Unions Can't Stop HI Hospital Privatization

by Julie St. Louis, Court House News, February 11, 2016

HONOLULU (CN) - A federal judge has denied a last-ditch effort to halt privatization of three hospitals brought by local unions worried the plan will impair workers current contracts.

The United Public Workers, American Federation of State, County & Municipal Employees, Local 646, AFL-CIO sued Governor David Ige in August 2015 claiming that when he signed HB 1075 into law as Act 103 months earlier it violates the contract clause of the U.S. Constitution. They sought to stop the implementation at least until their members' collective bargaining agreements expire July 1, 2017.

The hospitals in question are the Maui Memorial Medical Center and Kula Hospital and Clinic on the island of Maui, and Lanai Community Hospital - the only hospital on the nearby island of Lanai.

"Following such a transfer, the state will use public funds to pay for costs of operating these facilities, but the employees working in these facilities will no longer be public employees of the state of Hawaii who have civil service protections and public employee collective bargaining rights and the protections of existing collective bargaining agreements," the unions' complaint said.

The unions represent 1,500 members at Hawaii Health System Corporation-managed facilities, including the Maui public hospitals. The unions claimed the state "was well aware of financial problems at the Maui regional system at the time it entered into its binding, valid, enforceable contracts with UPW."

Hospital workers "were hired and retained in accordance with the merit principle through a statewide merit system," union officials said. Under this principle employees have reasonable job security and most senior employees are given higher priority within health care and other government entities to find other jobs when layoffs occur.

Ige did delay the final vote on the bill while trying to accommodate the concerns of current staff. Upon signing HB 1075 he stated that leadership of Maui health care facilities and the "unions representing employees of the facility or facilities shall meet to discuss the impact of a transfer on the employees and the feasibility of tampering the adverse effect of layoffs by amending the employees' collective bargaining agreements."

It also requires the private management firm to "offer all employees of the pre-transfer facility employment for a period of no less than six months after the transfer completion date," and states that "no employee of the (health care facility) who is separated from service as a result of implementation of an agreement and transfer under this part shall suffer any loss of any previously earned rights, benefits or privileges."

Even so, the unions countered with its lawsuit that "the Legislature could have made HB 1075 effective only upon expiration of the existing collective bargaining agreements."

Ige instead called the bill "a historic opportunity to transform the delivery of health care to the people of Maui." The bill's author, House Speaker Joseph Souki, called the bill "essential" for Maui residents.

"The financial situation for Maui Memorial was not sustainable for the short or long run, and what we are doing today will open the doors for a vital public-private partnership to keep Maui's hospitals open and to most importantly provide the appropriate and quality care for the people of Maui County," Souki said.

Maui Memorial Medical Center, the only non-Oahu hospital that provides a full range of cardiac services including open-heart surgery and angioplasty, lost more than $43 million in 2014.

At the time of the signing, Maui Mayor Alan Arakawa responded by releasing a statement saying, "The Maui Regional System Board has made its selection and I am confident that it was in the best interests of everyone in Maui County."

The governor, Hawaii Health Systems and the Maui region board of directors selected Kaiser Permanente to take control of the Maui facilities, signing an agreement on Jan. 14. Tuesday's court decision removed the final roadblock allowing for a transfer to Kaiser this July.

The agreement is projected to save the state an estimated $260 million over the next 10 years.

U.S. District Judge Helen Gillmor refused to block the privatization after discussion on Feb. 9. She has not issued a written ruling.

PDF: Injunction Denied