How to increase Hawaii’s healthcare capacity
from Grassroot Institute of Hawaii, August 9, 2022
Hawaii’s healthcare crisis is dire. How dire?
Keli‘i Akina, Grassroot Institute of Hawaii president, says the state has a critical shortage of doctors, nurses and other medical professionals, the fewest hospital beds per capita in the U.S., and the 10th longest emergency room wait lines. In addition, the state’s hospitals and long-term care facilities are understaffed, and many Hawaii residents are facing considerable delays in getting medical appointments.
Those were some of the frightening facts Akina reeled off Sunday morning, Aug. 7, 2022, in conversation with host Johnny Miro of he H. Hawaii Media network of Oahu radio stations — oldies 101.1 FM, 101.5 FM, 97.1 FM, 107.5 FM, 96.7 FM and 103.9 FM.
Miro noted that some people have been urging Gov. David Ige to declare a state of emergency, so as to suspend laws that could help alleviate the crisis. However, Akina said “an emergency isn’t the right way to address the problem.”
First of all, he said emergency orders are temporary, “so they’re a Band-Aid fix for a longstanding problem.”
They also lead to the dangerous territory of the governor abusing his emergency powers, whereas “a better way is to do it through the Legislature … where there can be public debate and participation.”
Akina said one helpful reform would be to liberalize the state’s certificate-of-need laws, which are among the most restrictive in the nation.
CON laws “are associated with higher costs, lower access to healthcare and fewer facilities,” he said. “Those are good reasons for Hawaii to join the rest of the country in getting rid of our CON laws.”
Akina also recommended exempting medical services from the state general excise tax.
“Hawaii is one of only four states that taxes the delivery of medical services,” Akina said. “The GET is a significant overhead expense for private practice doctors, making it very difficult to run a profitable practice, especially for new doctors with significant loans to repay,” or those in rural areas with lots of Medicare patients.
“We have a long-established history of creating GET exemptions to help certain industries,” he said. “Surely healthcare is worthy of the same assistance.”
Akina said Hawaii’s healthcare crisis “is the result of decades of regulation, taxation and other bad policy. And it can’t be undone in just a few easy steps, or in just a few years or with an emergency decree.”
He said the top priority of Hawaii lawmakers should be “removing the red tape that creates barriers to practice, whether that’s a certificate-of-need law reform or a licensing reform. That will lead to long-term solutions to our healthcare shortage and crisis.”
* * * * *
8-7-22 Johnny Miro and Keli‘i Akina discuss healthcare
Johnny Miro: Good Sunday morning to you. I’m Johnny Miro, and it’s time once again for Sunday morning public access programming here on our H. Hawaii media family radio stations here on the island of Oahu, oldies 101.1 FM, 101.5 FM, 97.1 FM, 107.5 FM, 96.7 FM and 103.9 FM.
And we have a pleasure, once again, of talking to the president and CEO of Grassroot Institute of Hawaii — that’s Grassroot Institute of Hawaii; they can be found at grassrootinstitute.org for all their great information — and its president and CEO, Keli’i Akina. Good morning to you, Keli’i.
Keli’i Akina: Good morning, Johnny. And to all your listeners, it’s great to be with you on a beautiful Sunday morning in Honolulu, and across the islands where your listeners are.
Miro: Yes, hawaiistream.fm for those folks that would like to listen on the smart device.
Healthcare reform, big topic. And we’ve been hearing more about a growing healthcare crisis in the state. What does that mean, and what are the main problems?
Akina: Well, Johnny, this is an issue that has been growing over many, many years. It’s been building up. Hawaii simply has a doctor shortage of around 1,000 doctors right now, up from about 800 just a year earlier. Now, the biggest area of need is primary care, but there are also significant shortages in specialty medicine.
But you know, Johnny, it’s not just doctors. Hawaii also has a nursing shortage, as well as staffing issues with other healthcare physicians. Our hospitals are struggling with capacity. They say they’re understaffed, running out of beds and unable to transfer patients to long-term care and other facilities, which are also understaffed. So this is really at the heart of the crisis we’re going through, Johnny.
