PART I

SECTION 1. The legislature finds that the State's community hospital system, the Hawaii health systems corporation, provides essential hospital and long-term care services, in addition to physician and other health care services throughout the State. Hawaii health systems corporation facilities are often the only hospitals and emergency care providers in many rural communities. Due to rapid changes taking place in the health care industry, the legislature acknowledges that the governing structure of our public hospital system must provide the appropriate flexibility and autonomy needed to compete and remain viable and to respond to the needs of the specific communities served, by furthering the development of centers of excellence in health care.

The purpose of this part is to centralize personnel, purchasing, and other administrative functions wherever feasible within the Hawaii health systems corporation and remove unnecessary operational limitations to achieve greater efficiency, effectiveness, and meaningful financial accountability.

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

"§323F- Financial and management audits. The auditor shall conduct a financial and management audit of the Hawaii health systems corporation every five years."

SECTION 3. Section 323F-7, Hawaii Revised Statutes, is amended by amending subsections (c) and (d) to read as follows:

"(c) Notwithstanding any other law to the contrary, the corporation and any of the regional system boards shall exercise the following duties and powers:

(1) Developing corporation-wide policies, procedures, and rules necessary or appropriate to plan, operate, manage, and control the system of public health facilities and services without regard to chapter 91; provided that each regional system board shall be responsible for its own policies, procedures, and rules necessary or appropriate to plan, operate, manage, and control the public health facilities within its own regional system consistent with corporation policies;

(2) Evaluating the need for additional health facilities and services; provided that each regional system board shall be responsible for the evaluation within its own regional system;

(3) Entering into and performing any contracts, leases, cooperative agreements, partnerships, or other transactions whatsoever that may be necessary or appropriate in the performance of its purposes and responsibilities, and on terms the corporation, or regional system boards, may deem appropriate, with either:

(A) Any agency or instrumentality of the United States, or with any state, territory, or possession, or with any subdivision thereof; or

(B) Any person, firm, association, partnership, or corporation, whether operated on a for-profit or not-for-profit basis;

provided that the transaction furthers the public interest; and provided further that if any dispute arises between any contract, lease, cooperative agreement, partnership, or other transaction entered into by the corporation and a regional system board with regard to matters solely within that regional system, after July 1, 2007, the contract, lease, cooperative agreement, partnership, or other transaction entered into by the regional system board shall prevail; and provided further that such agreements are consistent with corporation policies;

(4) Conducting activities and entering into business relationships as the corporation board, or any regional system board, deems necessary or appropriate, including but not limited to:

(A) Creating nonprofit corporations, including but not limited to charitable fund-raising foundations, to be controlled wholly by the corporation, any regional system board, or jointly with others;

(B) Establishing, subscribing to, and owning stock in business corporations individually or jointly with others; and

(C) Entering into partnerships and other joint venture arrangements, or participating in alliances, purchasing consortia, health insurance pools, or other cooperative arrangements, with any public or private entity; provided that any corporation, venture, or relationship entered into under this section furthers the public interest; provided further that this paragraph shall not be construed to authorize the corporation or a regional system board to abrogate any responsibility or obligation under paragraph (15);

provided that each regional system board shall be responsible for conducting the activities under this paragraph in its own regional system consistent with policies established by the corporation board;

(5) Participating in and developing prepaid health care service and insurance programs and other alternative health care delivery programs, including programs involving the acceptance of capitated payments or premiums that include the assumption of financial and actuarial risk; provided that each regional system board shall be responsible for conducting the activities under this paragraph in its own regional system consistent with policies established by the corporation board;

(6) Executing, in accordance with all applicable bylaws, rules, and laws, all instruments necessary or appropriate in the exercise of any powers of the corporation or regional system boards;

(7) Preparing and executing all corporation-wide budgets, policies, and procedures or any regional system budgets, policies, and procedures; provided that the regional system boards shall submit their regional and facility budgets to the corporation [to be consolidated into a corporation-wide budget for purposes of corporation-wide planning and appropriation requests. Regional system and facility budgets shall be received by the corporation and shall be included in the corporation-wide budget upon submittal to the corporation;] for approval, amendment, or rejection;

