by Andrew Walden
Why is HHSC management seeking a partnership with Hawaii Pacific Health? In short because HHSC only works financially if it imposes a monopoly bare-bones 'county clinic' type of medical care on the sister isles.
When patients and physicians on Maui began demanding medical care "which is, really, for a community our size is standard care anyplace else in the nation", the HHSC had to adapt. But as a State facility, HHSC's only function can be as a job trust for the HGEA maintained by monopoly laws such as Hawaii's notorious 'Certificate of Need' law requiring government approval for construction of new medical facilities.
In the mid and late 2000s, Wes Lo, the CEO of Maui Memorial Hospital led the fight against West Maui residents' push to build the private, non-profit Malulani Hospital. State Health Planning and Development Agency (SHPDA) denied their request precisely because a second hospital would interfere with the government's monopoly. (See links below)
Now in an interview with the Star-Advertiser, Wes Lo admits that all of the impetus to improve the quality of medical care came from the movement which he personally defeated.
If the Legislature fails to grant MMMC permission to negotiate a partnership agreement with HPH and MMMC goes bankrupt, this interview will be the smoking gun.
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Wesley Lo: The Maui region CEO of the state's public hospital system is enthusiastic about pending change
by Vicki Viotti, Star-Advertiser, January 30, 2015 (excerpt)
...QUESTION: How did the partnership idea get started?
ANSWER: The first effort we started, it really wasn't about a partnership. But it was, we knew the model wasn't working. ... Way back when, HHSC started, and Maui in those days was making money. The other hospitals weren't, and there was this big commotion on Maui about starting another hospital ...
It was clear that the community wanted more services -- all communities want more services.
Q: What kind of services were they demanding? And what year are we talking about?
A: This was probably back in 2004. That's when I first started at the hospital. ... We could only do diagnostic heart things. We didn't do hearts, so if you had a heart attack there, you would get lesser care, you would have to be flown (to Oahu) ... We did provide good services. It's just that they wanted more. And they wanted more than just the traditional county-hospital type of thing. ...
We could see that over the years that unless you changed your model, you couldn't really sustain it, and you needed to grow services. And the state really has so many things it has to do, it's hard to grow services, hard to invest in services. ...
We decided that we needed to start investing, and we needed to find different ways to get the money to invest and to grow services.
Q: And what were those?
A: In particular, it was the heart services. We wanted open-heart surgery and angioplasty, which is, really, for a community our size is standard care anyplace else in the nation. (Laughs.)
Q: So, where did you go for the money to get that started?
A: It was a two-step deal. The first year we went up and said, "Let's go check the capital markets out. Let's see if they'll lend us money." ... Frankly, in those days they were giving away money, prior to 2009, they were literally giving it away, before that whole Lehman Bros. stuff.
So we went up there and they said, "You know, we like your story, Maui, but we don't know about the rest of HHSC and the state."
That actually started us thinking. They said, "If you guys could get it where we only lend money to the Maui region, or Maui Memorial ... we'd consider it."
Q: Is that when the regions were separated?
A: The next year. It was for the right reason -- I know we got criticized for it, too -- but what we said is, "Well, if we create regions or corporations ... then we'd at least have access to the capital markets." The state wasn't going to give us the markets. The next year we actually created the regions.
Q: When did you finally secure the capital?
A: The first step was probably around 2008. we finally secured the first part of a $30 million loan. We got $11 million from the capital markets. ... We started building the heart program, we had to hire a surgeon, get equipment ... then the capital markets crashed. Oh, my goodness!
The bank, which will remain unnamed, said, "Oh, by the way, the rest of the money, you can't have it and now you guys gotta pay us back." ...
After 2009 ... we started doing really well. Our revenue growth was great, and we were outpacing our expenses. By 2013, we almost were breaking even, as a state entity. We were hemorrhaging money before. It really worked.
But there were some other things that happened along the way. Another region had tried to borrow money and it didn't go well. So the state precluded us from doing mortgages any more. ... And I understand. It's risky going out as a state entity to borrow money for yourself. ...
We always said, "Wouldn't it be better to have all the goodies that a large corporation has to help make you be all you can try to be, as opposed to being the biggest of a smaller one?" ... We said, "What if we started looking for a partner?"
Q: That's when Banner (Health system) came along?
A: No, that was before Banner, ... in late 2008. ... All the guys that were interested had pulled out, because everybody panicked, so we didn't have any ability to partner then. But we had gotten legislation to at least allow us to look for partners. ...
Then we kind of recovered. Then we said, "Let's renew our efforts. The markets have kind of stabilized." Lo and behold, Banner shows up. Out of the blue, our investment banker says, "Wow, we think this would be a great mix." Banner is a huge system, has done well across several different states. ...
They were extremely interested. They came down. And we were just looking at that time at the Maui region. We ended up meeting with the governor ... and he said, "That's great, but if you guys can do this better than the state can, why don't you take the whole system?"
They said, "Yeah, we'd be interested in taking the whole system." It kind of changed the discussion for us....
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Fighting for a Second Hospital on Maui: