SECTION 1. The legislature finds that the decentralization of personnel, purchasing and other administrative functions to the four regions within the Hawaii health systems corporation caused inefficiencies that are detrimental to the financial stability of the system, operational effectiveness, and employee morale. The current organizational structure of the Hawaii health systems corporation is ineffective. Consequently, there is an urgent need to stabilize the network of public hospitals that are the primary source of medical care on the neighbor islands, as well as a safety net for thousands of elderly and needy patients.

The purpose of this Act is to centralize personnel, purchasing, and other administrative functions within the Hawaii health systems corporation 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-1, Hawaii Revised Statutes, is amended as follows:

1. By inserting a new definition to be appropriately inserted and to read:

""Regional public health care facility management advisory committee" means a regional committee that advises the chief executive officer and the corporation board."

2. By repealing the definition of "regional system board":

["~~"Regional system board" means a community-based governing board of directors of a regional system of the corporation.~~"]

SECTION 4. Section 323F-2, Hawaii Revised Statutes, is amended to read as follows:

"§323F-2 Hawaii health systems corporation. (a) There is established the Hawaii health systems corporation, which shall be a public body corporate and politic and an instrumentality and agency of the State. The corporation shall be placed within the department of health for the administrative purposes specified in section 26-35(a)(6) only.

(b) The corporate organization shall be divided into five regional systems, as follows:

(1) The [~~Oahu regional health care system;~~] city and county of Honolulu;

(2) The [~~Kauai regional health care system;~~] county of Kauai;

(3) The [~~Maui regional health care system;~~] county of Maui, except for the county of Kalawao;

(4) The [~~east Hawaii regional health care system,~~] eastern section of the county of Hawaii, comprising the Puna district, north Hilo district, south Hilo district, Hamakua district, and Kau district; and

(5) The [~~west Hawaii regional health care system,~~] western section of the county of Hawaii, comprising the north Kohala district, south Kohala district, north Kona district, and south Kona district;

and shall be identified as regional systems I, II, III, IV, and V, respectively."

SECTION 5. Section 323F-3, Hawaii Revised Statutes, is amended to read as follows:

"§323F-3 Corporation board. (a) The corporation shall be governed by [~~an eighteen-member~~] a thirteen-member board of directors that shall carry out the duties and responsibilities of the corporation [~~other than those duties and responsibilities relating to the establishment of any captive insurance company pursuant to section 323F-7(c)(20) and the operation thereof~~].

[~~(b) The members of the corporation board shall be appointed as follows:~~

~~(1)~~ ~~The director of health as an ex officio, voting member;~~

~~(2)~~ ~~The five regional chief executive officers as ex officio, nonvoting members;~~

~~(3)~~ Three members who reside in the county of Maui, two of whom shall be appointed by the Maui regional system board and one of whom shall be appointed by the governor, all of whom shall serve as voting members;

~~(4)~~ Two members who reside in the eastern section of the county of Hawaii, one of whom shall be appointed by the East Hawaii regional system board and one of whom shall be appointed by the governor, both of whom shall serve as voting members;

~~(5)~~ Two members who reside in the western section of the county of Hawaii, one of whom shall be appointed by the West Hawaii regional system board and one of whom shall be appointed by the governor, both of whom shall serve as voting members;

~~(6)~~ Two members who reside on the island of Kauai, one of whom shall be appointed by the Kauai regional system board and one of whom shall be appointed by the governor, both of whom shall serve as voting members;

~~(7)~~ Two members who reside on the island of Oahu, one of whom shall be appointed by the Oahu regional system board and one of whom shall be appointed by the governor, both of whom shall serve as voting members; and

~~(8)~~ ~~One member who shall be appointed by the governor and serve as an at-large voting member.~~

The appointed board members who reside in the county of Maui, eastern section of the county of Hawaii, western section of the county of Hawaii, on the island of Kauai, and on the island of Oahu shall each serve for a term of four years; provided that the terms of the initial appointments of the members who are appointed by their respective regional system boards shall be as follows: one of the initial members from the county of Maui shall be appointed to serve a term of two years and the other member shall be appointed to serve a term of four years; the initial member from East Hawaii shall be appointed to serve a term of two years; the initial member from West Hawaii shall be appointed to serve a term of four years; the initial member from the island of Kauai shall be appointed to serve a term of two years; and the initial member from the island of Oahu shall be appointed to serve a term of four years; and provided further that the terms of the initial appointments of the members who are appointed by the governor shall be four years. The at-large member appointed by the governor shall serve a term of two years.]

(b) Ten members of the corporation board shall be appointed by the governor pursuant to section 26-34 as follows:

(1) One member from region I who resides in the city and county of Honolulu;

(2) One member from region II who resides in the county of Kauai;

(3) One member from region III who resides in the county of Maui;

(4) One member from region IV who resides in the eastern section of the county of Hawaii;

(5) One member from region V who resides in the western section of the county of Hawaii;

(6) One member from region II who resides in the county of Kauai or from region III who resides in the district of Hana or on the island of Lanai; provided that in no event shall the member be appointed from the same region for two consecutive terms; and

(7) Four at-large members who reside in the State.

The eleventh member shall be the chairperson of the executive public health facility management advisory committee, who shall serve as an ex officio, voting member.

The twelfth member, who shall serve as a voting member, shall be a physician with active medical staff privileges at one of the corporation's public health facilities. The physician member shall serve a term of two years. The initial physician member shall be from region II, and subsequent physician members shall come from regions IV, III, and V, respectively. The physician member position shall continue to rotate in this order. The physician member shall be appointed to the corporation board by a simple majority vote of the members of the executive public health facility management advisory committee from a list of qualified nominees submitted by the public health facility management advisory committee for the region from which the physician member is to be chosen. If for any reason a physician member is unable to serve a full term, the remainder of that term shall be filled by a physician from the same region.

The thirteenth member shall be the director of health or the director's designee, who shall serve as an ex officio, voting member.

Prior to the transfer date, the public health facility management advisory committees appointed pursuant to section 323F-10 for each county may recommend names to the governor for each position on the corporation board designated for a region that corresponds to its county. After the transfer date, the public health facility management advisory committees appointed pursuant to section 323F-10 for each region may make recommendations to the governor. The appointed board members shall serve for a term of four years; provided that upon the initial appointment of the first ten members:

(1) Two at-large members shall be appointed for a term of two years;

(2) Three at-large members shall be appointed for a term of three years; and

(3) Five regional members shall be appointed for a term of four years.

Any vacancy shall be filled in the same manner provided for the original appointments. The corporation board shall elect its own chair from among its members. [Appointments to the corporation board shall be as representative as possible of the system's stakeholders as outlined in this subsection. The board member appointments shall strive to create a board that includes expertise in the fields of medicine, finance, health care administration, government affairs, human resources, and law.]

(c) The selection, appointment, and confirmation of any nominee shall be based on ensuring that board members have diverse and beneficial perspectives and experiences and that they include, to the extent possible, representatives of the medical, business, management, law, finance, and health sectors, and patients or consumers. Members of the board shall serve without compensation but may be reimbursed for actual expenses, including travel expenses incurred in the performance of their duties.

(d) Any member of the board may be removed for cause by the governor or for cause by vote of a two-thirds majority of the board's members then in office. For purposes of this section, cause shall include without limitation:

(1) Malfeasance in office;

(2) Failure to attend regularly called meetings;

(3) Sentencing for conviction of a felony, to the extent allowed by section 831-2; or

(4) Any other cause that may render a member incapable or unfit to discharge the duties required under this chapter.

Filing nomination papers for elective office or appointment to elective office, or conviction of a felony consistent with section 831-3.1, shall automatically and immediately disqualify a board member from office."

SECTION 6. Section 323F-4, Hawaii Revised Statutes, is amended to read as follows:

"§323F-4 Board meetings. (a) The corporation board [~~and each regional system board~~] shall be exempt from part I of chapter 92 and shall meet no fewer than four times [a] per year[~~; provided that the regional system boards and the corporation board shall meet together at least once a year.~~] Each regional [~~board~~] public health facility management advisory committee shall meet at least six times each year; provided that two of these meetings shall be public community meetings for the purpose of informing the community and taking comment on the regional [~~system's~~] public health facility management advisory committee performance [~~if these meetings are in addition to the four board meetings~~]. The public community meetings shall be advertised in a newspaper of general circulation in the regional system at least two weeks in advance.

(b) All business of the corporation board [~~and each regional system board~~] shall be conducted at a regular or special meeting at which a quorum is present, consisting of at least a majority of the directors then in office. The corporation board [~~and each regional system board~~] shall adopt procedural rules for meetings, not subject to chapter 91, that shall include provisions for meetings via electronic and telephonic communications and other methods that allow the [~~boards~~] board to conduct business in a timely and efficient manner. Any action of the corporation board [~~or each regional system board~~] shall require the affirmative vote of a majority of those present and voting at the meeting; except that a vote of two-thirds of the entire membership of the respective board then in office shall be required for any of the following actions:

(1) Removal by the corporation board [~~or respective regional system board~~] of one of its members; provided that the eleventh and twelfth members set forth in section 323F-3 may be removed only pursuant to sections 323F-10 and 323F-10.5;

(2) Amendment by the corporation [~~or a regional system~~] board of its bylaws;

(3) Hiring or removing [~~a regional~~] the chief executive officer[;] of the corporation; and

[~~(4)~~ ~~Filling of vacancies on a board; and~~

~~(5)~~] (4) Any other actions as provided by the corporation [~~or regional system board~~] bylaws[~~, except the hiring or removing of the chief executive officer of the corporation~~]."

SECTION 7. Section 323F-5, Hawaii Revised Statutes, is amended to read as follows:

"§323F-5 Disclosure of interests. All corporation [~~and regional system~~] board members and employees of the corporation shall be subject to chapter 84."

SECTION 8. Section 323F-7, Hawaii Revised Statutes, is amended to read as follows:

"§323F-7 Duties and powers of the corporation [~~and regional system boards.~~ (a) Notwithstanding any other law to the contrary and unless otherwise specified, only those duties and powers related to corporation-wide matters, including but not limited to corporation-wide budgeting, personnel policies, procurement policies, fiscal policies, accounting policies, policies related to affiliations, joint ventures and contracts, regulatory compliance, risk management, continuing medical education programs, strategic planning, and capital planning, including the issuance of revenue bonds in any amount, shall be carried out by the corporation board in collaboration with the regional system boards. Duties and powers related to the operation of facilities within each regional system, including but not limited to regional system and facility budgeting, employment and removal of regional system and facility personnel, purchasing, regional system strategic and capital planning, organization, quality assurance, improvement and reporting, credentialing of medical staff, and the issuance of revenue bonds in any amount with corporation board approval, shall be carried out by the regional system boards, either directly or by delegation to regional and facility administration. Unless otherwise prohibited, the duties and powers granted to the corporation board may be delegated to the regional system boards.

(b) Duties and powers exercised by the regional system boards under this chapter or delegated to the regional system boards by the corporation board shall be consistent with corporation-wide policies. Wherever appropriate, corporation-wide policies shall take into account differences among regional systems and among types of facilities, particularly acute care, critical access, and long-term care facilities within the system.

New corporation-wide policies, and major changes to existing policies other than those changes mandated by legal or regulatory requirements, shall be developed by the corporation board after consultation with a policies committee. The policies committee shall be made up of representatives of the corporation board and each regional system board or designees of each board. The corporation board shall have two representatives on this committee. The corporation board shall review and consider approval of the policies within thirty days of transmittal by the policies committee or at the next board meeting; provided that, if the policies committee fails to take action within thirty days of receiving the proposed policy, the corporation board may consider and adopt or reject or revise the policy. The regional system boards and corporation board, as needed, may submit a request to the committee to alter corporation-wide policies along with detailed justification for the request. The regional system boards and the corporation board shall collaboratively establish a procedure to further implement this section.

~~(c)~~] (a) Notwithstanding any other law to the contrary, the corporation [~~and any of the regional system boards~~] shall have and 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] corporate-wide policies, procedures, and rules necessary or appropriate to plan, operate, manage, and control the system of public health facilities [~~within its own regional system consistent with corporation policies;~~] and services without regard to chapter 91;

(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];

(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 centralized 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~~] and its chief executive officer 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~~] for property that 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~~] the 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~~

~~(C)~~ ~~The~~] the corporation shall be subject to chapter 103D;

(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.~~] Calling upon the attorney general for legal services that the corporation may require.

[(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.]

(b) The corporation shall not be subject to chapters 36, 37, 37D, 38, 40, and 41D, except as otherwise provided in this chapter.

[~~(e)~~] (c) The duties and powers granted to the corporation [~~or any regional system board~~] may not be used to enter into contractual or business relationships that have the practical effect of allowing or are intended to allow private-sector counterparts to replace existing employee positions or responsibilities within the corporation [or in any regional system or its facilities; provided the corporation or regional system boards shall be allowed to enter into such relationships to the extent and for the purposes that the division of community hospitals could have done under collective bargaining contracts that were in effect for the 1995-1996 fiscal year]."

SECTION 9. Section 323F-7.6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) A transition shall only occur upon approval of the [appropriate regional system board 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 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 shall be subject to the following terms and conditions:

(1) All proceeds from the sale, lease, or transfer of assets shall be used for health care services in the respective regional system or facility, except that real property shall only be transferred by lease;

(2) Any and all liabilities of a regional system or facility transitioning into a new entity 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 regional system or 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 facility; and

(B) All applicable provisions of this chapter shall continue to apply.

Upon the completion of the transition of all the facilities in a regional system to a new entity, the regional system board for that regional system shall terminate; provided that if not all of a regional system's facilities are transitioned to a new entity, the existing regional system board shall not terminate but shall continue to retain jurisdiction over those facilities remaining in the regional system."

SECTION 10. Section 323F-8, Hawaii Revised Statutes, is amended to read as follows:

"§323F-8 Chief executive officer; exempt positions. (a) The corporation board may appoint, by majority vote of its entire membership, a chief executive officer of the corporation whose salary shall be set by the corporation board and who shall be exempt from chapter 76 and section 26-35(a)(4). The chief executive officer may also appoint up to eighteen other personnel, exempt from chapters 76 and 89, to work directly for the chief executive officer and the corporate board.

(b) The corporation board or its designee may discharge its exempt personnel with or without cause; provided that removal without cause shall not prejudice any contract rights of personnel.