(8) Setting rates and charges for all services provided by the corporation without regard to chapter 91; provided that the duty and power of the corporation board shall be limited to approving the rates and charges developed by the regional system boards for the regional system's facilities and services. Rates and charges may vary among regional systems and facilities and may be consolidated with the rates of other regional systems into one charge master. Third-party payer contracts may be negotiated at the corporation-wide level with input from the regional systems, taking into consideration the rates set by the regional system boards. For purposes of securing revenue bonds, the corporation or regional system board may covenant to set, and if necessary increase, rates and charges as needed to pay debt service and related obligations plus a coverage factor;

(9) Developing a corporation-wide hospital system that is subject to chapters 76 and 89; provided that employment of regional system and facility personnel shall be the responsibility of the regional system boards pursuant to corporation-wide policies and procedures, applicable laws, rules, regulations, and collective bargaining agreements;

(10) Developing the corporation's corporation-wide capital and strategic plans or any regional system board's capital and strategic plans; provided that each regional system board shall be responsible for development of capital and strategic plans in its own regional system that shall be consistent with, and incorporated into, the overall corporation-wide plans; and provided further that the corporation and each regional system board shall be entitled to undertake the acquisition, construction, and improvement of property, facilities, and equipment to carry out these capital and strategic plans;

(11) Suing and being sued; provided that only the corporation may sue or be sued; and provided further that the corporation and regional system boards shall enjoy the same sovereign immunity available to the State;

(12) Making and altering corporation board and regional system board bylaws for its organization and management without regard to chapter 91 and consistent with this chapter; provided that each regional system board shall be responsible for the final approval of its regional system board bylaws;

(13) Adopting rules without regard to chapter 91 governing the exercise of the corporation's or regional system boards' powers and the fulfillment of its purpose under this chapter;

(14) Entering into any contract or agreement whatsoever, not inconsistent with this chapter or the laws of this State, and authorizing the corporation, regional system boards, and chief executive officers to enter into all contracts, execute all instruments, and do all things necessary or appropriate in the exercise of the powers granted in this chapter, including securing the payment of bonds; provided that the corporation board shall delegate to a regional system board its authority to enter into and execute contracts or agreements relating to matters exclusively affecting that regional system; provided further that a regional system board shall exercise this power consistent with corporation-wide policies; and provided further that contracts or agreements executed by a regional system board shall encumber only the regional subaccounts of that regional system board;

(15) Issuing revenue bonds up to $100,000,000 subject to the approval of the governor or the director of finance; provided that:

(A) All revenue bonds shall be issued pursuant to part III, chapter 39;

(B) The corporation and any regional system board shall have the power to issue revenue bonds in any amount without regard to any limitation in chapter 39; and

(C) The corporation shall have the power to incur debt, including the issuance of revenue bonds in any amount, and the regional system boards shall have the power to issue revenue bonds in any amount upon approval by the corporation board;

(16) Reimbursing the state general fund for debt service on general obligation bonds or reimbursable general obligation bonds issued by the State for the purposes of the corporation or any regional system board;

(17) Pledging or assigning all or any part of the receipts, revenues, and other financial assets of the corporation or the regional system boards for purposes of meeting or securing bond or health systems liabilities; provided that each regional system board shall be responsible for conducting the activities under this paragraph in its own regional system. Any pledge or assignment by the corporation or any regional system board to secure revenue bonds or health system liabilities shall be valid and binding in accordance with its terms against the pledgor, creditors, and all others asserting rights thereto from the time the pledge or assignment is made, without the need of physical delivery, recordation, filing, or further act. The corporation shall not take or omit to take any act that would interfere with, impair, or adversely affect any pledge or assignment by a regional system board pursuant to this chapter. In connection with issuing revenue bonds or related obligations, consistent with corporation policies and procedures, any regional system board may make such other covenants, binding on the regional system board and the corporation, that the regional system board determines to be necessary or appropriate to establish and maintain security for the revenue bonds or related obligations;

(18) Owning, purchasing, leasing, exchanging, or otherwise acquiring property, whether real, personal, or mixed, tangible or intangible, and of any interest therein, in the name of the corporation, which property is not owned or controlled by the State but is owned or controlled by the corporation; provided that:

(A) Regional system boards shall have custodial control over facilities and physical assets in their respective regional systems. A regional system board may own, purchase, lease, exchange, or otherwise acquire property, whether real, personal, or mixed, tangible or intangible, and of any interest therein, other than property owned or controlled by the corporation, in the name of the regional system board; provided further that a regional system board shall be subject to section 323F-3.5; and

