The Hawai'i Health Systems Corp. announced yesterday that it is facing a $62 million deficit this fiscal year and will lay off workers, curtail the recruitment of doctors, and limit on-call services for doctors at its network of public hospitals.

The layoffs will fall, for now, in the system's West Hawai'i region and at the corporate office in Honolulu. HHSC will also examine changes to patient care but cannot make any reductions in healthcare services without approval from the state Legislature.

State House and Senate leaders described the financial situation at public hospitals as a crisis and said they will create a joint task force in response. Before the task force convenes, the Senate Ways and Means Committee and the House Finance Committee will hold informational briefings statewide to assess the problem.

Without any action, lawmakers said they were told by HHSC administrators that some hospitals within the system could be forced to close by November. Despite these warnings, however, several lawmakers are skeptical about HHSC's management and have chosen to wait for the task force to review the situation rather than take immediate action.

Lawmakers would have to return in special session to consider a resolution allowing HHSC to reduce services, and many lawmakers want to hear from the regional boards that govern the HHSC before making that decision.

"Situations such as this one require responsive decisions in an effort for affected facilities to continue to provide sufficient and quality patient services," Bill Wood, the chair of HHSC's O'ahu region board, said in a statement. "We would ask for understanding from our patients and the communities we serve and hope this will be a short-term restriction of services."

fourth-largest in u.s.

The HHSC oversees 13 public hospitals and has 4,200 workers and 800 affiliated doctors. It is the fourth-largest public-hospital system in the United States and is governed in part by five semi-autonomous regional boards. HHSC generates about $400 million a year and receives about $85 million in state general fund money.

HHSC administrators said the deficit is related to rising medical expenses and inadequate reimbursement from private-sector and government insurers. Each region has come up with plans to reduce costs and most are trying to avoid layoffs or cuts that would be felt by patients. Although the West Hawai'i region would not confirm the number of layoffs, sources said it is more than 50 workers. The corporate office will lay off nine workers.

On Maui, where the community has been embroiled in a debate over the creation of a private hospital to compete with HHSC's Maui Memorial Medical Center, Maui Memorial administrators announced on Friday that Maui Memorial, Kula Hospital and Lana'i Community Hospital will not be directly affected by the system's financial situation.

Wesley Lo, Maui Memorial's chief executive officer, said Maui Memorial wanted to reassure the community that no services will be jeopardized.

APPEAL TO GOVERNOR

A law passed by the Legislature last year granting more regional autonomy within the system gave each region flexibility to meet unique healthcare needs. The law, however, requires legislative approval for any reduction in healthcare services.

The original law that established HHSC in 1996 also prevents the governor from interfering with any systemic change, capacity building, advocacy, budget and personnel issues. The governor does have oversight responsibility over state general funds that go to subsidize HHSC's operating budget or deficits.

Lawmakers have said that an emergency appropriation for HHSC is unlikely after the system just received an extra $14 million to help it through the fiscal year that ended yesterday. Lawmakers have said they may allow HHSC to reduce services, but that decision will not likely come for a few months.

House and Senate leaders, appearing at a news conference at the state Capitol, said Gov. Linda Lingle could use her emergency powers or discretion over state spending to help public hospitals. Lawmakers noted that the governor recently extended an emergency declaration to respond to the homeless situation on the Leeward Coast.

"These services are so critical that it's important that our safety net not be disrupted, so I'm hoping that the governor will join with the Legislature and join with our communities to make sure that services — critical services, needed services, in all of our communities — remain viable," said state Sen. Rosalyn Baker, D-5th (W. Maui, S. Maui).

system at fault?

Lingle cited the limits on her power over HHSC under the law and reminded lawmakers that her administration opposed the quick conversion to regional boards. The governor said the regional board concept, which came out of Maui's desire for more autonomy for Maui Memorial, was drafted in part to help protect Baker politically because of her opposition to a private hospital.

Lingle said that before regional autonomy, HHSC was able to absorb financial difficulty by spreading losses across the statewide system.

"It's now that very system that's tying the hands of HHSC because they can't move money from one entity to another the way they used to before," the governor told reporters.

State Rep. Bob Herkes, D-5th (Ka'u, S. Kona), said lawmakers have to look at HHSC's management and structure and whether it is suited to provide acute, long-term and rural healthcare. He said long-term care at Ka'u Hospital, for example, should be separated from HHSC and perhaps managed by a different state agency.

"I think that this is more than money," Herkes said. "I think that we have to take a good, hard look at the operational policies of (HHSC). I think we have to examine their management structure."