[~~The discharge of the chief executive officer shall require a majority vote of the entire membership of the corporation board.~~]

(c) The corporation's chief executive officer or the chief executive officer's designee may appoint, exempt from chapters 76 and 89, hospital administrators, assistant administrators, directors of nursing, medical directors, and staff physicians, to facilitate the management of facilities within the corporation[; provided that directors of nursing appointed before July 1, 1998, may maintain their civil service status as provided in chapter 76 by so communicating in writing to the chief executive officer by October 31, 1998. Hospital administrators and assistant administrators appointed before July 1, 1983, may maintain their permanent civil service status as provided in chapter 76.

(d) Hiring, firing, compensation packages, and other personnel actions with respect to employees not covered by chapter 76 and 89 shall be governed by policies and guidelines established by the corporation, except as otherwise provided in this chapter.

(e) Upon the establishment of a regional system board, the authority to appoint regional hospital administrators, assistant administrators, directors of nursing, medical directors, and staff physicians under subsection (c) shall be superseded by section 323F-8.5 for that regional system. No incumbent personnel shall lose a position without specific action taken by the regional system board]."

SECTION 11. Section 323F-9, Hawaii Revised Statutes, is amended to read as follows:

"§323F-9 Hiring of attorneys. The corporation [~~and regional system boards~~] may employ or retain any attorney, by contract or otherwise, for the purpose of representing the corporation [~~or regional system boards~~] in any litigation, rendering legal counsel, or drafting legal documents for the corporation [~~or regional system boards~~]."

SECTION 12. Section 323F-10, Hawaii Revised Statutes, is amended to read as follows:

"§323F-10 Regional public health facility management advisory committees. (a) [~~On the transfer date, there~~] There shall be established within the corporation for each region, a public health facility management advisory committee to consist of nine members initially to be appointed by the chief executive officer of the corporation with the advice of the hospital administrators of the facilities in the affected regions. The members shall serve for a term of four years; provided that upon the initial appointment of the members, two shall be appointed for a term of one year, two for a term of two years, two for a term of three years, and three for a term of four years.

Following the initial appointments by the chief executive officer of the corporation board, any vacancies on a regional committee shall be filled by a simple majority vote of the members of the executive committee from a list of qualified nominees submitted by the regional committee in which the vacancy occurred. If a regional committee vacancy remains unfilled for more than thirty days, that vacancy may be filled by the chief executive officer of the corporation.

Each regional management advisory committee shall include medical and health care providers, consumers, and knowledgeable individuals in other appropriate areas such as business and law; provided that at least one member shall be a physician with active medical staff privileges at one of the region's public health facilities. At least three members of the committee shall be consumers.

The management advisory committee for the East Hawaii region shall have three members who reside in the Ka�u district, three members who reside in the Hamakua/North Hilo districts, and three members who reside in the South Hilo/Puna districts. The management advisory committee for the West Hawaii region shall have not less than three members who reside in the North Kohala/South Kohala districts.

Each regional committee shall select its own chairperson and vice chairperson and shall adopt rules governing the terms for removal of its chairperson from the executive management advisory committee. [~~In the event of~~] If a regional committee [~~voting~~] votes to remove its chairperson who concurrently sits on the corporation board, that vote shall be unanimous. [~~In the event of~~] If a regional committee [~~voting~~] votes to remove its physician member from the corporation board, that vote shall also be unanimous. Each regional committee may also adopt other rules as it may consider necessary for the conduct of its business.

The members of the regional committees shall serve without compensation, but shall be reimbursed for traveling expenses incurred in the performance of their duties. The corporation shall provide for the necessary expenses of the committees; provided that no expenses may be incurred without prior authorization by the chief executive officer.

(b) Each regional committee shall sit in an advisory capacity to the chief executive officer on matters concerning the formulation of regional operational and capital improvement budgets, and the planning, construction, improvement, maintenance, and operation of public health facilities within its respective jurisdiction and shall sit in an advisory capacity to the governor on matters concerning the nominees for positions on the corporation board. Nothing in this section shall be construed as precluding or preventing the committees from coordinating their efforts and activities with the facility administrators within their counties.

(c) Each regional committee may prepare a report for inclusion with the corporation's annual report and audit, which shall include but not be limited to comments and analyses on the corporation's regional operational and capital improvement budgets for its respective region.

[~~(d) Upon the establishment of a regional system board for a regional system pursuant to section 323F-3.5, this section shall no longer apply to that regional system.~~]"

SECTION 13. Section 323F-10.5, Hawaii Revised Statutes, is amended to read as follows:

"§323F-10.5 Executive public health facility management advisory committee; establishment. (a) There is established within the corporation an executive public health facility management advisory committee to consist of the chairpersons of each of the five regional public health facility management advisory committees. The executive committee [~~shall~~], through its chairperson, shall represent the interests of all regional committees on the corporation board.

(b) The executive committee shall select its own chairperson to serve on the corporation board and shall adopt rules governing the terms of office and removal from the corporation board. The executive committee shall also adopt rules governing the terms of office for each of the five regional committee chairpersons. The executive committee may also adopt other rules as it may consider necessary for the conduct of its business.

