There’s been a lot of press attention lately on the stress Oahu hospitals are under since the closure of the two hospitals owned by Hawaii Medical Centers (HMC). The hospital closures in Liliha and Ewa shocked Hawaii’s health care system and represents a tragic loss to the communities they served. Hawaii lost the capacity to treat 290 patients with serious illnesses or injuries. In addition, two emergency departments were lost that served an average of more than 500 patients weekly.

Fortunately, Oahu’s other hospitals, nursing homes, hospices and emergency medical services worked very closely together to immediately meet the needs of patients formerly served by HMC hospitals. Hospitals and nursing homes accepted transfer patients, and more ambulances were put into service. As a result, however, the remaining facilities in Oahu’s emergency medical system are experiencing volume similar to a bad flu season, with overloaded emergency rooms and longer wait times for patients. I am proud to say that even in the face of this strain health care facilities are meeting the needs of patients.

Why did the HMC hospitals close? In large part, for financial reasons. The revenue local hospitals receive for patient care does not cover the costs of care. One major contributing factor is underpayment by Medicaid; Medicaid currently reimburses only about 70 cents for every dollar spent. To give you a picture of how this affects local hospitals: 20-30% of their patients are typically on Medicaid. As not-for-profit entities, it is the responsibility of hospitals to take care of patients, regardless of their ability to pay.

Hawaii’s public and private hospitals collectively lost roughly $83 million in uncompensated care in 2010 due to non-payment for care and underpayment by Medicaid. More than 285,000 of Hawaii’s residents are enrolled in Medicaid—one in five Hawaii residents—so losses due to treating Medicaid patients are substantial.

The problem of underpayment from Medicaid is not unique to hospitals. The situation is even more prevalent for long-term nursing facilities, where an average of 70% of patients are on Medicaid. Nursing facilities currently lose $7-8 per Medicaid patient per day.

Looking forward, how can we avoid more facility closures? Given the economic climate, we can’t rely on the State to be the financial savior for health care facilities or services. In a statewide collaborative effort, hospitals and nursing facilities gathered together to come up with a new way to stabilize our fragile health care system. As a result, the Healthcare Association of Hawaii (HAH) introduced two pieces of legislation we believe will improve Medicaid payments by drawing down additional federal funds. The proposed Sustainability Programs (HB2275 for hospitals and SB2466 for long-term care facilities) are similar to models being implemented in 47 states. The sustainability programs require no State money and no taxpayer money.

Providers (hospitals and nursing facilities) acted proactively and are taking on all the risk by putting up their own funds to make these programs work.  Further, they are willing to give our financially distressed State 5% of the assessed fee to account for costs of administering the program. The HAH-sponsored bills will generate at least $2.5 million in new revenue to the State and $17.5 million in general fund savings.

If these programs were in existence, would they have saved the HMC hospitals? We can’t be certain because of other factors in HMC’s case. It is clear, however, that the facilities would have remained open longer, and that they would have been much more attractive to potential buyers.

Providers have bravely stepped forward to take a financial risk for the sustainable future of health care in Hawaii, because no other solution to sustain access to care for Medicaid patients is on the horizon. We will continue to work with legislators and the Governor to pass the proposed bills into law and bring some much-needed relief to a severely strained health system.

About the author: George Greene is the President and CEO of Healthcare Association of Hawaii (HAH). HAH membership includes all of the acute care hospitals in Hawaii, and two-thirds of the long term care beds, home care agencies and hospices. In addition to providing quality care to all of Hawaii’s residents, HAH members contribute significantly to Hawaii’s economy by employing over 40,000 people statewide.