The route to privatization for Maui’s financially struggling public hospitals and clinics is a marathon, not a sprint.
After surmounting hurdles of opposition in the state Legislature, the proposal to transition this region of the state’s system to private ownership finally was enacted during the 2015 session.
On Jan. 14, officials for Hawaii Health Systems Corp. (HHSC), the agency that runs the state’s public hospital and health care facilities, signed an agreement with Kaiser Permanente Hawaii to shift HHSC’s Maui regional facilities to a private entity known as Maui Health Systems.
But opposition persisted from the public employees’ unions, those representing HHSC staffers — the Hawaii Government Employees Association and United Public Workers. The unions supported and won passage of an ill-advised bill to excessively sweeten the employees’ separation from the unions, and UPW went to federal court to claim that the whole deal was unconstitutional.
In the midst of this rocky road, the latest development has to be read as a hopeful sign. On Friday the U.S. 9th Circuit Court of Appeals issued an order to give at least some latitude to those seeking to turn over the hospitals to Kaiser, the state’s largest health maintenance organization. Although the court still wants to hold off on closing the deal until the case is decided, the transfer proceedings can now resume.
It’s not too late to hope that the state ultimately can conclude the transfer successfully, as it should. The court, which on May 17 initially called a halt to all proceedings, evidently is not yet persuaded that the union’s rights will be abridged if transition planning continues.
It is also not too late to hope that Gov. David Ige will veto Senate Bill 2077. Most of the 1,400 employees will retain their jobs under the new management. This measure, though, will allow them to claim severance options that were intended only as compensation for job loss, in the process incurring an expense estimated at $40 million or more that taxpayers can ill afford.
Kaiser had been due on July 1 to assume control of Maui Memorial Medical Center, Kula Hospital &Clinic and Lanai Community Hospital when the UPW filed suit. The union’s argument is that the pact violates the contracts clause of the U.S. Constitution; it also claims that the deal interferes with collective bargaining accords that are in effect for another year.
On Feb. 19, U.S. District Court Judge Helen Gillmor ruled in favor of the state. The union appealed, and the appellate court initially ordered a stop to all activities related to the transition until Sept. 30.
This would have caused an intolerable disruption to the provision of health care in the region. HHSC officials said its Maui workforce has dropped almost 4 percent, because the agency had stopped hiring in anticipation of the transfer.
There’s still a great deal of anxiety and uncertainty, with state hospital administrators unsure whether to spend more money on continuing operations, given that there’s no transition date.
HHSC doesn’t have this money to waste. That’s the whole reason for the privatization move in the first place: to salvage hospital operations through a more sustainable business model.
When that privatization agreement was signed only months ago, the governor praised it, citing the
$260 million in hospital subsidies the state would save over 10 years.
That’s why it would make no sense for Ige now to allow a sweetheart deal like SB 2077 to become law. Even if it’s spread over five years, it would still register as a hit on the state general fund, and drive the state’s Employees’ Retirement System fund into a deeper hole. This would be a backslide from the state’s commitment to pay down its unfunded liabilities.
While he’s mulling this bill, the governor and UPW officials are progressing with negotiations toward a settlement of the case. That, at least, is a more encouraging sign. Another status report on the talks is due June 30.
Maui County residents, who depend on the survival of these hospitals, will continue to have their fingers crossed that good sense will prevail in the end, and that elected and union leaders will act in the public interest.