(B) Each regional system board shall be responsible for conducting the activities under this paragraph in its own regional system;

(19) Maintaining, improving, pledging, mortgaging, selling, or otherwise holding or disposing of property, whether real, personal, or mixed, tangible or intangible, and of any interest therein, at any time and manner, in furtherance of the purposes and mission of the corporation or any regional system board; provided that the corporation or any regional system board legally holds or controls the property in its own name; provided further that other than to secure revenue bonds and related obligations and agents, and to transition into a new entity, the corporation or any regional system board shall not sell, assign, lease, hypothecate, mortgage, pledge, give, or dispose of all or substantially all of its property; and provided further that each regional system board shall be responsible for conducting the activities under this paragraph in its own regional system, and control over such property shall be delegated to each regional system board; [~~provided further that this paragraph shall not be construed to authorize the sale, pledge, or mortgage of real property under the control of the corporation or a regional system board;~~]

(20) Purchasing insurance and creating captive insurers in any arrangement deemed in the best interest of the corporation, including but not limited to funding and payment of deductibles and purchase of reinsurance; provided that only the corporation shall have the power to create captive insurers to benefit public health facilities and operations in all regional systems; and provided further that a regional system board may purchase insurance for its regional system in collaboration with the other regional systems and the corporation until captive coverage is provided by the corporation;

(21) Acquiring by condemnation, pursuant to chapter 101, any real property required by the corporation to carry out the powers granted by this chapter;

(22) Depositing any moneys of the corporation or any regional system board in any banking institution within or without the State, and appointing, for the purpose of making deposits, one or more persons to act as custodians of the moneys of the corporation or any regional system board; provided that regional system boards may deposit moneys in banking institutions pursuant to corporation-wide guidelines established by the corporation board;

(23) Contracting for and accepting any gifts, grants, and loans of funds, property, or any other aid in any form from the federal government, the State, any state agency, or any other source, or any combination thereof, and complying, subject to this chapter, with the terms and conditions thereof; provided that the regional system boards shall be responsible for contracting for and accepting any gifts, grants, loans, property, or other aid if intended to benefit the public health facilities and operations exclusively in their respective regional systems; and provided further that all contracting for or acceptance of gifts, grants, loans, property, or other aid shall be consistent with corporation-wide policies established by the corporation board;

(24) Providing health and medical services for the public directly or by agreement or lease with any person, firm, or private or public corporation, partnership, or association through or in the health facilities of the corporation or regional system boards or otherwise; provided that the regional system boards shall be responsible for conducting the activities under this paragraph in their respective regional systems;

(25) Approving medical staff bylaws, rules, and medical staff appointments and reappointments for all public health facilities of the corporation or any regional system board, including but not limited to determining the conditions under which a health professional may be extended the privilege of practicing within a health facility, as determined by the respective regional system board and consistent with corporation-wide policies, and adopting and implementing reasonable rules, without regard to chapter 91, for the credentialing and peer review of all persons and health professionals within the facility; provided that regional system boards shall be the governing body responsible for all medical staff organization, peer review, and credentialing activities to the extent allowed by law;

(26) (A) Investing any funds not required for immediate disbursement in property or in securities that meet the standard for investments established in chapter 88 as provided by the corporation board or any regional system board; provided that proceeds of bonds and moneys pledged to secure bonds may be invested in obligations permitted by any document that authorizes the issuance or securing of bonds; and provided further that the investment assists the corporation or any regional system board in carrying out its public purposes; selling from time to time securities thus purchased and held, and depositing any securities in any bank or financial institution within or without the State. Any funds deposited in a banking institution or in any depository authorized in this section shall be secured in a manner and subject to terms and conditions as the corporation board or a regional system board may determine, with or without payment of any interest on the deposit, including without limitation time deposits evidenced by certificates of deposit. Any bank or financial institution incorporated under the laws of this State may act as depository of any funds of the corporation or a regional system board and may issue indemnity bonds or may pledge securities as may be required by the corporation or regional system board; provided that regional system boards may exercise the powers under this subsection with respect to financial assets of the regional system consistent with corporation-wide policies; and

