LOS ANGELES — Hawaii Gov. David Ige signed an operations transfer agreement last week that allows Kaiser Permanente to take control of three struggling Maui County Hospitals.
The deal expected to close June 30 represents the first such long-term management agreement involving a Hawaii state hospital.
"This is a transformational moment in Hawaii healthcare," Avery Chumbley, chair of the Maui Region Hawaii Board of Directors, said at a press conference.
The state heavily subsidizes Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital and will save an estimated $260 million over 10 years through the agreement, Ige said.
The Maui Region of the Hawaii Health Systems Corp., comprised of the three hospitals, faces a $46.3 million deficit for the current fiscal year which began in July.
Kaiser Foundation Hospitals, a California tax-exempt 501(c)(3) not for profit that is part of Kaiser Permanente, will run the hospitals. The Maui Regional System Board will serve as custodial caretaker of the properties and oversee performance of the terms and conditions of the agreement.
The change will enable the hospitals to move beyond providing safety-net services to more comprehensive healthcare services, said Mary Ann Barnes RN, president Kaiser Foundation Health Plan and Hospitals, Hawaii Region.
Under Kaiser's 30-year agreement, state subsidies would reach zero by 2024. The agreement envisions spending $110 million on capital improvements over the next 10 years, of which the state would fund $60 million. Kaiser would also provide a $30 million revolving line of credit to smooth cash flow.
Kaiser's lease payments would cover the annual debt service on the $8.1 million Series 2012A and Series 2012 B bond issues as well as a $12.6 million USDA direct loan.
The bonds were issued by Maui Memorial Medical Center as general obligation bonds to refinance an existing $8 million loan and to fund construction costs for a physician's clinic, according to the Hawaii Health Systems Corp.'s CAFR for the fiscal year ended June 30, 2013. The bonds are payable in annual installments ranging from $172,000 to $978,000, according to the CAFR.
The governor signed Act 103 in June 2015 authorizing the state to enter into a public-private partnership agreement with a private non-profit healthcare provider and lease the facilities.
The law allows the new entity, Maui Health System Kaiser Foundation Hospitals, to receive up to $32 million annually in operational support. Kaiser also can receive state funding for capital expenditures for the first 10 years of the lease.
The HHSC's Maui Region board evaluated proposals from Kaiser and Hawaii Pacific Health and selected Kaiser as its private partner.
Kaiser guaranteed it will employ existing Maui hospital workers for at least six months after the deal closes.
The state would realize significant savings if the entire 13-facility state hospital system moved to private management, Ige said.
"We have seen increased subsidies to healthcare, particularly in our rural areas," he said.
