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HMC, former St. Francis hospitals, shutting down

By Kristen Consillio

LAST UPDATED: 12:24 p.m. HST, Dec 19, 2011

Hawaii Medical Center has decided not to sell the former St. Francis hospitals in Liliha and Ewa and will immediately wind down operations.

HMC filed for bankruptcy protection in June. The U.S. bankruptcy court accepted today HMC's motion to withdraw its plan to sell the hospitals to its mainland lender.

The hospitals, which employ 990 workers, will close in about three weeks, HMC said.

HMC provides dialysis services to a significant number of Oahu's renal patients and operates the only organ transplant center in the Pacific and full-service emergency hospital in West Oahu.

In a memo to employees, HMC CEO Maria Kostylo said, "We can no longer continue operations."

She went on to say, "I cannot express how very sorry I am for this outcome. Many patients, families and communities have benefitted from our services. I thank you so much for all your efforts and ask that, as long as we have patients in the facilities, you continue to provide excellent patient care."

An affiliate of Prime Healthcare Services, a California hospital owner and operator, offered to pay a minimum of $25 million for HMC. St. Francis, HMC's main creditor, objected to the initial offer that would've paid it $11.3 million. St. Francis is owed $39 million, according to court documents. Following St. Francis' objection, HMC decided not to continue talks with Prime Healthcare.

HMC couldn't provide an immediate census count, but patient numbers have been dwindling since it filed bankruptcy in June. The 240-bed HMC-East in Liliha had about 80 patients and the 102-bed HMC West in Ewa had roughly 70, in early November, Kostylo previously said.

"There's little that the state can do because this is a private business," said Donalyn Dela Cruz, spokeswoman for Gov. Neil Abercrombie's office. "The administration has been monitoring the bankruptcy throughout. Really our interest is the patients' health and safety. During this bankruptcy our understanding is there have been less and less patients. We know that the other medical facilities are able to handle the census count as it stands."

Hawaii Pacific Health, which operates Kapiolani and Straub hospitals and previously expressed an interest in buying the assets, said HMC's closure will have a huge impact on the community and it's talking with the parties to "determine if we are able to play a role in the future of these facilities. 

'As the state's largest health care provider, we want to be sure that our facilities are prepared to accommodate additional patient volume should the closure take place," said HPH CEO Chuck Sted. "We will continue to work alongside others in our health care community to ensure that everyone who needs medical care will receive that care. This is especially critical for West Oahu where there is already limited capacity in that area."

Prime's attorney Mark Bradshaw, who was in Honolulu to negotiate the purchase, said Prime was ready to bid more than the $25 million if a sales transaction had the support of all parties.

"We were actually ready to show up at the hearing today, affirm that bid and proceed with an auction," Bradshaw told the Star-Advertiser. "We expected to start at $25 million and then if there were an auction potentially it would go up from there. The problem here was that St. Francis basically conveyed that they wouldn't support a sale unless we paid off St. Francis. The message that I got was you really need to offer $40 million because St. Francis needs to be paid in full. Given that the hospitals are not worth $40 million, it didn't make sense for anybody. We were basically discouraged from bidding. It's clearly about money for St. Francis I just don't know how much money."

St. Francis CEO Sis. Agnelle Ching, said "We respect Hawaii Medical Center's decision to close its two hospitals. We want to make sure the safety and well-being of their patients remain priorities in the wind down process, and St. Francis Healthcare System of Hawaii has offered to help Hawaii Medical Center's wind down efforts."

Until late October, St. Francis was planning to resume control of the hospitals but backed out because of financial concerns.

The Franciscan sisters sold the hospitals in January 2007 for $68 million to HMC LLC, then a for-profit joint venture between Hawaii Physician Group LLC, composed of 130 local doctors, and Kansas-based Cardiovascular Hospitals of America. St. Francis provided the bulk of the financing for the sale, $40.2 million.

HMC first filed for Chapter 11 bankruptcy protection in August 2008. It emerged in August 2010 and became a nonprofit organization governed by a nine-member board of directors before filing its second bankruptcy in June.

HMC provides acute dialysis care to a significant number of Oahu's renal patients and operates the only organ transplant center in the Pacific and full-service emergency hospital in West Oahu.

