The Beginning, Expanding, and Evolving
The Hawaii Health Systems Corporation (HHSC) is a truly unique organization whose evolution began pre-statehood when the major activities of the Neighbor Islands centered around the sugar and pineapple plantations, which in each county were responsible for providing medical care to its residents. The counties did this through a wide variety of facilities. Many were built by the counties as tuberculosis “sanitariums”. Other facilities were turned over to the counties as the plantations closed or reduced production. During the years 1950 to 1965, the cost of this care grew to the point that the individual counties could no longer afford it. It was at this point that the State began to give small subsidies and grants to the different counties.
A series of legislative actions began which expanded the role of the State to where it stands today. In 1965, the county public hospitals, serving both urban and rural communities spread out over various islands, officially became a State responsibility. However, the counties still ran the facilities with very limited State leadership or control. Then in 1967, the State, through the Department of Health (DOH), began the transition from county management to full State control. The County-State Hospital Division was created and, thus, it became a growing burden on the general revenue taxes.
Many governmental and private studies were conducted over the years after the State assumed responsibility for this system. Virtually all of the studies undertaken concluded that significant organizational and structural reform was necessary if the system was to ever operate efficiently and effectively. All of these studies concluded that major change was necessary to enable the system to continue to carry out its important patient care and community services mission and respond to the rapidly changing national and local health marketplaces.
In 1994, Governor Benjamin Cayetano initiated a “Blue Ribbon” Task Force to create a new and more autonomous “agency”, akin to a public benefit corporation, as the prescription for needed reform. The task force was led by Larry Gage, Esq., President, National Association of Public Hospitals, and included many representatives from the Hawaii health care, labor, and business communities.
Based upon the recommendations of this “Blue Ribbon” Task Force and with the support of the governor, the Legislature passed the landmark Act 262 in 1996, formally creating the Hawaii Health Systems Corporation effective July 1, 1996. In November of 1996, the state Department of Health transferred the liabilities and assets of the Department of Community Hospitals to the new Corporation Board of Directors appointed by the governor. The 13-member board of directors was responsible for developing policies, procedures, and rules necessary to plan, operate, and manage the hospitals. The joint conference, quality improvement, personnel and compensation, and finance and information systems committees were formed during November 1996. The purpose of the law was to free the facilities from executive branch oversight in order to make it more efficient. This was accomplished by exempting the hospitals from various laws that pertained to other State agencies, such as, the state procurement code, oversight by the department of accounting and general services, oversight by the department of budget and finance, mandatory use of the attorney general’s office for legal services, and the like.
It was understood at the time Act 262 was signed into law that operation of the HHSC facilities would continue to require State funding support. A significant number of the 12 facilities are located in remote, rural, and low-populated areas and have insufficient business volume to support operating costs. These facilities are referred to as “safety-net” facilities because they are often the only option for delivery of medical care in their respective geographic areas and provide emergency and other critical services without regard for a patient’s ability to pay.
Initial corporate management was provided by select individuals serving in acting positions. In August 1997, Thomas M. Driskill, Jr., was named President and Chief Executive Officer (CEO). Subsequently, the CEO hired and organized the primary corporate staff, established the Corporate Office at Leahi Hospital on Oahu, and filled key vacancies in hospital leadership positions.
Act 262 divided the health care system into five geographic regions: the city and county of Honolulu, the county of Kauai, the county of Maui (except Kalawao county), the eastern region of Hawaii county (Hilo/Puna/Hamakua/Ka`u), and the western region of Hawaii county (Kona/Kohala). The basic premise was to provide each of the five regions with shared-services support for its respective facilities, yet encourage hospitals within a particular geographic area to collaborate more closely in order to provide integrated community care. Community members from each region were appointed to the board by the governor. During the summer of 1998, through the generosity of the Harry and Jeannette Weinberg Foundation, HHSC developed a full-motion video teleconferencing system which connects all 12 HHSC facilities with the University of Hawaii, all other hospital systems in Hawaii, and other national and international organizations.
In response to the unique health care challenges being faced by the regions, the 2007 Legislature passed Act 290 (Session Laws of Hawaii), which enabled the five HHSC regions to establish their own governance, thereby creating five regional health systems and boards of directors in addition to the existing corporate board. In 2009, the Legislature passed Act 182 (Session Laws of Hawaii), in an effort to strengthen the viability of the public hospital system through organizational and operational changes, in addition to providing the regions with authority to transition into various legal entities.
Thanks to the tremendous support from our regional and corporate boards of directors, medical staffs, employees, labor partners, the legislature, governor, and communities, HHSC has been able to move forward as a health care leader in the state of Hawaii. At the same time, in light of the significant economic challenges and ever-changing health care environment that hospital systems are facing today, HHSC is aggressively engaging in planning designed to enable us to continue to provide quality, accessible health care to our island communities, many of which depend on us as the sole provider of health care services.
State Funding
Although HHSC earns the majority of its operating budget of approximately $650M, it is dependent on State legislative appropriations to fund the remaining portion of its operating budget and also to support capital improvement projects throughout the system. General fund support from the State amounted to approximately 15% percent of the operating budget in the fiscal year ending June 30, 2015.
Board of Directors
As of 2014, the HHSC Corporate Board of Directors consists of 18 members, including the State Director of Health (ex-officio/voting), one at-large member appointed by the governor, the five regional chief executive officers (ex officio/nonvoting), and 11 community members as follows: two members each from Kauai, Oahu, East Hawaii, and West Hawaii, and three members from Maui county (excluding Kalawao county). One of the community members from each region is appointed by the Governor, and the remainder (one or two) are appointed by their respective regional system boards.
Nonprofit Affiliates
The Hawaii Health Systems Foundation (HHSF), a 501(c)(3) affiliate, was established on October 21, 1999, in order to raise funds and obtain gifts and grants for the entire HHSC system, in addition to assisting HHSC facilities interested in developing their own foundations.
Ali’i Community Care, Inc., a 501(c)(3) affiliate, was incorporated on June 21, 2000 in order to build and operate a series of state-of-the-art assisted living facilities throughout the state of Hawaii. Groundbreaking for Roselani Place on Maui island took place on October 26, 2000. In 2007, the operations of Ali`i Health Center, an outpatient clinic in the Kailua-Kona community, were added. The legislature has historically appropriated a portion of HHSC’s special funds (funds earned by HHSC) to make up the shortfall between Ali`i Community Care’s operating expenses and revenues.
Kahuku Medical Center, a 501(c)(3) affiliate, was incorporated on March 21, 2007 in order to preserve and continue hospital operations at its facility on Oahu’s North Shore. The legislature has historically appropriated general funds to make up the shortfall between Kahuku Medical Center’s operating expenses and revenues.