Miro: Is this just about having enough doctors and nurses?
Akina: No, it’s not just about personnel. There are also access issues. Patients, for example, are facing considerable delays in getting appointments. Complaints about Maui Hospital recently made the news. Your readers may have seen that. Alleging issues with the quality of care.
There are also the problems that we are all familiar with: difficulty of getting specialty care on neighbor islands, the lack of sufficient facilities like dialysis centers and so forth. So that really compounds the problem, Johnny.
Miro: Is, in your opinion, this crisis the result of the COVID-19 pandemic or lockdowns?
Akina: Well, you know, that’s a great question. Frankly, this crisis was not caused by the pandemic. But you could argue that the pandemic exposed how serious these longstanding problems are.
You see, during the pandemic, we learned that Hawaii has the fewest hospital beds per capita in the country, and the 10th longest emergency room wait lines.
Now, that was the condition of our hospitals before the pandemic. That made our state less able to cope with the stress on hospital care during COVID-19.
So in answer to your question, Johnny, COVID-19 certainly exposed the problem, but it wasn’t the cause. We had this problem long before.
Miro: So we’re talking, basically, about problems that existed for years. But are they just getting worse now?
Akina: If you were involved with the Maui Hospital, for example — that effort and what it took to establish a public-private partnership in our state — you know that complaints about access to care and the regulations governing healthcare in Hawaii are nothing new. We’ve had them. The doctor shortage, nursing shortages and lack of sufficient facilities for things like dialysis, psychiatric care and so on, are things that have been part of our healthcare scene for years. So no, Johnny, this is not a new issue at all.
Miro: If the problems existed before the pandemic and these lockdowns, is it fair to say that the pandemic made things worse?
Akina: Well, in some ways, yes, it is fair to say that. Surveys of medical professionals suggest that the pandemic increased burnout among doctors and nurses, with more saying that they’re unhappy with their jobs, or even talking about leaving their profession, not just leaving the island.
Now 52% of providers are considering reducing their hours, 53% are thinking about leaving medicine or retiring, and 49% are thinking about moving to the mainland. All of that makes the problem more compounded for local residents.
Miro: Another question for Keli’i Akina of the Grassroot Institute of Hawaii, president and CEO: What about all the people who were told to stay home and not stress the hospitals and doctors during the pandemic?
Akina: Well, people who delayed care because of the pandemic are among those having trouble getting appointments now. In a recent survey on healthcare access in Hawaii, 58% of those surveyed said they have experienced healthcare delays in the past year; 21% say they wait. The wait time is significant, and about 48% of providers say the wait time to see a specialist is at least a month, and can be more than two months. You see, COVID has stressed the hospital capacity, increasing concerns about staffing and bed shortages.
Obviously, Johnny, the supply shortages, economic woes and inflation that are affecting every sector of society are also affecting healthcare. People who are having trouble financially may not seek care, or they may delay necessary medical procedures. This thing compounds the situation we’re in, Johnny.
Miro: Some people are calling for the governor to declare a state of emergency to address this healthcare crisis. What is their reasoning, and what do they want the governor to do exactly?
Akina: This is a very serious situation that we’re looking at, the crisis. Some people are calling for the declaration of an emergency, but that’s probably not the right medicine. Hospitals, especially the Healthcare Association of Hawaii, have petitioned Gov. Ige to issue an emergency order that would help deal with staffing shortages they’re currently experiencing. They would like the governor to use his emergency powers to waive state licensing requirements for out-of-state healthcare workers for at least 90 days.
Miro: The governor, he did something like this during the pandemic, correct?
Akina: This echoes an order that the governor did put in place during the pandemic, where he created a temporary waiver of licensing requirements for certain healthcare workers, such as physicians, nurses, osteopaths, physician assistants and more, so long as they held a license in good standing from another state, and were employed by a healthcare facility like a hospital or clinic in Hawaii.
All the facility had to do to bring in an out-of-state worker was ensure that they were licensed in another state, that there were no pending disciplinary actions or lawsuits or insurance claims against them, indemnify the state and register with the Department of Commerce and Consumer Affairs.
