HOUSE OF REPRESENTATIVES
TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII
A BILL FOR AN ACT
relating to the hawaii health systems corporation.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that the Hawaii health systems corporation is the fourth largest public hospital system in the nation and operates public health care facilities that provide essential safety-net hospital and long-term care services throughout the State. The legislature further finds that improving the efficiency and quality of health care services in all communities of the State has become increasingly important. Therefore the continued financial challenges faced by the Hawaii health systems corporation and the State requires the state government to take affirmative measures to improve the quality, efficiency, and availability of health care services in Hawaii.
The legislature additionally finds that prominent national studies have demonstrated that many public hospital systems have struggled financially for a variety of reasons, including providing a disproportionate level of uncompensated and under-compensated care compared to private hospital systems, and the inherent constraints and inefficiencies that result from operating as a governmental agency. As a result, an increasing number of public hospitals have converted to non-public status.
While the legislature recognizes that the system of public hospitals in the State will continue to require state subsidies and other support to assist public hospitals after their conversion to non-public status, the legislature finds that allowing the operations of one or more regional systems of the corporation, or one or more of its individual health facilities, to transition to non-public status is likely to improve the quality of health care services and operational efficiencies of health facilities in the communities they serve and reduce the level of state support that will be required over time, all for the improvement of the health and welfare of the people of the State of Hawaii.
The legislature also finds that it is essential that this transition to non-public operation be an option available for consideration by the various regional system boards and the Hawaii health systems corporation and should be carefully evaluated by the community representatives that comprise the regional system boards.
The purpose of this Act is to further advance the State's commitment to providing quality health care by allowing the operations of the regional systems of the Hawaii health systems corporation and their facilities to transition to non-public status.
SECTION 2. Section 323F-1, Hawaii Revised Statutes, is amended as follows:
1. By adding three new definitions to be appropriately inserted and to read:
""Health facility assets" means all property or rights in property and assets, real, personal, and mixed, tangible or intangible, owned, leased, operated, or otherwise used by or accruing to the corporation or a regional system with respect to a health facility or system.
"New entity" means an entity formed in accordance with section 323F-7.6(b).
"Private entity" means a non-public entity to which health facility assets are sold, leased, or otherwise transferred in accordance with section 323F-7.6."
2. By amending the definition of "health facility" to read:
facility" means any one of the facilities that [
constitute the division
of community hospitals.] is owned or operated under the direction of a
regional system board or the corporation, or both, or is transitioned to
non-public status pursuant to section 323F-7.6."
SECTION 3. Section 323F-7.6, Hawaii Revised Statutes, is amended to read as follows:
§323F-7.6[ ]] Transition of [ Hawaii
health systems] regional system or systems or health facility or
facilities to [ a new entity .]
non-public status. (a) Notwithstanding
any other law to the contrary, including but not limited to section 27-1 and
chapter 171, [ any of the] each regional system board is, and any two or more regional boards acting
together are, authorized to transition their respective regional systems or [ individual] one or more of the health facilities of
the [ Hawaii health systems] corporation [ is hereby authorized to
transition into] within
their regional systems to non-public status. Any transition shall comply with this
section, including the approvals required by subsection (c) and chapter 323D.
(b) In furtherance of any transition to
non-public status, each regional system board is, and any two or more regional
system boards are, authorized to form a new [
entity in any form recognized under the laws of the State, including but not
(1) A nonprofit corporation;
(2) A for-profit corporation;
(3) A municipal facility;
(4) A public benefit corporation; or
(5) Any two or more of the entities in paragraphs (1) through (4).
A transition shall occur
through the sale, lease, or transfer of all or substantially all of the assets
of the facility or regional system, except for] In order to facilitate the transition of
health facilities to non-public status, the regional system board for the
applicable regional system or health facility is authorized, alone or with
other regional system boards, to transfer to the governing body of the new
entity all of the duties, responsibilities, rights, and powers of the regional
system board with respect to the applicable regional system or systems or
health facility or facilities to be transferred to the new entity, including
without limitation those duties and powers set forth in sections 323F-3.5 and
323F-7, and is also authorized to sell, lease, or transfer the regional system
or systems or health facility or facilities and related health facility assets
to the new entity or directly to a private entity; provided that real property [ which]
shall only be transferred by lease[ . Any
transition shall comply with chapter 323D.] to a new entity or a private entity.
(b)] (c) A transition to non-public status, including any related transfer
of health facility assets to a new entity or a private entity, shall only occur
upon approval of the [ appropriate] regional system board or boards in whose region or regions the
health facility assets are located, in the case of a regional system
or individual facility transition, or upon approval of the regional system boards
and the corporation in the case of the transition of the entire corporation.
Any transition to
non-public status shall be subject to legal review
by the attorney general who shall approve the transition if satisfied that the
transition conforms to all applicable laws, subject to the review of the
director of the department of budget and finance who shall approve the
transition if it conforms to all applicable financing procedures, and subject
to the governor's approval. In addition, the
transition, including any
transfer of health facility assets to a new entity or a private entity, shall be subject to the following terms and conditions:
(1) All proceeds from the sale, lease, or transfer of
health facility assets shall be used for health care services
in the [
respective] applicable regional system or systems or
health facility[ , except that real property shall only be transferred by
lease;] or facilities, or to
discharge liabilities of the applicable regional system or systems or health
facility or facilities;
(2) Any and all liabilities of the corporation or a regional system or a health facility transitioning [
a new entity] to non-public status that were transferred to the [ Hawaii
health systems] corporation upon its creation by Act 262, Session Laws of
Hawaii 1996, and all liabilities of the corporation
or the regional system or health facility related to
collective bargaining contracts negotiated by the State, shall become the responsibility
of the State; and
(3) During the period of transition:
(A) The State shall continue to fund the provision of health care services provided for by the regional system or individual health facility; and
(B) All applicable provisions of this chapter shall continue to apply.
