Posted at 1:50 p.m., Friday, January 11, 2008
Maui Memorial gains control of own cash flow
CLAUDINE SAN NICOLAS
The Maui News
The loan essentially allows Maui Memorial, and the new Maui Region of which it is the flagship medical facility, to cut ties with the Hawaii Health Systems Corp., which has been the primary finance and operations manager of the state's community hospitals. The Maui Region also includes Kula Hospital and Lanai Community Hospital.
Proceeds from the JPMorgan loan will be used for Maui Memorial's working capital, predevelopment costs and financing of the hospital's new Heart, Brain and Vascular Tower. An initial $11 million will be made available immediately to Maui Memorial while details of the $130 million financing arrangement are worked out.
"This loan allows us to obtain control of our cash flow now rather than at the next budget cycle," which won't happen for about 18 months, said Wesley Lo, chief executive officer of the Maui Region.
The move by the hospital to gain a greater measure of independence from the health systems corporation was made possible by the passage of Act 290, dubbed by Gov. Linda Lingle as one of the most controversial pieces of legislation in 2007.
Lingle allowed Act 290 to become law without her signature, thus paving the way for the creation of five new regional boards empowered with the responsibility to oversee finances and operations of state medical facilities in their areas.
Now, Maui Memorial officials report to the Maui Region board, rather than Hawaii Health Systems Corp.
A key feature of the new law is that it allows Maui Memorial to keep all of the money it collects.
"It's a blessing and a curse. We've got the authority we've always wanted, but now we also get the accountability, which I really shouldn't say is a curse because it's not," Lo explained Thursday.
The new law allows administrators at Maui Memorial, Kula Hospital and Lanai Community Hospital to exercise the independence they've sought to manage the medical facilities, Lo said.
"If you don't have your own cash, you really don't have local control," Lo said.
Hawaii Health Systems Corp. agreed to decentralization after battling Lo and his staff in separate lobbying campaigns at the Legislature last year.
HHSC Chief Executive Officer Tom Driskill and his board initially opposed early versions of the legislation introduced by Maui Sens. Roz Baker, Shan Tsutsui and J. Kalani English.
Driskill argued that the formation of regional corporations within the health systems corporation, which was initially suggested, could break up the "safety net" of small rural hospitals and result in a duplication of services and increase cost of operations for the state-owned hospitals. The result could jeopardize care in rural communities, Driskill said.
In arguing for the decentralization of the health systems corporation, Lo said it was not a true system but another layer of management. He said the central board had not been responsive to the needs and capabilities of the diverse communities the hospitals served.
Even before the Maui region board appointees were confirmed by the state Senate last year, Lo expressed approval of the new members and the work they could potentially do to improve hospital operations.
"This is really huge when you think about it," Lo said. "We've now got the groundwork done to move to the next chapter, which is to improve operations at the hospital."
Maui region board members are stockbroker Zadoc Brown Jr., A&B Properties Vice President Grant Chun, Kula Community Association Vice President Gina Flammer, Alexander & Baldwin Inc.'s Stephen Holaday, Kaiser Permanente pediatrician Dr. Donna McCleary, Maui Radiology Associates Dr. Lee Miyasato, former Maui County Managing Director Howard Nakamura, Community Clinic of Maui Chief Financial Officer B.J. Ott, Maui Memorial Chief Clinical Executive Karen Oura, Kaiser internist Dr. Susan Stewart, and attorney Richard Clay Sutherland, a private attorney who will chair the board.
This week, Lo said he and his staff have been working with executives at Hawaii Health Systems Corp. to ensure that state financing is secured, and that the Maui region gains the local control dictated by the law to take effect this month.
"The timing of this arrangement is impeccable," Lo said. "We now have our board taking the helm this month. ... The bottom line is that Maui now has more control of decisions for the Maui region."
Lo said the financial takeover by his office closes last year's debate on whether it should have been done in the first place. It also signals the beginning of the hard work ahead for his staff and the new Maui Region board.
Board members have met several times during the last several weeks for orientation, training and discussions on parliamentary procedures for meetings. "Right now, it's all about getting organized," Lo said.
Sutherland joined Lo in lauding the development of financial independence for Maui Memorial.
"This financing ensures that we can start ramping up to provide advanced cardiovascular services such as angioplasty and open-heart surgery for the people of Maui," Sutherland said.
"Completion of this phase was also critical in laying the groundwork for the future improvement and development of the hospital, in which we will focus on finalizing our transition as the new local board, while working on improving quality and efficiency in addressing the health care needs of our community," he said.
Lo traveled to Oahu on Thursday to meet with state lawmakers about possible appropriations during this legislative session for a new obstetrics unit and more operating rooms at the hospital.
Ideally, Lo said, he would like the Heart, Brain and Vascular Tower built simultaneously with a medical building and new parking lot the hospital plans to construct in partnership with developer Everett Dowling.
Lo said his dream is have both projects break ground within 24 months.
In the meantime, design for the new tower is ongoing, with a target to finish by this summer.
Maui Memorial has narrowed its field of cardiovascular surgeon candidates to two and could issue a letter of intent to its new doctor within the next two months, Lo said. That could pave the way for open-heart surgery to be performed at Maui Memorial by next year, he said.
For more Maui news, visit The Maui News.