That order has since lapsed, and out-of-state workers are back to following the usual bureaucratic rules to get licensed and practice in Hawaii. And this really prevents us from getting the supply of medical labor that we really need. And that’s the problem, Johnny.
Miro: All right, for those folks that are listening, the layperson, why is licensing a barrier to getting more medical workers here in the state of Hawaii?
Akina: It’s not the only barrier, but it does slow down the process considerably. The DCCA oversees licensing and is experiencing delays right now. Some healthcare workers are reportedly waiting three months and more to get their license to practice in Hawaii.
And even before the pandemic, there could be significant delays in getting approved to practice here. While the average approval time might have been a couple of months, delays or issues with the paperwork might make it longer — sometimes as long as a year — and so we can’t very quickly solve the doctor, nursing and other medical personnel shortage, Johnny.
Miro: We’re joined by Keli’i Akina, the president and CEO of the Grassroot Institute of Hawaii, and you can find out more information at grassrootinstitute.org. Always appreciate his time here.
We were talking just about licensing of workers. It’s not just about getting the workers here during an emergency, right? Licensing laws are more generally a barrier to bringing medical staff pretty much at all times, right?
Akina: Well, time and expense become factors in discouraging people to come to Hawaii to work, especially when there are other places that will recognize an out-of-state license immediately.
One study of licensing among medical professionals found that licensing is associated with restricted labor supply and increased wages of the licensed occupation, rent, increased output prices and no measurable effect on output quality.
Another study found that states with stricter licensing laws for migrant physicians have fewer new migrant doctors, drawing a direct line between the ease of licensure and availability of new physicians.
So our difficulties in getting licenses approved for out-of-state doctors is really causing a bottleneck.
Miro: Why would it be a problem to have the governor simply reinstate his emergency orders regarding medical licensing?
Akina: Well, we understand and share the concerns about staffing shortages. An emergency order isn’t the right way to address the problem. Emergency orders come with all kinds of baggage.
First of all, emergency orders are temporary, so this wouldn’t be more than a Band-Aid fix for a longstanding problem. This leads us into a dangerous territory on abuse of the governor specifically — or the governor’s emergency powers — to act as a superlegislator. This usurps the role of the Legislature and upsets the constitutional balance of powers.
You see, there’s a right way and a wrong way to create real lasting reform. The right way is to do it through the Legislature, change our laws, where there can be public debate and participation.
But the exercise of a governor’s emergency powers, in addition to being just very, very short-term, takes the decision-making out of the hands of the Legislature, which is the representative of the people. And there are lots of side effects affecting the balance of powers to that.
Miro: OK. Then what should the Legislature do to address the licensing issue?
Akina: To be honest, the Legislature deserves a little bit of the blame — some of it at least — for not absorbing the lessons of the pandemic and taking more action to address the healthcare problems that have emerged.
When it comes to occupational licensing, especially in the medical field, they do have several options.
[For example,] they can have Hawaii join one of the interstate compacts that streamline licensing requirements between participating states to allow providers to practice across state lines. Lots of states do this. There are interstate compacts for multiple professions, including nursing, doctors, EMTs, psychologists and physical therapists.
The details for how the compacts work vary, but generally they either include recognition of the licenses of other states in the compact, or an expedited process to obtain a license in participating states.
Now, alternatively, the Legislature can adopt measures similar to those in Gov. Ige’s emergency order. For example, a streamlined process for those who hold a license in good standing or are in another state.
So we’re not opposed to the governor, and certainly the Legislature, taking actions that need to be taken during an emergency. We’re just pointing out that there are ways to do this other than emergency orders that actually work better and result in long-term permanent solutions.
Miro: And what about the objection that our current licensing laws keep people safe?
Akina: No one is suggesting that we do away with licensing altogether for medical professions. This isn’t about people applying for a first-time license or becoming a doctor. This is about recognizing the redundancy in having licensing barriers between Hawaii and other states. You wouldn’t hesitate to see a licensed doctor in California or Nevada if you got sick there. Why should that same doctor be barred from treating you here? That’s all we’re saying.
