The Hawai'i Health Systems Corp., the state's network of public hospitals, is suffering financially, and administrators have told state lawmakers they may soon have to lay off workers or reduce healthcare services.

State lawmakers and Gov. Linda Lingle agreed to $14 million in emergency spending this year so HHSC could make it through the fiscal year that ends Monday. In private meetings with state House and Senate lawmakers yesterday, HHSC administrators described the financial situation as dire and discussed whether lawmakers might authorize a reduction in services.

A law enacted last year created greater regional autonomy within HHSC and requires legislative approval before services are reduced or eliminated.

Miles Takaaze, HHSC's public affairs director, and several lawmakers, speaking privately because the discussions were held in closed caucuses and deemed confidential, confirmed that a resolution authorizing a reduction in services is being considered.

"I think that's part of all the various scenarios we're looking at right now," Takaaze said.

Takaaze would not confirm any details about layoffs. He linked HHSC's financial difficulty to the state's slowing economy and said administrators are examining different options to preserve "uninterrupted service."

Lawmakers would have to come back in special session to adopt such a resolution. A one-day session is possible in early July to try to override Lingle's vetoes, but lawmakers have said an override session is unlikely. House and Senate leaders are still discussing potential veto overrides.

The HHSC, the nation's fourth-largest public hospital system, was created by the state in 1996 as an umbrella to govern what is now 13 community hospitals. The hospitals are the largest healthcare providers on the Neighbor Islands.

The law passed last year established regional boards within HHSC and was in response to demands for greater autonomy and local decision-making generated, in large part, by a debate on Maui about the creation of a private hospital.

State Sen. Russell Kokubun, D-2nd (S. Hilo, Puna, Ka'u), said he doubted lawmakers would agree to an emergency appropriation for HHSC but may authorize a reduction in services.

"They're running out of money, and they need to take some measures to address that," said Kokubun, who did not attend the Senate's caucus yesterday and was not bound by any privacy constraints.

State Rep. Josh Green, D-6th (N. Kona; Keauhou; Kailua, Kona), who also did not attend the House caucus, said he has asked Lingle to call for a special session to address HHSC's financial problems.

"Our hospitals are experiencing very tough times and may be considering cutting jobs because (the Hawaii Medical Service Association), Medicare and Medicaid refuse to increase reimbursements enough for our healthcare system to survive," said Green, a Big Island doctor. "This is just the tip of the iceberg. We will continue to see the same desperate cycle of shortfalls and possible cuts until HMSA is forced to raise reimbursements."

However, state Senate Minority Leader Fred Hemmings, R-25th (Kailua, Waimanalo, Hawai'i), said lawmakers should not continue to bail out what he described as a failed monopoly that has fought private competition on Maui.

"It's totally uncalled for," Hemmings said. "Taxpayers are being held hostage by a foolhardy monopoly state hospital system."

Several Democrats have also questioned whether HHSC's management team has been effective. Some lawmakers complained privately yesterday about the awkward position of possibly having to return in special session to authorize service reductions at hospitals in the communities they represent.