Systems Corp., which operates 1,275 licensed beds in about a dozen state-owned facilities on five islands, recently testified in favor of Senate Bill 3064, which also would transition the organization into a nonprofit hospital corporation.

Wesley Lo, CEO of Hawaii Health Systems Corp. Maui Region, noted that the need to re-structure the public hospital system has been a conversation that dates back years.

“Over the years, Hawaii Health Systems Corp. has always struggled financially since it started in 1996,” he said. “It has always been a tough path because a lot of rural hospitals are not very big and have been relying on state subsidies forever. In many years there have been emergency appropriations.”

It’s time to change the model, he added, especially with increasing costs needed for hospitals to meet requirements of the federal Affordable Care Act.

“Many of us have been thinking that there needs to be new way to re-design this to have better access to capital or be able to operate more like a private hospital as opposed to a state hospital system,” he said.

Alice Hall, acting president and CEO of Hawaii Health Systems Corp., outlined the current funding challenges facing the regional health-care provider in testimony submitted on Monday to the Senate Committee on Health. After losing $400,000 in 2010, Hawaii Health Systems Corp. has seen annual losses climb to $53.4 million last year.

“To continue to provide the same level of service and meet Affordable Care Act requirements, Hawaii Health Systems Corp. facilities will require an increase in annual state subsidies,” she testified, noting that it will need $1 billion in capital improvement funds in the next decade. “Currently there is only $40 million available for the entire Hawaii Health Systems Corp. to cover an estimated $189 million for capital improvement and life-safety needs.”

This means possible reductions in medical services, supplies and staff. That is where a public private partnership could reverse the funding challenges by allowing the system to tap into other sources of capital, its proponents argue.

Other benefits of such a partnership include access to best practices, better infrastructure and ability to have private-sector compensation packages to attract and retain medical staff, Hall testified.

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