Hawaii Health Systems Corp. told lawmakers Monday that it will seek a $14 million emergency appropriation next year as financial woes continue to mount at the state’s public hospitals.

As federal health reform rolls out next year, the mostly rural 14-member hospital system is facing significant challenges to upgrade its technology infrastructure as well as declining reimbursements and deteriorating facilities, some more than a century old. Part of the shortfall is due to mandatory pay raises for state workers under an unfunded collective bargaining agreement, HHSC said. The system expects a $28 million loss next year.

"It’s a pretty precarious situation," said Edward Chu, HHSC’s chief financial offer. "One blip in our cash collections for a month and we’re almost out of business."

About 65 percent of patients of HHSC’s facilities, including Leahi Hospital, Maui Memorial Medical Center and Kula Hospital, are covered by Medicare and Medicaid, the government health insurance programs for seniors and low-income residents.

"The impact of national health care reform could threaten some of our facilities and services … so we have to be very careful with our dollars these next several years," said state Sen. Josh Green, a Hawaii island emergency room doctor and chairman of the Senate Committee on Health. "The point is to make sure the taxpayers are getting their money’s worth from our health care safety net, and we’re going to hold the HHSC leadership accountable to make sure that services continue to be delivered. As health care costs spiral upward, we have to be very careful with our health care safety net."

In addition, lawmakers grilled HHSC executives on why the projected cost to convert to electronic medical records is nearly double original estimates.

HHSC projects it will now need to spend as much as $109 million on the conversion.

The organization initially budgeted $58 million over five years, then last year re-forecast the figure at more than $75 million for installation, maintenance, hardware and software, as well as additional staffing for the new systems.

"We just underestimated the scope and complexities of the project, and it just hit us like a brick," said Avery Chumbley, HHSC’s board chairman, placing some of the blame on hired consultants who had projected higher expenses that were never brought to the board. "There were some things that should have been brought up. That was our fault; we failed."