(B) Notwithstanding subparagraph (A), contracting with the holders of any of its notes or bonds as to the custody, collection, securing, investment, and payment of any moneys of the corporation or regional system board and of any moneys held in trust or otherwise for the payment of notes or bonds and carrying out the contract. Moneys held in trust or otherwise for the payment of notes or bonds or in any way to secure notes or bonds, and deposits of such moneys, may be secured in the same manner as moneys of the corporation or regional system board, and all banks and trust companies are authorized to give security for the deposits;

(27) Entering into any agreement with the State, including but not limited to contracts for the provision of goods, services, and facilities in support of the corporation's programs or the regional system boards' programs, and contracting for the provision of services to or on behalf of the State; provided that the regional system boards shall be responsible for entering into agreements to provide goods, services, and facilities in support of programs in their respective regional systems consistent with corporation-wide policies;

(28) Having a seal and altering the same at pleasure;

(29) Waiving, by means that the corporation or regional system board deems appropriate, the exemption from federal income taxation of interest on the corporation's or regional system boards' bonds, notes, or other obligations provided by the Internal Revenue Code of 1986, as amended, or any other federal statute providing a similar exemption;

(30) Developing internal policies and procedures for the procurement of goods and services, consistent with the goals of public accountability and public procurement practices, and subject to management and financial legislative audits; provided that the regional system boards shall be responsible for developing internal policies and procedures for each of their regional systems consistent with the corporation's policies and procedures; and further provided that:

(A) The regional system boards and the corporation board shall enjoy the exemption under section 103-53(e);

(B) The regional system boards shall enjoy the exemption under chapter 103D; and

(31) Authorizing and establishing positions; provided that regional system boards shall be responsible for hiring and firing regional and facility personnel consistent with corporation policies, except a regional chief executive officer shall only be hired or dismissed upon the approval of the regional system board as further set forth in section 323F-8.5;

(32) Having and exercising all rights and powers necessary or incidental to or implied from the specific powers granted in this chapter, which specific powers shall not be considered as a limitation upon any power necessary or appropriate to carry out the purposes and intent of this chapter; provided that the regional system boards shall be responsible for having and exercising all powers and rights with respect to matters in their regional systems consistent with the law; and

(33) Each regional system, through its regional system board, shall:

(A) Develop policies and procedures necessary or appropriate to plan, operate, manage, and control the day-to-day operations of facilities within the regional system that are consistent with corporation-wide policies;

(B) Exercise custodial control over and use of all assets of the corporation that are located in the regional system pursuant to this chapter; and

(C) Expend funds within its approved regional system budget and expend additional funds in excess of its approved regional system budget upon approval of the corporation board.

(d) Each regional system board shall not be subject to chapters 36 to 38, 40, 41D, and 103D as well as part I of chapter 92 and shall enjoy the exemptions contained in sections 102-2 and 103-53(e), except as otherwise provided in this chapter. The corporation shall not be subject to chapters 36 to 38, 40, and 41D, as well as part I of chapter 92, and shall enjoy the exemptions contained in sections 102-2 and 103-53(e); provided that the exemption provided under this subsection to chapter 37D shall only apply to financing agreements of $5,000,000 or less; provided further that the aggregate value of financing agreements per fiscal year shall not exceed $25,000,000[.] per region."

SECTION 4. Section 323F-21, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (b) to read:

"(b) The corporation board and regional system boards shall collaboratively develop budgetary guidelines and annual operating and capital budgets for each facility, taking into account anticipated surpluses from or subsidies to the facilities pursuant to the annual guidelines described in this section, accumulated corporation and regional reserves and accounts, subsidies, if any, that are determined to be needed from the general fund, and other sources of corporation-wide and regional income as may be identified. Two-year budgets will be [~~approved for~~] recommended for approval by regional system boards, in alignment with State of Hawaii biennium budgeting. The corporate board shall [~~not alter~~] approve the two-year budget of [a] the regional system [~~except:~~

~~(1)~~ ~~Where state general funding is reduced;~~

~~(2)~~ ~~An emergency exists; or~~

~~(3)~~ ~~There is a renegotiated budget approved by a regional system board~~].

The corporation and regional system boards shall collaboratively develop budgetary guidelines and negotiate with each facility reasonable corporation administrative costs, including funds determined by the corporation or any regional system board to be needed from or provided to each facility to:

(1) Repay corporation or regional system board debts;

(2) Provide subsidies to any facility determined to be unable to fund from within that facility's programs and services deemed essential to community needs; and

(3) Maintain appropriate reserves."

