The politics of the governor’s race could be an unexpected catalyst for policy changes at the state’s troubled public hospital system.
State Sen. David Ige, the Democratic candidate, former Lt. Gov. James "Duke" Aiona, the Republican, and former Honolulu Mayor Mufi Hannemann, the Hawaii Independent Party candidate, all maintain that the next governor should drive the discussion on stabilizing the Hawaii Health Systems Corp., the $650 million network of 12 public hospitals that functions as the health care safety net for many neighbor island and elderly patients.
Over the past decade, the state has restructured the HHSC into a regional system, opened the possibility for partnerships with the private sector, flirted with privatization and increased the state’s financial subsidy, but public hospitals routinely appear on the verge of implosion and in need of emergency spending from the Legislature.
This fiscal year, after the Legislature agreed to fund $102 million of the HHSC’s $150 million budget request, the HHSC announced layoffs and other cost-cutting strategies to make up for the shortfall. Public hospitals are financed by patients and health insurers but have relied on a state subsidy that has tripled since 2004.
With a significant portion of the HHSC’s patients on Medicare and Medicaid, the system is dependent on adequate reimbursement payments from the federal government, and with many of its 4,500 employees represented by public-sector labor unions, public hospitals have high labor costs and are bound by civil-service requirements. Aging facilities, the cost of up-to-date medical equipment and projected inflation in the health care sector add to the financial pressure.
The plight of public hospitals has surfaced as a policy issue during the past two televised debates in the governor’s race — on KITV and on PBS Hawaii — with Aiona and Hannemann both faulting Ige, chairman of the Senate Ways and Means Committee and former chairman of the Senate Health Committee, for not doing enough to help or to stand up to labor unions.
But the issue is far more complex than has been portrayed during the debates. In separate interviews, Ige, Aiona and Hannemann each gave essentially the same prescription — that the next governor should lead the discussion — and would not commit to any specific structural reform to the system beyond the idea of some form of public-private partnership.
Ige said his opponents have trivialized the fact he was involved in drafting a 2009 law that enabled the HHSC to look at public-private partnerships and gave the system expanded negotiating authority with labor.
"It is very clear to me that any kind of public-private partnership has to be driven by the Governor’s Office," he said. "Trying to have legislators trying to bring parties together is really not going to work."
Ige said he would like the solution for HHSC to be part of the state’s larger response to its health care challenges, such as the doctor shortage and the gaps in medical care on the neighbor islands. For example, he said, a residency program linked to Maui Memorial Medical Center’s cardiac care specialty might be an option and an incentive for other public hospitals to pursue similar initiatives.
"I do think the Governor’s Office needs to be a catalyst," he said, "and they haven’t been active in a way that has led us to a solution."
Aiona said he would immediately get hospital administrators, union leaders, lawmakers and community activists together to "sit down and hash this out," adding, "Whether it’s public-private, whether it is straight privatization, whatever it is, we’re going to have to come to some kind of agreement and solution to this issue because it’s that important."
Aiona has cast the Hawaii Government Employees Association, the state’s largest public-sector labor union, which, along with the United Public Workers, represents workers at public hospitals, as the obstacle. He has questioned whether Ige could stand up to the HGEA, which has endorsed the state senator.
"I think the leverage right now is the public," Aiona said. "I really believe it’s the public that’s putting the leverage on this thing, putting the pressure on this thing. Not that it wasn’t there in the past, but, I think, it wasn’t a campaign issue."
Both Aiona and Hannemann argue that Ige cannot take credit for his legislative experience and his leadership of the Senate Ways and Means Committee and Senate Health Committee and yet not accept some blame for the problems at public hospitals.
Hannemann said Ige and Aiona do not have the chief executive experience he has in negotiating with labor unions, or a history of relationships with business. He said he would work to find private partners, preferably local, for public hospitals.
He said the governor should be "very conciliatory to what their concerns are, which is basically not guarantee every job upfront, but give them the flexibility to be able to run it like a business," he said.
"And then I need to speak with the unions to say, ‘Hey, look, we all got to sacrifice, because it’s not just about jobs. The overarching concern here is not about union memberships; it’s about patient-centered health care wherever you reside.’"
State lawmakers have discussed structural changes to the HHSC during the past two sessions but have been unable to reach agreement.
In 2013, with Banner Health, a nonprofit health care system based in Arizona, as a potential suitor for Maui Memorial and other public hospitals, lawmakers considered privatization or some kind of public-private partnership.
But lawmakers were concerned about turning over public hospitals to a mainland company that could leave the state without a health care safety net if the partnership failed financially. There was also some trepidation over how Banner, which has a nonunion history, would handle labor.
This year, after months of talks among the Abercrombie administration, hospital administrators, union leaders and key lawmakers who oversee health care, lawmakers were close to an agreement on a bill that would have allowed the HHSC to make a transition into a nonprofit or public-benefit corporation with a local partner, such as the Queen’s Health Systems, Kaiser Permanente or Hawaii Pacific Health. Negotiators presumed that labor unions would still likely represent hospital workers.
But the bill died in conference committee negotiations, in part because the HGEA pulled its support. Several sources involved with the talks said privately that other interests, including some hospital administrators who support public-private partnerships, were also disappointed with late drafts.
Hawaii Pacific Health and Kaiser have shown interest in Maui Memorial, sources say, and a more detailed partnership plan might emerge before the next session of the Legislature opens in January.
"We’ve got to somehow get a deal on the table so people will realize that perhaps it will save money, it won’t get rid of the subsidy immediately — but over time — and if it increases services and it provides fair-market value, competitive private-sector wages and benefit packages, does that make sense?" said Wesley Lo, chief executive officer at Maui Memorial and regional CEO for the Maui region of the HHSC.
Randy Perreira, the HGEA’s executive director, said Aiona’s claim that the union is the obstacle is wrong.
"He’s as wrong on this as he’s wrong on a lot of other things," he said. "He is oversimplifying. And suggesting that we’re the obstacle is just really ignorant of what’s really been happening, frankly."
Perreira said the state may have to decide whether to split Maui Memorial, which has been the loudest voice for change, off from the system. He also said the state should re-centralize the system to create greater efficiencies, ending the experiment with regional governance.
The existing structure, he said, "basically allows each island to have its own fiefdom and try to determine what’s best for its own island without considering what’s right for the entire health care system, as well as the taxpayers who are paying for it."
