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MMMC Considers Affiliation with Nonprofit Hospital System

A “go” or “no go” notice from Banner Health is anticipated in early December.

November 15, 2012
Susan Halas ( , The Maui Weekly

Maui Memorial Medical Center (MMMC) is considering an affiliation with Banner Health, one of the nation's largest nonprofit hospital systems based in Phoenix, Arizona. Banner operates 23 acute-care hospitals and healthcare facilities with more than 36,000 employees in Alaska, Arizona, California, Colorado, Nebraska, Nevada and Wyoming.

According Wesley Lo, regional CEO of MMMC, talks have been underway with Banner since June of this year. Members of the Banner administration have visited Hawai'i and members of the Maui hospital board and executive team have visited Banner hospitals in Phoenix and Mesa, Arizona; Fairbanks, Alaska; and Greeley, Colorado.

While specifics of the proposal are not yet available, Lo said a "go" or "no go" notice from Banner is anticipated in early December. If the decision is made to move forward, an intensive period of due diligence by both sides will follow.

Article Photos

“The way it is now, it’s hard to make a better hospital when there is barely enough money to keep us going,” said Wesley Lo, regional CEO of Maui Memorial Medical Center.
Photo courtesy of MMMC

"The impetus to look for a partner came from the Maui side," said the hospital executive. "For many years, MMMC has been seeking more autonomy and the ability to make better use of our own resources. We want to improve the delivery of healthcare here."

Presently, MMMC, a 213-bed, acute-care hospital, is Maui's only hospital and part of a statewide system of 13 public hospitals administered by the Hawai'i Health Systems Corporation (HHSC). There have been numerous attempts to exit the state system or start other private hospitals to offer other health options on Maui. The reasons most commonly cited over the years has been that the HHSC is cumbersome, top-heavy and short on specialized expertise.

In 2007, the state Legislature passed a bill that allowed the Maui hospital to set up its own board and control its own money and real estate.

Follow-up legislation passed in 2009. That measure enabled the hospital to transition to other kinds of entities, including partnerships, leasing or third-party operators in a variety of formats. The specifics of the bill allowed both for-profit and nonprofit ventures, but do not allow actual sale of hospital assets. The measure also requires any prospective agreement to be approved by the governor, the state attorney general and the state director of budget and finance.

An August memo alerted staff to recent developments and their possible implications for the hospital's future.

"If the hospital transitions out of the state system, it may no longer be required to engage in the state's collective bargaining process," Lo said.

Presently, all of the hospital's approximately 1,500 employees are members of the Hawai'i Government Employees Association (HGEA) or the United Public Workers (UPW). Lo said he met briefly the leaders of both unions in September to update them on the progress of the talks.

The goal in seeking an affiliation with Banner is to provide improved healthcare for the community in the form of a higher level of competence and greater access to money for needed improvements, he said. Banner first came to the attention of the Maui hospital via BMO Capital Markets, a Montreal-based investment bank retained by MMMC to advise it on possible partners "that would be a good fit."

As he explained it, Maui and Hilo generate the largest revenues of all the state's public hospitals. Maui's share alone is approximately $200 million annually, yet the hospital is always strapped for funds and runs a continuous deficit. State funds are used to close the gap.

Lo and others connected with the hospital have long believed that an affiliation with a larger system would lead to greater self-sufficiency and improved care on Maui.

From the Banner side, Lo thinks the potential partnership could give the large nonprofit system "a toehold in the under-served Hawai'i market, especially on Maui and potentially the Big Island."

From the Maui point of view, hooking up with one of the top five healthcare providers in the nation would bring many benefits presently out of reach to a small public hospital in a state-run system.

Some of the issues that would need to be resolved before any formal agreement is reached include pensions, contracts, staffing and retention concerns.

"The way it is now," Lo said, "it's hard to make a better hospital when there is bare-ly enough money to keep us going."



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