Miro: It makes sense. Other actions that the governor took during the pandemic that could be made permanent now to help address healthcare issues?
Akina: In addition to his orders on medical licenses, Gov. Ige also expanded the availability of telehealth. Among other things, he allowed licensed professionals to treat patients via telehealth, even when there was no preexisting relationship or in-person consultation.
Similar to his waiver of licensing requirements more generally, he allowed out-of-state physicians, osteopaths and physician assistants who hold a valid license, along with those who held a valid but expired Hawaii license, to engage in telehealth in Hawaii without a state license or in-person consultation or prior physician-patient relation.
Now, of course, provided that they have never had their license revoked or suspended and are subject to the same convictions in their own jurisdiction.
Now, as mentioned earlier, these orders have lapsed, making telehealth less accessible again. It would be good to see the Legislature take action to loosen telehealth restrictions again, especially in light of the difficulties and delays in getting appointments.
Really, Johnny, telehealth is part of the solution going into the future, and making healthcare far more accessible than it currently is. It’s something good for Hawaii.
Miro: Yes, it does sound that way.
Reforming licensing alone won’t solve the doctor shortage. What other steps should we be considering at this time?
Akina: Well, in addition to loosening the restrictions on telehealth, we should reform the certificate-of-need laws that restrict access and raise healthcare costs. You and I have talked about that on your program in the past. We should also eliminate the general excise tax that is placed upon medical services. Those two measures in and of themselves would help us quite a bit.
Miro: The general excise tax. You always hear about that during election times. How does the general excise tax hurt doctors?
Akina: Hawaii is one of only four states that taxes the delivery of medical services, and the only state to tax the gross revenue of medical care. While not-for-profit facilities, like hospitals, are exempted from the state’s general excise tax, private practice physicians must pay the 4.16% state excise tax plus any county surcharge, making the tax as much as 4.712%.
Now, that is burdensome to private practice doctors, which are very much in need on our neighbor islands. Because the GET is a gross receipts tax, it becomes a significant overhead expense for private practice doctors, making it very difficult to run a profitable practice, especially for new doctors with significant loans to repay.
The Hawaii Medical Association estimates that the GET accounts for about 13% of net practice revenue, enough to make a practice unviable financially, especially in rural areas with lots of Medicaid or Medicare patients. This is very hard on doctors trying to practice on their own, and it shrinks the supply available, especially in our neighbor island communities.
Miro: People would say, well, aren’t the patients the ones that really pay the tax, though?
Akina: Well, doctors can pass the GET on to patients. That is not the case for Medicare and Medicaid patients. Passing the GET on to those patients runs afoul of federal law, and could get a doctor into significant trouble.
According to a 2020 report from the Grassroot Institute of Hawaii, for-profit healthcare spending in Hawaii totals approximately $5 billion and the excise tax accounts for about $222 million of that total.
If all for-profit medical providers were exempted from the general excise tax, it would result in a savings of $200.3 million. That’s about $5,275 per medical worker in the state, or roughly 6.7% of the average medical worker’s wage.
All of that is huge and can make a difference ultimately in the supply of medical doctors here in Hawaii.
Miro: Now, if we did get rid of the general excise tax for medical services, I guess the question would be: Wouldn’t that stress the state budget too much?
Akina: Not necessarily at all, Johnny. You see, if the exemption were to bring 820 new physicians to Hawaii to set up a for-profit practice, that in itself would create 4,000 new full-time healthcare positions, assuming a support staff of 3.8 people per physician. This would generate about 4,000 supplier and induced jobs, resulting in $1.4 billion in new economic activity and $67.3 million in new tax revenues, thereby offsetting about one-third of the revenue lost from the medical services exemption. It’s doable.
Miro: So then, it’s just not about the budget. Some other reasons to get rid of the GET on medical services, correct? There’s some other reasons?
Akina: Yes, Johnny. Eliminating the GET on medical services would accomplish other goals, like lowering healthcare costs and attracting more healthcare professionals to our state. We have a long-established history of creating GET exemptions to help certain industries, like aircraft maintenance and orchard operators. Surely healthcare is worthy of the same assistance.
