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The Honolulu Advertiser
Posted on: Friday, July 11, 2003

State investigating Kuakini

By Robbie Dingeman and Curtis Lum
Advertiser Health Writer

The state attorney general's office is investigating allegations that suggest "possible financial irregularities and mismanagement" have occurred at Kuakini Medical Center in a way that compromises patient care. The hospital vigorously denied the claim yesterday.

Gary Kajiwara, Kuakini president and chief executive officer, said that the organization is financially sound, and he welcomed the opportunity to clear the hospital's name.

"It's (the attorney general's) duty in terms of looking at any potential problems, and from our standpoint it's our duty to respond, and I think it's going to be a good opportunity for us to show the attorney general's office that we've done things the right way," Kajiwara said last night.

An eight-page letter from Deputy State Attorney General Hugh Jones dated Wednesday and addressed to Kajiwara and 19 members of the board of directors outline a series of allegations, many of them directed at Kajiwara, the head of the operation since 1990.

Kuakini Medical Center and its parent, Kuakini Health Systems, are tax-exempt public charities and fall under the oversight of the state attorney general. The parent organization is generally ranked in the top 10 of Hawai'i's healthcare providers. Hawai'i Business Magazine listed Kuakini sixth in the state in terms of gross annual sales last year.

The attorney general's office began its investigation, Jones said in the letter, after receiving a detailed statement of concerns about possible mismanagement and financial problems from someone he did not name.

In the letter, he said his office also reviewed a lawsuit filed against the hospital by a former board member and received a statement from the Hawaii Nurses Association criticizing the hospital's administration. Jones said his office was also aware of a survey by Kuakini doctors complaining about a lack of leadership and low morale.

Many of the allegations surround Kuakini's financial health.

"It has been alleged that the medical center is plagued by severe financial problems and is not staying current with its creditors," Jones wrote. He asked for a response to the allegations and requested the hospital provide financial statements and audit reports by July 30. Jones said yesterday he had no comment about the investigation beyond the contents of the letter.

Kajiwara said external auditors review Kuakini's financial statements each year and the state does an annual site survey. Medicare and Medicaid also evaluate the hospital annually and have shown no abnormalities, he said.

"We look at this as an opportunity to provide information that will address what we think has been misinformation provided to (the attorney general's office)," Kajiwara said. "There are many bodies and agencies that are rolling through here on a regular basis, some annually, others more frequently, and we welcome these third parties to come and review us."

The allegations say that poor management has degraded patient care, caused staff turnover and that the board of directors has failed to provide proper oversight and governance, allowing Kajiwara full control over the institution.

Kajiwara said it was "disheartening" to hear allegations of poor patient care.

"We feel we're providing excellent patient care, and this is not only for the acute hospital, but also for our long-term-care patients as well," he said.

He added that the continuing accreditation by the medical community shows a commitment to quality patient care.

Among the allegations of financial problems and irregularities laid out in Jones' letter are claims that:

• Managers have been told a $3 million shortfall exists while staff has been told there is no operational deficit.

• No central office oversees expenditure of grant money.

• Millions of dollars were spent to develop a family practice residency program on Maui, but the cost to build the clinic was never reported and the board of directors was never informed that the clinic opened and closed.

• Kuakini invested heavily in a telemedicine system that has not been used.

• Kajiwara spent $1.5 million to install a telecommunications line to the Maui High Performance Computing Center that was seldom used and ordered disconnected.

• Only six of 72 units in the Physicians Office Tower have been sold to third-party buyers.

Jones also pointed out that 990 forms, the tax returns that most 501(c)(3) charities file annually with the IRS, show that Kajiwara was paid $218,969 for the health system in 2001-02 and $218,861 for the medical center in 2000-2001 and questioned whether Kajiwara was being paid by both entities.

A section in Jones' letter indicates his office has received a complaint suggesting patient care has been compromised, including claims that:

• The hospital's nursing personnel are "seriously understaffed and patients are complaining about poor service."

• There have been an increased number of patients who fall because of insufficient staff to monitor them.

• Inadequate staffing has led to a rise in medication errors; there are increased absences among nurses because of fatigue and stress; a large staff turnover exists because of problems with management; some acute-care services are unavailable on weekends.

Kajiwara defended his management style and said "our managers collectively, as well as our staff, they'll be able to confirm whether I mismanage or not."

"Whatever actions that I have done in my position, I do make sure that I do present it to the board, or I have to work within the budgetary limits that the board has approved for the fiscal year," he said. "I'm confident that the attorney general will recognize that we have been trying to do a very good job."

Established in 1900 as the Japanese Charity Hospital, Kuakini is a 212-bed acute-care hospital that reported gross revenue of $198 million last year. The medical center reported having 920 employees last year. Among its specialties, Kuakini lists geriatric care, cardiovascular care, cancer care, 24-hour emergency service and gastroenterology.

In the letter, Jones said his office recently received a detailed statement of concerns and also is aware of a lawsuit filed by a local physician, Dr. Robert Oishi, accusing management of improperly removing him from the board of directors.

Oishi's lawsuit, filed May 21, charged that he was wrongfully and illegally removed from the center's board after he criticized Kuakini management, including accusing Kajiwara of failing to disclose information to board members, mismanaging programs and retaliating against board members who questioned Kajiwara's policies.

In court papers filed in response, Kuakini denied all the allegations.

Earlier this week, a group of 21 Kuakini doctors released a survey that they had commissioned indicating that a majority of them are unhappy with hospital management. The group issued a statement that 94 of 275 physicians responded to the SMS Research survey and the results are critical of the administration and management.