2. By amending subsection (d) to read:

"(d) Beginning with the first of the legislative biennium budget years following the establishment of a regional system board, and for each biennium period thereafter, the corporation shall call together all the regional systems through representatives selected by each regional system board, and the chairs of the facility management advisory committees, if any, to determine which services and functions should be provided by the corporation for the next biennium budget period, consistent with this chapter. As part of the biennium budgeting process, the corporation board and the representatives of each regional system, working through the corporation board regional representatives, shall agree upon an allocation methodology for funding the agreed upon and statutorily created corporate services and functions. When allocation decisions cannot be reached by agreement of the regional and corporate boards, the corporate board shall decide the allocation for that service or function for that biennium period."

PART II

SECTION 5. The legislature finds that under current law, employees of the Hawaii health systems corporation are included in seven bargaining units that also include employees of other public employers. While this arrangement is not unique to the Hawaii health systems corporation, the corporation's status as one of the nation's largest public health care organizations providing acute and long term health care services makes its workforce needs wholly different from other government agencies in the State.

Other health care workers are employed by the State. The ability to negotiate comprehensive master collective bargaining agreements that address the wages, hours, and working conditions of its employees will allow the Hawaii health systems corporation to expeditiously respond to and address the unique issues inherent in its hospital operations, including census, acuity, process improvement, and most importantly, quality patient care.

The purpose of this part is to provide for negotiation of master collective bargaining agreements by the Hawaii health systems corporation for its employees.

SECTION 6. Section 89-8.5, Hawaii Revised Statutes, is amended to read as follows:

"[[]§89-8.5[]] Negotiating authority; Hawaii health systems corporation. Notwithstanding any law to the contrary, including section 89-6(d), the Hawaii health systems corporation or any of the regional boards, as a sole employer negotiator, may negotiate with the exclusive representative of any appropriate bargaining unit and execute [~~memorandums of understanding~~] its own collective bargaining agreement that is a mandatory subject of collective bargaining for employees under its control [~~to alter any existing or new collective bargaining agreement on any item or items subject to section 89-9~~]."

PART III

SECTION 7. In Act 182, Session Laws of Hawaii 2009, the legislature authorized any of the regional systems or individual facilities of the Hawaii health systems corporation to transition into a new legal entity in any form recognized under the laws of the State. With the approval and support of its regional system board, at least one regional system has actively explored the possibilities of a public-private partnership allowed under section 323F-7.6, Hawaii Revised Statutes, including undertaking three formal solicitation efforts to gauge the interest of potential private partners locally and nationally. In the course of the regional system's exploration of possible ventures with private partners, that regional system has contacted over twenty companies that operate in Hawaii and elsewhere in the United States. In 2012, that regional system submitted confidential information memoranda, describing the operational and financial landscape of its facilities, to twelve different companies and contacted an additional eight entities to explore their interest in a possible partnership. Over the course of these explorations, that regional system has undertaken serious and robust discussions with at least six preliminarily interested parties.

During the course of these efforts, the Hawaii health systems corporation has determined that the majority of potential partners are hesitant to evaluate partnership opportunities without enabling legislation that addresses certain structural issues related to such a transaction. In recent years, the only private entity outside Hawaii that was willing to invest resources to evaluate a partnership opportunity concurrently with the pursuit of enabling legislation eventually withdrew its interest when such legislation was not adopted. The regional system in that case has since engaged in discussion with other private entities, including one private entity that has indicated willingness to continue discussions concurrently with pursuit of enabling legislation.

The purpose of this part is to ensure that the people of the State have continued access to health care services areas served by regional systems of the Hawaii health care corporation. Accordingly, this part authorizes a regional system of the Hawaii health systems corporation, in collaboration with a private entity, to transition any one or more of its facilities, to management and operation by a new nonprofit management entity.

SECTION 8. 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 a regional system facility to a new entity

§323F-A Definitions. As used in this part:

"Nonprofit management entity" means a nonprofit organization duly established under the laws of the State, the sole shareholder or member of which is the private entity, and the principal purpose of which is to manage and operate a transitioned facility.

"Pre-transition facility" means a facility of a regional system prior to its transition into a transitioned facility.

"Private entity" means a business organization duly established under the laws of the State that operates medical care facilities and with which, directly or through a wholly-owned nonprofit management entity, a regional system or the State, as applicable, is authorized to enter into lease agreements and any other agreements contemplated or necessary under this part for the purpose of transferring business ownership interests of a pre-transition facility to a nonprofit management entity.

