A top-to-bottom assessment of operations at Kahuku Hospital looms as a primary task for the state hospital system once it begins managing the financially troubled facility July 1.

For now, nothing will change, said Kelley Roberson, chief operating officer and chief financial officer for the public benefit corporation that oversees 12 facilities in the state-supported Hawai'i Health Systems Corp. Services will remain the same and staff will have their jobs, he said.

"We're not going to swoop in on July 2 and fire people," Roberson said. "But we'll have to evaluate things."

With the hospital on the verge of bankruptcy and threatening to close last year, lawmakers this session approved a bill that authorizes HHSC to acquire Kahuku Hospital assets using $3.9 million provided in the bill. The measure awaits Gov. Linda Lingle's consideration.

Final approval will mean that HHSC will own and operate the facility, assuring its future in the community where the nearest hospital is 22 miles away in Wahiawa.

With the passage of the bill, employees and community residents are relieved. But they worry about what could happen in the coming months.

Hospital employees are optimistic and upbeat but still are anxious about the future of the hospital and their benefits, said Lorrie Callaway, director of nursing.

They have received a letter stating they will no longer be Kahuku Hospital employees as of June 30, and that through the transition period HHSC plans to retain everyone and honor the union contracts in place, Callaway said.

"Are we going to be state employees or aren't we?" Callaway said. "Are we going to keep our benefits? Are we going to lose them? How is that going to affect our jobs?"

In 58 years serving the North Shore, Kahuku Hospital has at times been a near full-service facility. But years of financial losses have eroded its services and is now able to provide only essential needs such as a 24/7 emergency room and acute care.

Roberson praised the staff for maintaining a clean facility under difficult financial circumstances and held out hope of an expanded operation, including possibly opening areas for outpatient surgical procedures.

"That is an interesting possibility for the facility, but we have made no decision about additional services or any reduction in services because it's premature," Roberson said.

MUCH WORK REMAINS

Meanwhile, there's still plenty to do in the next seven weeks to complete action taken by the Legislature and Health Department to save the institution.

The transfer will require setting up a not-for-profit entity to run the hospital — a first for HHSC — and settling the bankruptcy proceedings.

A not-for-profit entity is needed to minimize any diversion of present funding from the 12 hospitals now under the agency and to grandfather current labor status for the Kahuku Hospital employees, said Miles Takaaze, public affairs director for HHSC.

After the transition, Kahuku Hospital will still be separate and distinct from the other 12 hospitals, but through its association with HHSC, the hospital will be able to reduce costs, Takaaze said.

The hospital's current board feels the pressure of the handover deadline.

"The real urgency is that come June 30 if the deal is not done, we'll be in the same position we were last December, which is we'll be out of money, ready to slip in to a Chapter 7 and shut down," said Eric Beaver, hospital board chairman.

As part of the deal with the state, the hospital was given $950,000 in emergency funding to carry it through June 30. That is separate from money included in the bill.

The bill sets aside $3.9 million for the transition. Most of that will go to the hospital for the purchase of assets, but some will be retained to pay operating costs through the first few months until reimbursement starts coming in, said Vincent Lee, chief executive officer for HHSC O'ahu Region, which will oversee the hospital. Reimbursement includes patient fees, health insurance and Medicaid/Medicare payments.

Lee said he expects the transfer to take place, though everything may not be done by July 1.

WHAT KIND OF SERVICES?

After the transfer is complete, the next step is to evaluate the services and operation there and decide what to provide at the facility.

"The decision will have to be based on one, is there a need for a hospital and for what type," he said. "It also has to do with the financial viability, the work force and also reimbursements."

Lee said he expects to work with the staff, the physicians and the community after the transition about the future of the hospital.

Residents are concerned and hope for more services, not less, said Irene Carpenter, a Sunset Beach resident and board member of the Ko'olauloa Community Health & Wellness Center.

"What we'd really like is to have improved services up there from what the hospital was able to offer with their limited finances, not just a cutback to an emergency room and nothing else," Carpenter said.

Whatever happens to the hospital, the state should at least get community input, she said.

The bill awaits Lingle's signature, but no problems are expected, said Linda Smith, the governor's senior policy adviser.

The measure must first be scrutinized by the Department of Health, the attorney general, Budget and Finance and the Kahuku Hospital Board, Smith said.

"So we have an implementation plan in place as the governor is signing this particular measure," Smith said. "I know everybody is very anxious to be able to keep the hospital open and operating out there and we want a smooth transition."

Reach Eloise Aguiar at eaguiar@honoluluadvertiser.com.