This press release was issued:

Kahuku, Hawai'i (Nov. 14, 2006)-The board of directors of Kahuku Hospital announced that it had voted on Nov. 6 to close the hospital effective Dec. 31.

All patients staying in the hospital and needing care beyond the closure date will be transferred to other providers on O'ahu. To plan for the closure, during the next few weeks, the hospital will stop admitting acute inpatients that may need care beyond the closure date. The hospital will maintain emergency services as long as possible, but emergency services are not planned past Dec. 31, 2006.

As part of the closure efforts, the hospital will seek to wind up its business operations through bankruptcy proceedings."

Kahuku chairman of the board R. Eric Beaver stated that "After three years of evaluating all reasonable alternatives, this painful decision was reached. Our board of directors worked very hard before finally concluding that the healthcare market in Hawai'i made it impossible to financially sustain Kahuku Hospital." Beaver expressed the board's heartfelt appreciation for the past support of these employees, physicians and major benefactors, including the state. "They were truly the miracle creators that enabled the hospital to remain open. Without support from these wonderful people and organizations, the hospital would not have been able to serve the community for the past decade," he said.

Unlike the Mainland, that has experienced many hospital closures, Hawai'i has been fortunate in that it has not had any acute hospital closures. In California, approximately one out of six hospitals has closed over the past 15 years. The economics of acute hospital survival has changed and the impact is being experienced in Hawai'i. Over the past year, much larger hospitals on O'ahu, specifically St. Francis-Liliha and St. Francis-West, had to be sold to survive. Also, most of the outer island hospitals in Hawai'i are essentially wards of the state through the state hospital system. Independent and isolated, Kahuku Hospital has been weathering a "perfect storm" of financial difficulties, and is now succumbing to the economic pressures of that storm.

"Kahuku Hospital cannot subsist without a significant subsidy from the state of Hawai'i and private donors, or an affiliation with a larger healthcare system, or some combination of the three," stated Kahuku Hospital CEO R. Don Olden. He noted that sufficient support from private donors is no longer available, and annual subsidies from the state of Hawaii are insufficient to meet the shortfall in revenues. The board conducted extensive discussions with nearly all larger healthcare systems regarding an affiliation, but in light of their struggles, none of the systems had any interest in operating, or affiliating with, Kahuku Hospital. It also became apparent that Hawai'i's economy requires independent hospitals to be reasonably large to be financially sustainable — particularly on Oahu, Olden said.

Kahuku Hospital is a very small independent hospital that has averaged fewer than three acute care inpatients per day for several years, combined with a small skilled nursing service that has averaged fewer than 13 patients per day. In addition, the hospital's emergency services treat, on average, approximately 12 patients per day. Low utilization of each of these core services at Kahuku Hospital has created annual operating losses that cannot be funded through any sources available in today's healthcare market.

Over the past decade or more, the hospital has been supported by major benefactors including the Campbell Estate Foundation, Queen's Healthcare System, Harold K.L. Castle Foundation, The Church of Jesus Christ of Latter-day Saints Foundation, and the Harry & Jeanette Weinberg Foundation, as well as tax-based support from the community through grant-in-aid awards from the state of Hawaii. In addition, the loyal employees and physicians who have supported Kahuku Hospital all these years received salaries and professional fees that have been below the salary and wage market on O'ahu.