Kahuku hospital in peril

By Eloise Aguiar
Advertiser Windward O'ahu Writer

KAHUKU — Millions of dollars in debt and with little relief on the horizon, Kahuku Hospital faces major cuts in services, and even closure, without an emergency infusion of cash and a healthcare partnership to provide financial stability for the long term.

Kahuku Hospital has struggled for years because the rural population of Ko'olauloa is too small to sustain the facility. It's the only critical access medical facility between Kane'ohe and Wahiawa. Advertiser library photo • July 2002

to $430,000 this year — have contributed to a budget shortfall of $1.1 million a year for the past five years, said Don Olden, hospital administrator and CEO. The hospital also has more than $2 million in debts and IRS liabilities.

Like other rural hospitals across the nation, Kahuku has struggled for years because its surrounding population is too small to sustain the facility. Kahuku Hospital mounted something of a financial rally several years ago, but it wasn't enough.

The result today is a financial situation that has reached a critical level, and the hospital's board of directors is looking at options that include affiliating with a larger healthcare provider, cutting services and, ultimately, closure. The hospital will continue operating for now, said Olden, but a partnership is necessary if it is to survive.

"An affiliation is a real critical link in the process and the future of the hospital," Olden said. "The second thing after that is continued growth in the community."

But Kahuku Hospital must act now and will seek community support immediately, asking residents to choose its services over other institutions' when needed. The hospital administration will discuss the financial predicament during a series of community meetings beginning today.

Its shutdown would be a blow to the community, area residents said.

"If you live here, you're five to seven minutes away from help," said Junior Ah You of La'ie. "Without that, you're an hour away from the nearest help. You can be dead already."

Kahuku Hospital operates with an annual budget of $6.5 million, relying heavily on state financing, grants and private donations. Though Kahuku is a private hospital, it receives state money because it serves a rural area.

There are six other critical access hospitals in the state and four of them belong to the state hospital system. From 2001 to 2003 Kahuku received only $350,000 a year while five other rural hospitals received more than twice that, Olden said.

Money going to Kahuku was increased to $750,000 last year, and the hospital hopes the Legislature will raise it to $1.2 million this year, Olden said. However, even that would only buffer the hospital from old debt and it would still need to make changes to survive, he said.

Growth in the community would help — and there are about 500 new homes planned for the area, Olden said. But that help is not coming soon enough.

An affiliation or partnership with a larger organization would mean reduced administrative costs and potentially other savings where duplicate services can be eliminated.

However, the hospital has tried several times in recent years to find an affiliation, only to learn that other organizations were not interested.

In spite of the hospital's financial problems, business has improved, said R. Eric Beaver, chairman of the hospital's board of directors.

In the past two years, patient use has increased from 13 to 16 per day, a key number because every increase of one to two patients a day boosts net income by $250,000 a year, he said.

Surgery cases have grown from almost zero to 20 per month. And in 2001, the hospital received an increase in annual operating funds from the Medicare program when it received accreditation as a critical access hospital, Beaver said.

However, increased labor and insurance costs have eroded those gains. It costs $600,000 a year to run the full-time emergency room, which in turn brings in only $200,000. And the emergency room is the one service the community cannot do without, he said.

Only 22 percent to 25 percent of the population has used the facility, and that isn't enough to stop the losses, Beaver said.

Besides a 24-hour, seven-day-a-week emergency room, Kahuku's 25-bed hospital offers general acute care, skilled nursing care, obstetrics, outpatient surgery and physical therapy. It provides low-cost services for people without health insurance.

Rural hospitals across the nation are having financial problems, said Dr. Linda Rosen, state Department of Health deputy director for health resources administration. One of the major reasons is that the population is too small to sustain the facility, Rosen said.

Losing services, especially emergency services at Kahuku, would be a big concern to the state because ambulances would have to take patients to Kailua or Wahiawa in an emergency, Rosen said.

"We value the services at Kahuku and, from a public health point of view, we would certainly want to look at what could be done," she said. "I do not know what we would do exactly, but we would be concerned."

For Beaver, it's clear what must be done.

He said the community needs to use the facility more and the hospital must find a partner for the long term.

"I think without an affiliation, the long-term picture for a sustainable model isn't possible," he said.

Reach Eloise Aguiar at eaguiar@honoluluadvertiser.com or 234-5266.