(d) A new entity and the governing body thereof are authorized to exercise all of the duties, responsibilities, rights, and powers transferred by the regional system board or boards with respect to the applicable regional system or systems or health facility or facilities transferred to the new entity, including without limitation those duties and powers set forth in sections 323F-3.5 and 323F-7; to enter into and perform any lease or contract with a private entity for the lease and operation of the regional system or systems or health facility or facilities; and to sell, lease, or otherwise transfer all or substantially all of the health facility assets of the applicable regional system or systems or health facility or facilities.
(e) Upon and after the completion of the [
of all the health facilities in a regional system to a new entity[ , the] or a
(1) The regional system board for that
regional system shall terminate; provided that if not all of a regional
system's health facilities are [
transitioned] transferred to
a new entity[ ,] or a private entity, the existing regional system
board shall not terminate but shall continue to retain jurisdiction over those health
facilities remaining in the regional system[ .];
(2) Any adjustment to be made by the new entity or a private entity to the levels of services provided by the transferred facilities or regional system shall be subject to section 323F-31 and shall be exempt from section 323D-82;
(3) None of the liabilities of the transferred health facilities or regional system shall become liabilities of the new entity or the private entity by operation of law or otherwise, unless otherwise negotiated between the applicable regional system board and the new entity or between the new entity and the private entity, as applicable;
(4) Subject to legislative appropriation of the necessary funds, the State shall continue to fund the provision of health care services by the new entity or the private entity through operating support subsidies, and provide funds for capital improvements to the applicable regional system and health facilities operated by any new entity or private entity;
(5) The new entity shall have the right to incur revenue bond debt to finance capital expenditures;
(6) No new entity, unless the new entity is a municipal facility, or private entity shall in any respect be a governmental body, agency, establishment, or instrumentality by virtue of acquiring, leasing, or operating any of the health facilities or regional systems, including by virtue of leasing any real property or acquiring any other health facility assets, and no provisions of law that are or shall be applicable to any governmental body, agency, establishment, or instrumentality are or shall be applicable to the new entity, unless the new entity is a municipal facility, or the private entity, including without limitation, chapter 84, chapter 91, chapter 92, chapter 92F, and sections 323F-7(d), 323F-21, 323F-22, 323F-24, and 323F-25. As a non-public entity, the private entity shall be subject to the hospital sustainability fee and shall participate in the hospital sustainability program special fund on the same basis as other private hospitals;
(7) Notwithstanding any other law to the contrary, each new entity and private entity shall be exempt from paying any state taxes on any operating support subsidies and funds for capital improvements received by either or both of them and any taxes imposed under chapters 237, 238, and 247 with respect to amounts received in connection with the transactions comprising the transition to non-public status or in connection with any other transaction between or among any two or more of the State, the corporation, the regional systems, the new entity, and the private entity;
(8) Employees of the new entity, unless the new entity is a municipal facility, and the private entity shall be exempt from chapters 76, 87A, 88, and 89, and in no event shall the employees of the new entity or the private entity be considered as employees of the State;
(9) No director, or other member of the governing body regardless of title; officer; employee; or other agent of a private entity may be a director or other member, regardless of title, of the governing board of a new entity; and
(10) Any transaction between a new entity and a private entity, and any purchase of goods and services by or on behalf of the new entity or the private entity, shall be exempt from chapters 102, 103, 103D, and 103F."
SECTION 4. Section 323F-31, Hawaii Revised Statutes, is amended to read as follows:
"§323F-31 Maintenance of services. (a) No planned substantial reduction or elimination of direct patient care services at any health facility shall be undertaken unless all of the following requirements are met:
(1) An initial determination is made by the regional chief executive officer, or by a new entity or a private entity under section 323F-7.6, as to critical and emergency services which shall not be subject to reduction or elimination pursuant to this section;
(2) The plan of the health facility, the new entity, or the private entity to substantially reduce or eliminate any direct patient care services at the health facility shall first be presented to the regional system board, or to the new entity in the case of a plan of a private entity, for its approval;
(3) Subsequent to the requisite [
board] approval, the regional chief executive officer or the designated representative of the new entity or private
entity shall present the plan
to the community in which the health
facility is located, at a community informational meeting, in order to obtain
community input on the plan; and
(4) Provided that if the regional system board
approves the plan, the plan as approved by the regional system board shall be
submitted to the corporation board for ratification[
.]; provided that no approval by the regional system
board or ratification by the corporation is required if the governing body of
the new entity approves a plan presented by a private entity.
(b) After the community
informational meeting, but at least twenty days prior to the implementation of
the plan approved by the regional system board[
,] or by the governing body of the new entity, the regional system board or the governing body of the new entity or
the private entity shall give notice of implementation of the plan to the governor,
senate president, and the speaker of the house of representatives.
(c) The decision of the regional system board, or the governing body of the new entity with respect to a plan presented by a private entity, shall be the final decision with respect to the plan. Implementation of the plan shall commence and continue, provided that no legislation is enacted that:
(1) Requires the reinstatement and continuation of the direct patient care services that are subject to reduction or elimination under the plan; and
(2) Includes an appropriation of additional moneys sufficient to adequately fund the mandated reinstatement and continuation of the subject direct patient care services."
SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 6. This Act shall take effect upon its approval.
Hawaii Health Systems Corporation; Health Care; Non-Public Status
Permits the regional systems of the Hawaii health systems corporation and their health facilities to transition to non-public status.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.