"Transitioned facility" means a medical facility of a regional system:

(1) For which the ongoing right to conduct business is exclusively transferred to a nonprofit management entity, subject to the limitations of this part;

(2) The management and operations of which become the sole responsibility of the nonprofit management entity; and

(3) The real property assets of which remain owned by the corporation or the State and shall be subject to a fixed-term lease agreement between a regional system or the State, as applicable, and the nonprofit management entity, pursuant to section 323F-D.

§323F-B Transition of a facility of a regional system to management and operation by a nonprofit management entity. Notwithstanding any other law to the contrary, including but not limited to section 27-1, section 76-16(b) and other sections of chapter 76, chapters 78, 89, 89A, 89C, and 171, part V of chapter 323D and all other parts of 323D, and section 323F-7.6, a regional system may negotiate an agreement with a private entity to transfer the exclusive right to conduct ongoing business at one or more of its facilities to a nonprofit management entity wholly-owned by the private entity.

§323F-C Approvals required. Transition under this part shall occur only upon approval of the operating lease described in section 323F-D and section 323F-E by the governor and the relevant regional system board. Any documents associated with the transition shall be subject to review by the attorney general and the director of finance in their capacity to advise the governor.

§323F-D Real property; terms and conditions. (a) As a precondition to transfer of the exclusive right to conduct ongoing business at a facility under section 323F-B, the corporation or the relevant regional system board, or both, as applicable, shall enter into a fixed-term operating lease of no less than twenty-five years with the nonprofit management entity for the purpose of leasing the facility's real property, including improvements and physical structures, and for operating the facility as set out in section 323F-E.

(b) The operating lease shall include the following terms and conditions:

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

(2) The operating 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 nonprofit management entity shall have exclusive control of all matters related to the management and operation of the leased facilities, except as otherwise set forth in the operating lease;

(4) The responsibility to oversee the performance of the terms of the lease by the nonprofit management entity shall rest with the relevant regional system board or the corporation, as applicable; and

(5) The corporation shall retain ownership of all leased property throughout the term of the operating lease.

§323F-E Management terms and other business assets. The operating lease shall include terms and conditions for transfer of ownership or assignment of business operations at the transitioned facility, equipment and furnishings including any leases for same, accounts receivable, medicare and other provider agreements, business and commercial licenses and registrations, intellectual property and goodwill, and any other current assets. The operating lease shall also include a ten-year business plan for the facility after completion of its transition into a transitioned facility, and the nonprofit management entity shall agree to make reasonable best efforts to achieve the performance goals described in the business plan.

§323F-F Liabilities. (a) The State, the relevant regional system board, 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 of the effective date of the operating lease described in section 323F‑D. 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 all current outstanding post-employment benefits, shall remain the responsibility of the State.

(b) All future liabilities arising out of a transitioned facility's management and operation shall be the responsibility of the nonprofit management entity for that transitioned facility.

§323F-G Employment, wages, and benefits. (a) The corporation and the unions representing employees of the corporation shall meet to discuss the impact of the transition of a pre-transition facility on its employees.

(b) The employees working at a transitioned facility shall be subject to laws and regulations that apply to private sector employees. The employees of a nonprofit management entity shall not be governed by state laws that apply to public officers and employees of the State including, but not limited to, section 76-16(b) and all other sections of chapter 76, chapters 89 and 89A, and any other laws and regulations that govern public or government employment in the State.

(c) Employees of a pre-transition facility shall be transitioned to employment at a transitioned facility under the terms and conditions of employment established by the nonprofit management entity for that transitioned facility.

(d) The nonprofit management entity 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 entity, continued employment for an initial period established by the nonprofit management entity for newly hired employees, subject to any rules or policies applicable to employees of the nonprofit management entity. The nonprofit management entity may, at its discretion, continue to employ any or all medical and nonmedical employees at the transitioned facility after the initial period.

(e) 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.

(f) Subject to subsection (d), the nonprofit management entity shall take all reasonable steps necessary to provide for a smooth transition of employees from state employment to private employment by the nonprofit management entity at a transitioned facility.