Miro: Alright, then you also mentioned regulations that discourage new medical facilities. Could you explain?
Akina: Well, I mentioned certificates of need. Certificates of need create a regulatory process by which certain changes to, or expansions of, healthcare facilities must apply for and receive government approval before they can go ahead.
Now, during the approval process, the government will evaluate the request and decide whether there’s a “need” for the change or whether it would be somehow a surplus to the community’s requirement.
Often that analysis doesn’t really match the reality of the market, and sometimes competitors in the medical profession use this process to prevent new competition from coming in.
So ultimately the patient — the consumer — doesn’t benefit by having the most options. It’s a cumbersome process and it restricts the availability of healthcare throughout the islands.
Miro: Interesting. When do facilities need one of these government approvals?
Akina: Well, certificate-of-need laws are required for new facilities like hospitals or dialysis centers, new equipment like MRI machines or X-ray machines, and even changes like shifting beds from acute care to long-term care in a hospital.
While many states have reformed or replaced their CON laws, Hawaii has one of the most restrictive CON schemes in the nation, with approximately 28 services that require a certificate of need. Everything from ambulances to hospice services require government approval through a certificate of need. It sometimes chokes the availability of viable options.
Miro: OK, then there must be an argument against this. What is the argument against Hawaii’s certificate of need? I guess it’s also known as the CON laws?
Akina: Right, these CON laws became popular in the 1970s, when they were required to receive federal funding. Since then, research has demonstrated that they have failed, and the policy of the last five presidential administrations has been that CON laws should be repealed. So we’re quite a bit behind the country in this in Hawaii.
Research shows that states with CON laws have fewer hospitals, substance treatment facilities, dialysis clinics, nursing home beds, hospice facilities and more. CON laws lead to fewer hospital beds, longer wait times and decreased access to medical imaging technology. And residents of CON states usually have to travel further to get care because CON laws are linked to fewer rural hospitals and alternatives.
CON laws do not reduce costs or lead to higher quality of healthcare, either.
In short, certificate-of-need laws are associated with higher costs, lower access to healthcare and fewer facilities.
Johnny, I think those are good reasons for us to join the rest of the country in getting rid of our CON laws.
Miro: Who’s arguing against granting certificates of need to build more hospitals or dialysis centers?
Akina: CON schemes or CON-law schemes are often known as the competitors’ veto, because they allow potential competitors to argue against issuing a certificate of need to a new facility. Thus, an existing dialysis center on Maui can argue against issuing a CON to a new dialysis center in Kihei by claiming that it will dilute the level of care.
Imagine if McDonald’s could stop the building of a Burger King in the same city because they argued that the city’s burger needs are already being met and a new restaurant would provide too many burgers for the region. Do you see the conflict of interest there?
Miro: Yeah, I get it. Very very well stated. I guess the State Department of Health says that most certificates of need are approved. How can they have such a negative effect on the healthcare access? And that’s a question.
Akina: We have to analyze this correctly. While it’s true that most CONs are actually approved, the state does turn down CON requests all the time. And you do often see testimony from potential competitors arguing against the CON.
You also need to consider the chilling effect of a restricted CON scheme. It’s hard to measure how many businesses decide not to expand in Hawaii because they would have to go through the expense and difficulty of CON application.
For example, the Maui Hospital contract was awarded to Kaiser in part because the terms of the deal required that the company already have a CON in Hawaii. That eliminated some possible mainland groups, like the Mayo Clinic, and ultimately, then, our consumer has less options.
Miro: How big of an impact does the certificate-of-need requirement have on our state in general?
Akina: Well, according to a study from the Mercatus Institute, without CON laws, this is what would happen:
>> Annual per capita spending for healthcare in Hawaii would go down by $219; that’s a good thing.
>> Annual per capita physician spending in Hawaii would be $95 less.
>> Hawaii would have 11.7 more hospitals and 2.2 more ambulatory surgical centers. Four of those additional hospitals would be rural hospitals, as would 0.6 of the ambulatory surgical centers.