(c) The members of the executive committee shall serve without compensation, but shall be reimbursed for reasonable expenses incurred in the performance of their duties.

[~~(d) Upon the establishment of a regional system board for a regional system pursuant to section 323F-3.5, this section shall no longer apply to that regional system.~~]"

SECTION 14. Section 323F-11, Hawaii Revised Statutes, is amended to read as follows:

"§323F-11 Executive branch; noninterference. Notwithstanding any other law to the contrary, the governor and executive branch agencies shall limit their responsibilities to that of review and oversight when the corporation [~~or regional system board~~] receives general funds from the State to subsidize the operating budgets of deficit facilities. The governor and executive branch agencies shall not interfere with the systemic change, capacity building, advocacy, budget, personnel, system plan development, or plan implementation activities of the corporation [~~or any regional system board~~]. The governor and executive branch agencies shall not interfere with the ability of the corporation [~~or regional system board~~] to function as a multiple facility public hospital system delivering health care services to the residents of the State."

SECTION 15. Section 323F-21, Hawaii Revised Statutes, is amended to read as follows:

"§323F-21 Fiscal provisions. (a) There is created in the state treasury a special fund to be known as the health systems special fund, into which shall be deposited all fees, proceeds, reimbursements, and the like owed to or received by the corporation[~~, any regional system board,~~] and its facilities, except as herein provided. [~~There shall be established within the special fund regional subaccounts for each regional system board upon its establishment.~~] The special fund [~~and the regional subaccounts~~] shall be used solely to fulfill the purposes outlined in this chapter.

The corporation [~~and each regional system board~~] may establish and maintain, within the health systems special fund [~~or any regional subaccount~~], any [~~other~~] accounts that [~~may be~~] are necessary [~~and appropriate~~] to carry out its purposes and responsibilities.

[~~The corporation and any regional system board may deposit moneys into trustee accounts for the purposes of securing or issuing bonds.~~]

The corporation [~~and regional system boards~~] may provide reasonable reserves for any of the following purposes:

(1) Insurance deductibles;

(2) The improvement, replacement, or expansion of their facilities or services;

(3) The securing of the corporation's [~~or regional system boards'~~] bonds, notes, or other instruments of indebtedness; or

(4) Any other purpose the corporation [~~or the regional system boards deem~~] deems necessary [~~or appropriate~~] in the performance of their purposes and responsibilities.

(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 regional system boards, in alignment with State of Hawaii biennium budgeting. The corporate board shall not alter the two-year budget of a 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~~], and may allocate to 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.

(c) The corporation [~~and regional system boards~~] shall [~~collaboratively~~] develop annual corporation operating and capital budgets, taking into account anticipated surpluses from or subsidies to the facilities pursuant to the annual guidelines described in this section, accumulated corporation [~~and regional system board~~] reserves and accounts, subsidies, if any, that are determined to be needed from the general fund, and other sources of corporation-wide [~~and regional system board~~] income as may be identified.

[(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.

~~(e)~~] (d) The corporation may share in any facility's surplus and may offset any facility's deficits as provided herein. [Any regional system board shall share in the surplus of any facility within the regional system and shall offset any facility deficits within its regional system. Operating surpluses of the regional system board shall be reinvested in the operations of that regional system in any prudent manner; provided that upon request, and subject to authorization by the regional system board, the regional system board may share its surplus or resources with a facility outside of the regional system to benefit the corporation-wide system of health care.] Obligations undertaken by a facility shall be paid only from funds of that facility, unless the corporation board[~~, the regional system board managing the facility, or an~~] or its authorized agent explicitly agrees to guarantee the obligation. [~~Loans and other transfers may be made between regional systems upon approval of the affected regional system boards to assist in the cash flow and operations of the public health facilities.~~]

[~~(f)~~] (e) In accordance with each annual facility budget, and subject to policies established by the corporation board [~~and by each regional system board,~~] each facility of the corporation [~~and regional system board, respectively,~~] shall:

(1) Bill and collect for its services;

(2) Maintain bank accounts; and

(3) Pay for needed personnel, supplies, equipment, and other operational and capital expenditures.

[~~(g)~~] (f) The corporation [~~and each regional system board~~], subject to policies established by the corporation [~~and each regional system board, respectively~~], may elect to manage its own capital improvement project and funds, either directly or indirectly by contract; provided that annual reports of the project moneys are provided to the governor and legislature.

[~~(h)~~] (g) The corporation board [~~and regional system boards~~] may hold public informational meetings on [~~their~~] its budgets. Representatives of any county government, state government, or any other person having an interest in the budget, shall have the right to be heard at the meetings."

