Faced with declining membership and rising costs, Kaiser Permanente Hawaii, the state's largest health maintenance organization, said it will let go about 45 employees and look at other ways to shave costs as it restructures itself to meet its current business levels.

The health plan said yesterday about 1 percent of its almost 4,800 full- and part-time workers will be affected and will told by mid-November whether their jobs were being eliminated.

Kaiser said the job cuts should be transparent to its 225,000 members and that its restructuring work could result in improved efficiencies as it shifts personnel around.

"We are looking at the strategic plan as a way to make Kaiser an even stronger organization," said spokeswoman Lynn Kenton.

Kaiser's operating expenses have been higher than its revenue, resulting in a $400,000 operating loss during the first half of 2006. The weak performance resulted in part from declines in Kaiser's membership, which has been slipping since 2003.

The health plan, brought to Hawai'i in 1958 by industrialist Henry J. Kaiser, has lost about 10,000 members during the past three years, a period during which the state's population increased and the economy grew. During that time the health plan's employee count has risen by about 100 workers, in part because it now offers more acute-care beds at its hospital that require more staffing.

By contrast the Hawaii Medical Service Association, the state's largest health insurer, gained about 26,000 thousand members, including about 10,000 at its Health Plan Hawaii health maintenance organization since 2003.

Kaiser, which provides health insurance and operates its own clinics and a hospital, also has faced more competition from other health insurers entering Hawai'i.

Kenton said Kaiser's membership is cyclic and typically fluctuates every decade. In addition, she said about one-third of the recent membership decline has occurred on Kaua'i. It lost 3,200 members when it began dropping member coverage on the island, a decision that it's since reversed.

She said the cuts made now will adjust Kaiser's staffing to its current membership level while other steps will prepare the health plan for a time when membership rises again.

The membership drop comes as the health plan has faced higher costs for hospital medical services, more demand for new technology and lower reimbursements from government programs such as Medicare.

"These are challenging times for the healthcare industry and require Kaiser Permanente Hawaii to make difficult decisions to immediately reduce costs while positioning us for the future," said Kaiser Regional President Jan Head in a press statement.

The restructuring program is an escalation of cost-cutting efforts at Kaiser since last year, when the health plan began such cost-saving initiatives as not filling vacant jobs, reviewing vendor contracts and delaying pay raises for its nonunion workers. About 62 percent of its workers are covered by collective bargaining agreements.

The new round of cuts includes eliminating most of Kaiser's medical transcription department by cutting 15 jobs and outsourcing the work to two contractors, Kenton said. The vendors have expressed an interest in hiring the employees, she said.

Other plans call for eliminating next year's merit increases for senior management and continuing to leave vacant positions open. Kaiser also intends to continue its staffing review next year and may make further reductions.

Kenton said the layoffs were difficult for Kaiser, which takes pride in having a stable workforce.

"It was very, very difficult for Kaiser Permanente to come to this decision," she said.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.