LOS ANGELES — Hawaii signed a lease agreement with Kaiser Permanente in which the health system will run three struggling Maui hospitals.
The 30-year lease agreement between Hawaii Health Systems Corp. and Maui Health Systems, a Kaiser Foundation Hospitals LLC, takes effect July 1.
"The goal is to ensure access to quality healthcare services and improved delivery of those services for the Maui region," Hawaii Gov. Ige said in a prepared statement. "Revenues generated in the Maui facilities will be invested back into providing healthcare services in the Maui region."
On January 14, the Maui Regional Board and the HHSC Corporate Board signed an operations agreement transferring management of the three Maui facilities from the state to the new Kaiser entity. That agreement is expected to close in June. The deal represents the first such long-term management agreement involving a Hawaii state hospital.
The state heavily subsidizes Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital and will save an estimated $260 million over 10 years through the agreement, Ige said.
The Maui Region of HHSC, comprised of the three hospitals, faced a $46.3 million deficit for the current fiscal year, which began in July, before the agreement was signed.
Maui Health Systems is expected to begin operating the hospitals on July 1.
Under Kaiser's 30-year agreement, state subsidies would reach zero by 2024. The agreement envisions spending $110 million on capital improvements over the next 10 years, of which the state would fund $60 million. Kaiser would also provide a $30 million revolving line of credit to smooth cash flow.
Kaiser's lease payments would cover the annual debt service on the $8.1 million Series 2012A and Series 2012B bond issues as well as a $12.6 million USDA direct loan.
The bonds were issued by Maui Memorial Medical Center as general obligation bonds to refinance an existing $8 million loan and to fund constructions costs for a phusician's clinic, according to the HHSC's CAFR for the fiscal year ended June 30, 2013.
Hawaii Health Systems operates 13 facilities throughout Hawaii. In 1996, HHSC was formed to provide healthcare services in places where they were not widely available from private providers.