SECTION 16. Section 323F-22, Hawaii Revised Statutes, is amended to read as follows:

"§323F-22 Annual audit and report; disclosure of revenue projections[~~; internal performance audit~~]. (a) The corporation shall engage a certified public accountant to conduct an annual audit of its financial affairs, books, and records in accordance with generally accepted accounting principles. [The corporation, in consultation with a regional system board, may permit or require a regional system board to retain an audit firm to conduct an independent audit of the regional system. Each regional system board shall submit the results of the annual audit to the corporation board within one hundred twenty days after the close of the regional system board's fiscal year.] The corporation shall submit to the governor and the legislature, within one hundred fifty days after the close of the corporation's fiscal year, a report that shall include the audited financial report for that fiscal year for the corporation [~~and each regional system board~~].

(b) In addition to the submittal of the audit required under subsection (a), the corporation[~~, in cooperation with the regional system boards,~~] shall submit a report to the legislature at least twenty days prior to the convening of each regular session that shall include but not be limited to:

(1) The projected revenues for each health care facility;

(2) A list of all proposed capital improvement projects planned for implementation during the following fiscal year; and

(3) All reports submitted by regional public health facility management advisory committees pursuant to section 323F-10(c).

(c) The regional [~~system boards~~] public health facility management advisory committee shall prepare a report for inclusion with the corporation's annual report and audit.

(d) There shall be an annual internal audit of the management and operations of the corporation [~~and regions~~]. The corporation[~~, in cooperation with the regional system boards,~~] shall submit a report to the legislature at least twenty days prior to the convening of each regular session on the results of the annual internal audit of the management and operations of the corporation [~~and regions~~]."

SECTION 17. Section 323F-23, Hawaii Revised Statutes, is amended to read as follows:

"§323F-23 Exemption from taxation. The corporation [~~and each regional system board~~] shall be exempt from paying any:

(1) Assessments levied by any county; and

(2) State taxes of any kind."

SECTION 18. Section 323F-24, Hawaii Revised Statutes, is amended to read as follows:

"§323F-24 Budget oversight. The corporation's [~~and each regional system board's~~] operating and capital improvement budgets shall not be subject to review or approval by the governor or any state agency, except where state general funds or capital improvement moneys are requested. If general funds or capital improvement moneys are requested, then the corporation [~~or any regional system board~~] shall include, with its request, the proposed budget for which the funds or moneys are to be included. The corporation [~~and regional system boards, once operational,~~] shall [~~collaboratively~~] submit [~~their~~] its budgets annually to the legislature for review and approval at least twenty days prior to the convening of the regular legislative session[~~, beginning with the budgets for the 2010-2011 biennium fiscal years~~]."

SECTION 19. Section 323F-25, Hawaii Revised Statutes, is amended to read as follows:

"[[]§323F-25[] ~~Regional system board; community~~] Community hospitals; community health centers; collaboration. Each [~~regional system board and each~~] community hospital under the jurisdiction of the corporation shall collaborate with community health centers within their respective geographic jurisdictions to maximize funding from the state and federal governments to:

(1) Maximize reimbursement for health care services provided;

(2) Acquire funds for capital investment;

(3) Provide expanded hours of service; and

(4) Ensure the provision of the appropriate level of care to the community served by each community health center."

SECTION 20. Section 323F-31, Hawaii Revised Statutes, is amended to read as follows:

"§323F-31 Maintenance of services. (a) Prior to implementation, the corporation shall notify the legislature of any planned substantial expansion, reduction, or elimination of direct patient care services.

[~~(a)~~] (b) No [~~planned~~] substantial reduction or elimination of direct patient care services at any facility shall be undertaken [~~unless all of the following requirements are met:~~

~~(1)~~ ~~An initial determination is made by the regional chief executive officer as to critical and emergency services which shall not be subject to reduction or elimination pursuant to this section;~~

~~(2)~~ ~~The plan of the facility to substantially reduce or eliminate any direct patient care services at the health facility shall first be presented to the regional system board for its approval;~~

~~(3)~~ Subsequent to the requisite regional system board approval, the regional chief executive officer shall present the plan to the community in which the 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.~~] by the corporation without the approval of the legislature.

[(b) After the community informational meeting, but at least twenty days prior to the implementation of the plan approved by the regional system board, the regional system board 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 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.~~]

(c) The legislature shall maintain review and oversight authority over the provision of direct patient care services provided at each facility and may intervene to counter or restrict any substantial reduction or elimination of patient care services."

SECTION 21. Section 323F-3.5, Hawaii Revised Statutes, is repealed.

["~~§323F-3.5~~ ~~Regional system boards.~~ (a) There is hereby established a regional system board of directors to govern each of the five regional systems specified in section 323F‑2, no later than January 1, 2008. The regional system boards of directors shall carry out the duties and responsibilities as set forth in this chapter and as further delegated by the corporation.

(b) Upon its establishment, a regional system board shall assume custodial care of all financial assets, real property, including land, structures, and fixtures, or other physical assets, such as personal property, including furnishings, equipment, and inventory, of the corporation within its regional system. No sale or encumbrance of any such real property or such other financial assets, physical assets of the corporation shall be permitted without the mutual consent of the Hawaii health systems corporation board and the appropriate regional system board. No additional debts or liabilities or superior debts shall be added by the corporation to any regional system board that would negatively impact the holders of bond notes. Each regional system board shall be liable for any liabilities arising from financial assets, real or personal property in its custodial care.

