In Privatization

PACIFIC BUSINESS NEWS; LORIN ELENI GILL; MAY 4, 2015

Hawaii lawmakers have given their approval for the potential privatization of Maui state hospitals, a switch that could cost the state hundreds of millions of dollars, according to preliminary state estimates.

House Bill 1075 CD1 passed its final reading in the House on Friday, clearing the way for the Hawaii Health Systems Corp. Maui hospitals — including Maui Memorial Medical Center, Kula Hospital and Clinic and Lanai Community Hospital — to transfer operations to a nonprofit entity.

Maui Memorial Medical Center is the island’s only acute care hospital.

“We are so very grateful for the hard work of our legislators, our community and all the hands that have crafted this legislation, sought to lessen future impacts and stood with us over the last several years,” said Wesley Lo, the region’s CEO. “While we still have a long road in moving forward and working with all parties involved as outlined in the legislation at the end of the day our hospitals and our county will be better because of this work.”

The bill, which will be sent to Gov. David Ige for his signature, authorizes the governor to lead negotiations during the transition.

The legislation includes a six-month layoff provision for employees during a transition, and also allows any other health care provider to be considered in any management deal.

Hawaii Pacific Health has been in talks with officials from the Maui region for several months, as the region faces a $28 million deficit in the upcoming year.

Hawaii Government Employees Association, a vocal opponent of privatization legislation, said Monday its primary concern is for employee security and warns that the acquisition will be costly to the state and taxpayers.

The union represents about 850 employees at the Maui Memorial and Kula hospitals.

Executive Director Randy Perreira told PBN that any implications on job security will depend on a prospective operator’s proposal.

“The implications for this so-called partnership go beyond Maui and are of statewide concern,” he said. “While the Maui region has been at the focal point, there are public policy implications because you still have hospitals operated by the state on Kauai and Big Island and long term facilities here on Oahu.”

Perreira said the state Department of Budget and Finance has reported potential expenses of $114 million to cash out any accumulated leave benefits, overtime, or compensatory time for government employees before they switch to the private sector. With potential carried costs that include retirement and medical plans, it could total $320 million to $330 million dollars.

“Irrespective what happens on Maui, I’d anticipate the next session we’ll talk about what to do with Hilo and Kona,” he said. “I think having the governor running the conversation is right move so we can ensure all parties are included, including the counties, so [negotiations] won’t be dominated by one particular county.”

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