SECTION 1. The purpose of this Act is to ensure that the people of the State have continued access to health care services in the county of Maui. Accordingly, this Act authorizes the Maui regional system of the Hawaii health systems corporation, in collaboration with a private entity, to transition any one or more of its facilities, which include Maui memorial medical center, Kula hospital and clinic, and Lanai community hospital, to operation by a new private nonprofit corporation.

SECTION 2. Chapter 323F, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part . PUBLIC-PRIVATE COLLABORATION and TRANSITION OF

MAUI REGIONAL SYSTEM FACILITIES TO A NEW ENTITY

§323F-A Definitions. Whenever used in this part, unless a different meaning clearly appears from the context:

"Pre-transition facility" means a facility of the Maui regional system prior to its transition into a new private nonprofit corporation under this part.

"Private entity" means a private entity with which the Maui regional system is authorized to enter into an agreement with under this part.

"Transitioned facility" means a facility of the Maui regional system that has transitioned into a new private nonprofit corporation under this part.

§323F-B Transition of the facility or facilities of the Maui regional system to a new private nonprofit entity. Notwithstanding any other law to the contrary including, but not limited to, section 27-1, chapters 76, 78, and 89, and chapter 171, the Maui regional system, a division of the Hawaii health systems corporation, is hereby authorized to enter into an agreement with a private entity to transition one or more of its facilities, including Maui memorial medical center, Kula hospital and clinic, and Lanai community hospital, into a new private Hawaii nonprofit corporation, to be operated and managed by the private entity as its sole member and operator.

The private entity shall be responsible for establishing the new private nonprofit corporation, which shall be organized under the laws of this State, for purposes of this part.

§323F-C Approvals required. Transition under this part shall occur only upon approval by the Maui regional system board. Any transition 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 finance who shall approve the transition if it conforms to all applicable financing procedures, and subject to the governor's approval.

§323F-D Lease; terms and conditions. (a) The Maui regional system board is authorized to enter into a fixed long- term lease of no less than twenty-five years with the transitioned facility, which shall lease the facilities under custodial control of the Maui regional system board and shall operate and manage the leased facilities.

(b) The lease shall be subject to the following terms and conditions:

(1) Rent for the lease shall be a nominal $1.00 per year payable in advance and in full for the term of the lease;

(2) The lease shall not be terminated other than for good cause and upon a minimum of three hundred sixty-five days prior notice to ensure that the delivery of health care to the community served will not be disrupted;

(3) The transitioned facility shall be allowed to have exclusive control of all matters related to the management and operation of the leased facilities, except as otherwise set forth in the lease; and

(4) The responsibility to oversee the performance of the terms of the lease by the transitioned facility shall rest with the Maui regional system board as the lessor.

§323F-E Assets; real property. (a) The corporation shall retain ownership of all real property associated with the lease.

(b) The Maui regional system board, having custodial control over all lands and facilities in the Maui region, is authorized to lease real assets under its custodial control to the transitioned facility at nominal rent. The board shall not dispose of any real assets other than by lease. The Maui regional system board may transfer to the transitioned facility all equipment relating to the operation of the hospital and all other assets except real assets.

§323F-F Liabilities. (a) The State, the Maui region, the corporation, or one or more of these, shall assume current liabilities associated with accounts payable, accrued paid time off, debt, capital leases, malpractice liabilities, and other liabilities as specifically set forth in the lease. Any and all liabilities of the pre-transition facility that were transferred to the corporation upon its creation by Act 262, Session Laws of Hawaii 1996, all liabilities of the pre-transition facility related to collective bargaining contracts negotiated by the State, and the liability for the current outstanding post-employment benefits, shall become the responsibility of the State.

(b) All future liabilities arising out of the transitioned facility's operation of the leased facilities shall be the responsibility of the transitioned facility.

§323F-G Employment, wages, and benefits. (a) A personnel system for employees working at the transitioned facility shall be established and governed by laws and regulations that apply to private sector employees. The personnel system of the transitioned facility shall not be governed by state laws that apply to public officers and employees of the State including, but not limited to, the civil service system laws, state collective bargaining laws, and any other laws and regulations that govern public or government employment in the State.

(b) Employees of the pre-transition facility shall be transitioned to the private party standard wage and benefit structure and the personnel system established under subsection (a).

(c) The transitioned facility shall offer all medical and nonmedical employees of the pre-transition facility, who satisfy the job qualifications for comparable positions and the employment requirements of the private party, continued employment for a period of no less than six months after commencement of the lease. The transitioned facility, at its discretion, may thereafter continue to employ any or all medical and nonmedical employees at the transitioned facility.

(d) No employee of the corporation who is separated from service as a result of implementation of an agreement and transition under this part shall suffer any loss of retirement allowance earned as provided in section 88-74 or any loss of vacation leave earned and accumulated.

(e) The private entity shall provide a plan for a smooth transition of the employees of the pre-transition facility from state employment to private employment by the transitioned facility.

§323F-H Operating subsidy. The State shall subsidize the operation of the transitioned facility pursuant to a subsidy schedule in which the guaranteed maximum annual subsidy shall not exceed the 2014 fiscal year subsidy and may be lowered based on operating performance.

§323F-I Capital subsidy. (a) For the first ten years of the lease, the State shall jointly fund capital expenditures with the private entity that operates and manages the transitioned facility on terms to be agreed upon as part of the lease required by section 323F-D; provided that:

(1) Capital planning and expenditures shall be completed in accordance with the private party's operative capital planning procedures; and

(2) Capital funding shall be consistent with the pre-transition facility's funding level, previously approved capital improvement project requests, and pending capital improvement project requests at the time the lease is executed.

(b) After the first ten years of the lease, the new private nonprofit corporation formed pursuant to section 323F-B and the private entity shall be responsible for funding all capital expenditures of the new transitioned facility.

§323F-J Strategic commitment during term of lease. (a) The private entity shall be committed to supporting the transitioned facility to achieve excellence and improve access to services in Maui county.

(b) The private entity shall establish a governance and management structure that improves the performance of the transitioned facility. The private entity shall apply efficiencies of scale, consolidation of shared services, and administrative and technological expertise to improve the health care performance of the transitioned facility.

(1) Expanding primary care access throughout Maui;

(2) Recruiting and rotating specialists to fill current service gaps;

(3) Extending the private entity's service line coordination to Maui, including but not limited to cancer, cardiology, orthopedics, pediatrics, and women's health services;

(4) Coordinating long term care patients and reducing the wait list;

(5) Upgrading facilities and equipment as needed to provide high quality care and to enhance patient experience; and

(6) Incorporating Maui region into the private entity's value-based contracting initiatives to better align quality and cost initiatives."

SECTION 3. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 4. This Act shall take effect on July 1, 2050.

HOUSE OF REPRESENTATIVES	H.B. NO.	1075
TWENTY-EIGHTH LEGISLATURE, 2015		H.D. 1
STATE OF HAWAII