(c) Each regional system shall be governed by a regional system board of directors to consist of not less than seven members and not more than fifteen members, as determined by the regional system board after the initial regional system board is established.

~~(1)~~ ~~Each regional system board shall initially consist of twelve members to be appointed by the governor under section 26-34 or as provided in this section, as follows:~~

~~(A)~~ ~~Four members shall be appointed by the governor within thirty days of receipt of a qualified list of candidates as follows:~~

~~(i)~~ Two members shall be chosen from a list of four individuals submitted by the speaker of the house of representatives within fifteen days of July 1, 2007; provided that this list shall not include physicians; and

~~(ii)~~ ~~Two members shall be chosen from a list of four individuals submitted by the president of the senate within fifteen days of July 1, 2007; provided that this list shall not include physicians;~~

~~(B)~~ Four members shall be appointed by the governor within thirty days from a list of eight individuals nominated by the regional public health facility management advisory committee within fifteen days of July 1, 2007. These individuals may be medical and health care providers and professionals, consumers, and knowledgeable individuals in other appropriate areas such as business, finance, and law; provided that these individuals shall not be physicians currently in active practice;

~~(C)~~ Three physicians shall be appointed by the governor within thirty days from a list submitted within fifteen days of July 1, 2007, of six physicians nominated by a majority vote of the medical staff of the public health facilities in the regional system present at a duly noticed meeting from a list of qualified candidates submitted by the medical executive committees in the regional system; and

~~(D)~~ ~~The corporation board chairperson or chairperson's designee shall serve as an ex officio, nonvoting member of each regional system board;~~

~~(2)~~ One member of each regional system board nominated by the speaker of the house of representatives, the president of the senate, and medical executive committees in a regional system shall be appointed for a term of two years;

~~(3)~~ ~~One member of each initial regional system board nominated by the regional public health facility management advisory committee for the regional system shall be appointed for a term of two years;~~

~~(4)~~ ~~The remaining members of each initial regional system board and all members appointed thereafter shall be appointed for terms of three years; and~~

~~(5)~~ New regional system board members appointed to any regional system board after the initial regional system board shall be selected by a two-thirds affirmative vote of the existing regional system board members.

~~Except for the ex officio members of each regional system board, all other members of a regional system board shall be residents of the region. Each regional system board shall elect its own chair.~~

~~(d) Each regional system board shall:~~

~~(1)~~ Be responsible for local governance, operations, and administration of the delivery of services in its respective regional system as set forth in this chapter and as further delegated by the corporation;

~~(2)~~ Include medical and health care providers and professionals, consumers, and knowledgeable individuals in other appropriate areas, such as business, finance, and law; provided that no more than three members of the regional system board shall be physicians;

~~(3)~~ ~~Be as balanced and representative of the community stakeholders as possible; and~~

~~(4)~~ ~~Have the powers, duties, and responsibilities that are specific to the regional system board as provided in this chapter.~~

(e) Any member of a regional system board may be removed for cause by the governor or for cause by vote of a two-thirds majority of the regional system board's voting members then in office. For purposes of this section, "cause" shall include without limitation:

~~(1)~~ ~~Malfeasance in office;~~

~~(2)~~ ~~Persistent failure to attend regularly called meetings;~~

~~(3)~~ ~~Sentencing for conviction of a felony, to the extent allowed by section 831-3.1; or~~

~~(4)~~ ~~Any other cause that may render a member incapable of discharging or unfit to discharge the duties required under this chapter.~~"]

SECTION 22. Section 323F-4.5, Hawaii Revised Statutes, is repealed.

["~~[§323F-4.5] Captive insurance board.~~ (a) There is established a ten-member captive insurance board that shall carry out the corporation's duties and responsibilities relating to the establishment of any captive insurance company pursuant to section [323F-7(c)(20)] and the operation thereof.

~~(b) Eight members of the captive insurance board shall be appointed by the governor as follows:~~

~~(1)~~ ~~Three members from a list of five persons submitted by the president of the senate; provided that at least one of these members shall have experience in the insurance industry and financial matters;~~

~~(2)~~ Three members from a list of five persons submitted by the speaker of the house of representatives; provided that at least one of these members shall have experience in the insurance industry and financial matters; and

~~(3)~~ ~~Two members, one of whom shall be the chief executive officer or chief financial officer of an insurer licensed to do business in the State and shall serve as a nonvoting member.~~

~~The director of health or the director's designee and the insurance commissioner or the commissioner's designee shall serve as ex officio, nonvoting members.~~

~~Any vacancy shall be filled in the same manner provided for the original appointments. The captive insurance board shall elect its own chair from among its members.~~

(c) The selection, appointment, and confirmation of any appointed nominee shall be based on ensuring that captive insurance board members have diverse and beneficial perspectives and experiences and that they include, to the extent possible, representatives of the insurance and/or finance sectors. Members of the captive insurance board shall serve without compensation but may be reimbursed for actual expenses, including travel expenses incurred in the performance of their duties.

