Decisions loom for $10.3 million Oahu region transition to Department of Health


Nicole Pasia


A years-long process to transform Oahu’s long-term care and safety net services will have to wait a little longer—at least until a new state administration takes place next year. 

Previous legislation mandated the transition of the Oahu regional health care system to the Department of Health to be completed by the end of this year, but the estimated $10.3 million price tag is prompting stakeholders to consider other options before making a final decision. 


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The department is justifying this transition by looking to expand mental health and substance abuse services in the region—such as the establishment of stabilization beds—through the Oahu region’s two facilities, Leahi Hospital and Maluhia. For the Oahu region, which currently operates under Hawaii Health Systems Corporation (HHSC), it would no longer need to compete for funds from the same pool as acute-care HHSC facilities on the neighbor islands. 

The Oahu Region currently provides lower-acuity, long-term care, and adult day health services to the area’s underserved population. A majority of these residents rely on Medicaid for their care, and the Oahu region may be the only setting for them to receive it, according to Sean Sanada, Oahu Region chief administrative officer. Other facilities may not admit these residents due to their need for more resources combined with low Medicaid reimbursement rates, he said. 

In July 2021, Gov. David Ige signed Act 212, which established a workgroup to facilitate the transition. The workgroup contained dozens of stakeholders from the department, Oahu Region, HHSC, and an independent consultant. 

Over the last few months of 2021, the group met several times to discuss the financial, human resource, IT, and legal logistics of the transition.

“Our concerns pre-pandemic centered on the potential financial impacts of block billing and the anticipated increase in need for long-term care,” Sanada said. “At that time, our discussions with the Department of Health on mental health and substance use treatment were still in their early stages. Since then, a whole lot has shifted. We still have a strong focus on our long term care operations – which includes the incorporation of the new Daniel K. Akaka State Veterans’ Home into our system – but mental health and substance use treatment have become additional and important priorities. We believe that now more than ever, we must be very strategic with our finances and operational goals.” 


Image: State of Reform


The workgroup estimated an additional 51 positions would need to be created to complete and maintain the inclusion of the Oahu region into the department framework. The expense totals $10.3 million, with an annual post-transition cost of $5 million. It also estimated the transition would more practically be completed by the end of 2024—well past the current deadline of Dec. 2022. 

In January 2022, the legislature introduced a bill that would extend the transition deadline to the end of 2025. However, during one of the bill’s hearings in March, the department issued testimony in opposition of the bill. 

“We don’t think that for $10.3 million, we would be able to get anything more than what we’re achieving right now,” said Department of Health Deputy Director Marian Tsuji at the hearing. “The goal was to be able to work closely and to ensure that we are able to partner, and that’s something that we’re doing already.”

Tsuji clarified the department would continue to work collaboratively with the Oahu region regardless of the legislature’s decision. Sanada offered testimony in support of the bill, adding that the Oahu region would also push through with the transition, if that is what the legislature decides. However he clarified to State of Reform that funds spent on the transition could be better allocated elsewhere.

“If given a choice, we believe that the community could be better served by repurposing the $10.3 million in estimated transition costs for capital improvements at our facilities. Under these circumstances, we would remain with HHSC and still have to facilitate our programs in a more complicated fashion through contracts, but the capital improvements would enable us to develop different areas of our facilities to make them more available for new and expanded services.” 

The workgroup is left with a couple alternative options. One is to classify the Oahu region as a standalone quasi-association to the department, much like the HHSC is now. This designation would allow the Oahu region to retain more of its current organizational structure without adding more positions. This translates to a much lower expenditure of $1.7 million during the initial transition and annual post-transition cost of $1.36 million. 

During last week’s testimony, Tsuji recommended another option, in which the Legislature would completely repeal Act 212, and therefore the transition. Instead, the Oahu region would remain under HHSC with a separate program ID to streamline funding. 

Ultimately, aside from the bill moving through the Senate to extend the transition timeline, no major decisions have been made yet. 

“It is possible,” Sanada said, “that [the legislature] may elect to delay the transition to give us time as a working group to further evaluate the feasibility of the different options and, at the same time, allow for the transition of power so that the new administration will have an opportunity to weigh in on this issue.” 

Regardless of the final decision, Sanada said all parties are committed to increasing services for Oahu’s vulnerable safety net population. 

“Our number one priority is to find the best and most financially feasible way to expand the resources we provide to the community both in the areas of long term care and mental health and substance use treatment. Despite any extensions of time that may be necessary to choose a particular route, that’s not going to stop us as well as the Department of Health from continuing to collaborate on innovative ways to extend the scope of our programs.”