§323F-H Operating support. (a) Without regard to chapter 42F, a nonprofit management entity or the relevant regional system may seek funds from the State for its operating costs of a transitioned facility by preparing a budgetary request, as those terms are defined in section 37-62, in accordance with procedures and criteria established by the director of finance. In no event shall the amount requested exceed the amount appropriated for the operating costs of the relevant regional system for the 2014 fiscal year. The director of finance shall review the request and may include some or all of the amount requested in the executive budget of the department of health. Any appropriation made in response to the request shall be subject to the allotment system generally applicable to all appropriations made by the legislature. The department of health shall be responsible for transferring the funds allotted to the nonprofit management entity or the relevant regional system for expenditure.

(b) To qualify to request funds from the State under this section, a nonprofit management entity or the relevant regional system must satisfy the following standards and conditions:

(1) Be incorporated under the laws of the State, and determined and designated to be a nonprofit organization by the Internal Revenue Service, or, in the case of a regional system, continue to be designated as a regional system pursuant to section 323F-2(b);

(2) Be licensed and accredited, in accordance with federal, state, or county statutes, rules, or ordinances, to conduct the activities for which funding is sought;

(3) Have a governing board whose members have no material conflict of interest and serve without compensation;

(4) Have bylaws or policies that describe the manner in which business is conducted, prohibit nepotism, and provide for the management of potential conflicts of interest situations;

(5) Be in compliance with all of the requirements of chapter 323D with respect to the transitioned facility and any other health care facility it operates;

(6) Submit tax clearances from the director of taxation and the Internal Revenue Service to the effect that all tax returns due have been filed, and all taxes, interest, and penalties levied or accrued against have been paid, or, in the case of a regional system, as appropriate with respect to the corporation;

(7) Submit to an annual audit, disclose revenue projections, and prepare an annual internal performance audit and itemized financial statements, including reimbursement rates, with respect to a transitioned facility, in the same manner as described in section 323F-22; and

(8) Submit its annual budget with respect to a transitioned facility to the legislature for review at least twenty days prior to the convening of the regular legislative session.

§323F-I Capital project support. (a) Without regard to chapter 42F, a nonprofit management entity or the relevant regional system may seek funds from the State for capital expenditures, as that term is defined in section 37-62, for a transitioned facility for each or all of the first ten years of the operating lease required by section 323F-D, using the ten-year business plan described in section 323F-E for guideline purposes. Each year's request for funds shall be submitted to the director of finance in accordance with procedures and criteria established by the director, and reviewed by the director and comptroller with pertinent capital planning and expenditure documents, and the capital planning procedures supplied by the nonprofit management entity or the relevant regional system. The director of finance may include some or all of the funds requested in the executive budget of the department of health. Any appropriation made in response to a request shall be subject to the allotment system generally applicable to all appropriations made by the legislature. The department of health shall be responsible for transferring the funds allotted to the nonprofit management entity or the relevant regional system for expenditure.

(b) After the first ten years of the operating lease, the nonprofit management entity and the private entity shall be responsible for funding all capital expenditures of the transitioned facility.

(c) To qualify to request funds from the State under this section, a nonprofit management entity or a regional system shall satisfy all of the standards and conditions set out in section 323F-H(b). In addition, the transitioned facility shall demonstrate that the capital projects constructed, operated, and maintained with the requested funds will be in compliance with all federal, state, and county health care planning laws and rules, land use and zoning laws and rules, environmental laws and rules, and building and health codes, rules, and regulations.

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

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

(1) Expanding primary care access throughout the relevant region;

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

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

(4) Coordinating long-term care patients and reducing wait lists;

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

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

PART IV

SECTION 9. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2015-2016 for the establishment of full-time equivalent ( FTE) permanent positions in the department of budget and finance to coordinate the review of documents and examine the fiscal implications posed by a transition of any Hawaii health systems corporation facility to management and operation by a nonprofit management entity.

The sum appropriated shall be expended by the department of budget and finance for the purposes of this part.

PART V

SECTION 10. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 11. In codifying the new sections added by section 8 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 12. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 13. This Act shall take effect on January 7, 2059; provided that part II of this Act shall apply to collective bargaining agreements negotiated after July 1, 2015; provided further that part IV shall take effect on July 1, 2015.

HOUSE OF REPRESENTATIVES	H.B. NO.	1112
TWENTY-EIGHTH LEGISLATURE, 2015		H.D. 2
STATE OF HAWAII		S.D. 2