(d) Any appointed member of the captive insurance board may be removed for cause by the governor or for cause by vote of a two-thirds majority of the captive insurance board members then in office. For purposes of this section, cause shall include without limitation:

~~(1)~~ ~~Malfeasance in office;~~

~~(2)~~ ~~Failure to attend regularly called meetings;~~

~~(3) Sentencing for conviction of a felony, to the extent allowed by section 831-2; or~~

~~(4)~~ ~~Any other cause that may render a member incapable or unfit to discharge the duties required under this chapter.~~

Filing nomination papers for elective office, appointment to elective office, or conviction of a felony consistent with section 831-3.1, shall automatically and immediately disqualify a board member from office.

(e) No member of the captive insurance board shall be an employee or vendor of the corporation, or an immediate family member thereof. For purposes of this subsection, "immediate family member" means a corporation board employee's or vendor's spouse, child, parent, grandparent, or any related individual who resides in the same household of the employee or vendor.]"

SECTION 23. Section 323F-7.5, Hawaii Revised Statutes, is repealed.

["~~[§323F-7.5]~~ Regional system boards; delegated authority. If the Hawaii health systems corporation board is unable to act on important transactions in as timely a manner as the chairperson of the corporation board deems reasonable, the chairperson of the corporation board may further delegate authority to the regional system boards to take action on specific matters."]

SECTION 24. Section 323F-8.5, Hawaii Revised Statutes, is repealed.

["~~§323F-8.5 Regional chief executive officer; exempt position.~~ (a) Upon establishment, a regional system board may appoint a regional chief executive officer whose salary shall be set by the corresponding regional system board and may discharge a regional chief executive officer; provided that the position shall be exempt from chapter 76 and section 26-35(a)(4). Each regional chief executive officer may also appoint, as necessary, other personnel, exempt from chapters 76 and 89, to work directly for the regional chief executive officer for the regional system and for the corresponding regional system board.

~~(b) Any regional system board or its designee may discharge its exempt personnel with or without cause; provided that removal without cause shall not prejudice any contract rights of personnel.~~

(c) Each regional chief executive officer or their designees may appoint, exempt from chapters 76 and 89, hospital administrators, assistant administrators, directors of nursing, medical directors, and staff physicians, to facilitate the management of facilities within the regional system.

(d) Hiring, firing, compensation packages, and other personnel actions with respect to employees not covered by chapters 76 and 89 shall be governed by policies adopted by each regional system board. These policies and guidelines shall be consistent with policies and guidelines adopted by the corporation board after consultation with the regional system boards."]

SECTION 25. The auditor shall conduct a comprehensive financial and management audit of the Hawaii health systems corporation, including an analysis of information technology operations, procurement practices, contract administration, cash collections, accounts receivable, and personnel management.

SECTION 26. The auditor shall submit a report of its findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2016.

SECTION 27. All rights, powers, functions, and duties of the Hawaii health systems corporation regional system boards are transferred to the Hawaii health systems corporation.

All employees who occupy civil service positions and whose functions are transferred to the Hawaii health systems corporation by this Act shall retain their civil service status, whether permanent or temporary. Employees shall be transferred without loss of salary, seniority (except as prescribed by applicable collective bargaining agreements), retention points, prior service credit, any vacation and sick leave credits previously earned, and other rights, benefits, and privileges, in accordance with state personnel laws and this Act; provided that the employees possess the minimum qualifications and public employment requirements for the class or position to which transferred or appointed, as applicable; provided further that subsequent changes in status may be made pursuant to applicable civil service and compensation laws.

Any employee who, prior to this Act, is exempt from civil service and is transferred as a consequence of this Act may retain the employee's exempt status, but shall not be appointed to a civil service position as a consequence of this Act. An exempt employee who is transferred by this Act shall not suffer any loss of prior service credit, vacation or sick leave credits previously earned, or other employee benefits or privileges as a consequence of this Act; provided that the employees possess legal and public employment requirements for the position to which transferred or appointed, as applicable; provided further that subsequent changes in status may be made pursuant to applicable employment and compensation laws. The board of directors of the Hawaii health systems corporation may prescribe the duties and qualifications of these employees and fix their salaries without regard to chapter 76, Hawaii Revised Statutes.

SECTION 28. All appropriations, records, equipment, machines, files, supplies, contracts, books, papers, documents, maps, and other personal property heretofore made, used, acquired, or held by the Hawaii health systems corporation regional system boards relating to the functions transferred to the Hawaii health systems corporation shall be transferred with the functions to which they relate.

SECTION 29. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 30. This Act shall take effect on July 1, 2015.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	1355
TWENTY-EIGHTH LEGISLATURE, 2015
STATE OF HAWAII