>> Deaths from post-surgery complications would decrease by 4.8%.
>> The number of people who would have to travel out of their … county for a medical imaging scan would be reduced by 3.6% to 5.5%.
These are the likely benefits of what would happen if we eliminated our CON laws, Johnny.
Alright, we’re speaking about healthcare reform with Keli’i Akina, president and CEO of Grassroot Institute of Hawaii. Healthcare reform, obviously a very important topic, especially around election time.
The research indicates that there’s a lot of benefits from reforming certificate-of-need laws. Why hasn’t it made any progress here in the state of Hawaii?
Akina: Well, there have been some legislative efforts to remove CON requirements for certain facilities like substance abuse centers and dialysis centers. Unfortunately, those have stalled and they haven’t passed.
There are a few legislators who are interested in the issue and have indicated a willingness to address the issue, but they need much more public support, and support from their colleagues.
[You] have to remember that there are people and organizations that benefit from the current system, and they’re not likely to oppose reform to it. That represents a special vested interest, Johnny.
Miro: What kind of reforms, if any, would make sense to start with then?
Akina: It isn’t necessary to start with a full repeal of the CON law. Instead, we could make great progress incrementally. First, help the most vulnerable by removing the CON requirement for substance abuse and drug-abuse facilities, psychiatric facilities and intermediate care facilities for those with intellectual disability.
Or to help reduce the high price of healthcare, Hawaii should consider eliminating CONs associated with services that lower patient costs, such as ambulatory surgical centers and home healthcare facilities.
One of the rationales for CON laws is that they help prevent overprescription of unnecessary care. Plus, lawmakers could eliminate CON requirements for services or facilities that are highly unlikely to be prescribed or used unnecessarily. This includes CONs for neonatal intensive care, burn care units and hospice. We could start with any of these solutions.
Miro: That would get rid of some of the requirements for specific facilities. Now, here, what about the bureaucracy and the process of getting a CON?
Akina: Well, we could also reform the practice itself:
>> Eliminate the competitor’s veto by borrowing testimony against the CON from incumbent providers.
>> Or create a use-it-or-lose-it provision where someone who has been granted a CON has to act on it within a certain period of time.
>> Or eliminate guessing games about the long-term financial feasibility of a project as a reason for denying a CON. While the applicant should be able to demonstrate that they can fund their project, the CON board isn’t meant to act as a long-term financial analyst.
Miro: OK, as you get close to wrapping up the discussion, what do you think the highest priorities are when it comes to addressing Hawaii’s healthcare crisis?
Akina: This crisis is the result of decades of regulation, taxation and other bad policy. It didn’t just crop up. It’s not just the result of the pandemic. And it can’t be undone in just a few easy steps or in just a few years or with an emergency decree.
Still, the highest priority should be removing the red tape that creates barriers to practice, whether that’s a certificate-of-need law reform or a licensing reform. That’s going to be the key, because that will lead to long-term solutions to our healthcare shortage and crisis.
And at the same time, a medical services exemption for the general exercise tax would be a simple change that sends the right message to Hawaii’s medical professionals.
In short, there are things we could do to get the ball rolling to improve our healthcare supply and our shortage, as well as our crisis situation, and they could result in long-term change.
The bottom line, Johnny, is our legislators need to start moving in that direction.
Miro: Final question is — we always like to leave this wide open, for Keli’i Akina of the Grassroot Institute of Hawaii — any last words for the listeners on this topic of import?
Akina: Well, I just want to thank your listeners for bearing with us in a complicated subject, and want them to know that if you’d like more information or to talk with one of our staff about this, just contact us at the Grassroot Institute of Hawaii. And our website is grassrootinstitute.org, and you can find all kinds of studies and research on this issue as well. Thank you so much. Loved being with you today, Johnny, and being with your listeners.
Miro: Covered a lot, very deep discussions. So head on over to the website, grassrootinstitute.org, for more on that.
Keli’i Akina president and CEO, thanks for joining us once again. Have yourself a fantastic Sunday. I hope to speak soon.
Akina: Aloha to you and to everyone.