HONOLULU-Two of Hawaii's leading hospitals, Queen's Medical Center and Straub Clinic and Hospital, have embarked on talks that could lead to collaboration-or more.
The nonbinding exploratory talks are expected to take several months, officials said.
Hovering over the discussions, however, are huge financial losses at Straub, which posted aggregate losses of more than $72 million from 1995 to 1997.
Queen's Health Systems, the parent of Queen's Medical, is solidly in the black, however. It's the 12th-largest corporation in Hawaii, with 4,000 employees and net income of $19.8 million on revenues of $497 million in 1998.
Queen's Medical and 139-bed Straub-which also operates a statewide network of 20 clinics and about 200 physicians, and runs several health plans-are investigating various unspecified forms of collaboration, according to officials at the two Honolulu-based hospitals. Queen's Medical Center, with 457 beds, is the islands' largest hospital, and a partnership or merger with Straub would increase its considerable market clout.
Collaboration between the two "could enhance services now provided or enable them to offer more-comprehensive services," according to a written statement by Richard Griffith, chief executive officer at Queen's Health, and Jon Grimes, his counterpart at Straub. Grimes recently replaced longtime Straub CEO Blake Waterhouse, M.D., who retired March 31.
The hospitals are the state's premiere tertiary-care centers and attract patients from as far away as Guam and Saipan in the West Pacific, according to Doug Murata, an industry consultant who was vice president of managed-care operations at Queen's Health Systems. Together, their tertiary-level market clout would be "unmatched," he said.
Between 1995 and 1997, however, Straub lost a total of $72.6 million, according to HCIA, a Baltimore-based healthcare information company. HCIA did not have more recent figures, and Straub officials declined to provide them.
In 1997 alone, Straub suffered a net loss of $23.4 million on net patient revenues of $165 million, according to HCIA. Straub officials dispute those figures, which are taken from hospital Medicare cost reports to HCFA.
"Those numbers reflect the hospital's numbers, and we are an integrated system. It misses half of the organization," said Jim Rudosky, Straub's administratorof marketing and communications.
In January, Straub officials told Pacific Business News, a weekly business journal,that the collapse of the Asian economy and a drop in tourists from East Asia were straining the system financially. Other factors were reductions in Medicare and Medicaid funding and higher pharmaceutical costs, officials said.
Nashville-based PhyCor acquired Straub in January 1997. A little more than a year later the hospital slashed pay for staff and clinic physicians, and last fall it trimmed about 150 jobs-8% of the system's roughly 2,000 positions at the time.
The Straub discussions could dovetail with talks between Queen's Health Systems and Kapiolani Health, a two-hospital system, about merging their money-losing health plans (Jan. 18, p. 10). Those talks, which could lead to expanded collaboration, are still under way, according to Queen's Health spokesman Joel Kennedy.
Kennedy said the systems' talks are separate from the hospitals' discussions.
Queen's Health and Kapiolani said early this year that combining 35,000-enrollee Queen's Island Care and Kapiolani's 43,000-enrollee HealthHawaii HMOs could reduce costs and improve quality of care.