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chief wrote:
This is a very sad situation. For any of you who have been to the Liliha Hospital you'd know its not worth what the sisters of SF think it is. The buildings constantly leak, the infrastructure is antiquated, rooms and offices get flooded and there are buildings on the site that are condemned! What do the sisters plan to do now - "pray" for the patients who need transplants and the employees who stuck with the hospital. This is disgusting!
on December 16,2011 | 10:30AM
EducatedLocalBoy wrote:
As far as the nuns are concerned it was always about money. Sisters Bea and Gretch (Beatrice and Gretchen are known by the foregoing nicknames) built St. Francis West because they thought they would make money since the surrounding population was heavily Catholic. They sold all of the hospitals because they miscalculated the patient load and were financially insolvent. The sales price to HMS was inflated but HMC didn't care because it did not pay cash for it HMC paid for it in credit HMC always knew that if it didn't work out it could always get out of the deal by filing for bankruptcy.The only losers in this tale of greed of the sisters of St. Francis are the residents of Oahu.
on December 16,2011 | 08:44PM
Vivgie wrote:
Could other hospitals be in danger? Thought they all made a lot of money.
on December 16,2011 | 10:53AM
al_kiqaeda wrote:
My guess was it is the insurance, pharmaceutical and med devises companies that are making the bulk of the money.
on December 16,2011 | 11:04PM
1local wrote:
Hopefully St. Francis will utilize there $39 million credit to buy the hotels, National Medical Development Inc. will provide a bid, or Hawaii Pacific Health or Kaiser will step in. Would be good for Kaiser to Step in and get two good locations...
on December 16,2011 | 10:58AM
EducatedLocalBoy wrote:
Although I don't know the details of the original sales agreement, I doubt the nuns will have to credit bid for the hospital buildings at a bankruptcy auction. I'll bet that the "loan" the nuns gave to HMC is backed by the hospitals as collateral. In bankruptcy the nuns can execute on that security interest and get the hospitals back by merely moving the bankruptcy court for a lifting of the automatic stay, and have their own foreclosure sale outside of bankruptcy.
on December 16,2011 | 08:50PM
LRob69 wrote:
scary...now all transplants will have to be done on the mainland...and I dont think any insurance will pay for that.
on December 16,2011 | 11:01AM
EducatedLocalBoy wrote:
Social security is the primary medical coverage for all patients who suffer from total kidney failure for more than 18 months. Before that medicare is the secondary coverage. Since practically all of the kidney failure patients have been on dialysis for that amount of time, a combination of medicare and private insurance will pay for the whole operation. I know of several people who have had kidney transplants done on the mainland with Medicare and either Kaiser or HMSA paying for the whole thing even when St. Francis was doing transplants. This may be a blessing in disguise. St. Francis had a terrible transplant program that was greed based, just like everything St. Francis did.
on December 16,2011 | 08:57PM
Bobbiejeanne wrote:
Well....there goes my transplant!
on December 16,2011 | 11:23AM
th2855 wrote:
My guess is the sisters are going to try and wait it out and get them at a fire sale. They want the properties, but don’t want to take over the debt. They are going to wait for a few months until the bankruptcy goes from chapter 11 to chapter 7 and then obtain the properties. They would then get them back without having to absorb the debt too. We’ll see what happens. The only people that end up on the short end are the community. Both the patients and the almost 1000 jobs that is lost.
on December 16,2011 | 11:30AM
pakeheat wrote:
Let's see if the unemployment percentage change in a few months which I doubt, because many of them will be moving to the mainland. Maybe the pro-railers can offer them jobs since they claim it will produce 10,000.
on December 16,2011 | 11:45AM
RomyC wrote:
Very troubling news for the local economy. I won't be surprised if given the state of the economy, level of taxes and other costs of living, there soon materializes a mass exodus from Hawaii to the mainland.
on December 16,2011 | 11:46AM
pakeheat wrote:
Is this RomyC the city councilman? You voted for rail didn't you, lol.
on December 16,2011 | 12:33PM
ardee wrote:
So what's your point?
on December 16,2011 | 12:48PM
pakeheat wrote:
IRT ardee, what's my point? Rail will further burden our society with increases in property taxes and you watch and see that they are going to extend the .5% beyond the year it suppose to stop. So RomyC shouldn't complain about the level of taxes and other costs (rail) of living going further up.
on December 16,2011 | 07:47PM
Wazdat wrote:
Its already happening and will increase in the coming years. very sad times for Hawaii with everything going up, but NOT wages or good paying jobs. Looks like a good chance to move and try something different if out of work anyway.
on December 16,2011 | 03:44PM
Wazdat wrote:
This is TERRIBLE news.
on December 16,2011 | 12:35PM
alikarx03 wrote:
This is really just awful. I am an employee at Hawaii Medical Center and it feels like St. Francis just punched everyone that works here right in the gut. They have no sympathy for anyone here. Its all about the money for them. Doing this at this time of the year too. This is really really awful. It is the feeling of almost everyone that works here that St. Francis was never going to agree to a sale price and wanted to shut this place down all along. I wish they would have just done that a long time ago to save all the loyal employees who stuck around and held out hope that something positive would happen. Thanks a lot St. Francis.
on December 16,2011 | 01:23PM
omd111 wrote:
Chalk up another one for the Catholics.
on December 16,2011 | 02:23PM
mudsprkt1 wrote:
Whats with this Catholic Comment. It's about Business, Not Religion. Nothing like running off at the mouth when you have nothing better to say.
on December 16,2011 | 07:35PM
st1d wrote:
i must have missed the part in this report that mentioned the loyal employees and almost everyone that works at st. francis were willing to work for 60% less if and when prime healthcare takes over the hospital. after all, it's what you are asking the nuns to do with prime healthcare's offer.
on December 16,2011 | 05:25PM
kaleboy wrote:
And how are the nuns going to live with themselves? The are literally shutting down a medical facility and making people lose their jobs. I hope they can look at themselves in the mirror and answer to god for this horrible situation.
on December 16,2011 | 01:35PM
WesleySMori wrote:
on December 16,2011 | 02:15PM
mvanhess wrote:
RE: The close of Hawaii Medical Center from Representative Pine MEDIA STATEMENT Honolulu "Today is a very sad day for the residents of the Leeward Coast. Many people work at the hospital and use their facilities. We will do everything that we can to ensure that the impact on our community is minimal. We will ensure that unemployment benefits are immediately extended to those that will lose their jobs." "On behalf of all the residents of the Leeward Coast, I sincerely thank the people of the St. Francis Healthcare System for all the care they’ve given our community over the years, most importantly the care they have provided to lower income residents." "This is a devastating blow to the people of the Leeward Coast who will no longer have timely access to emergency health care that could save lives."
on December 16,2011 | 01:44PM
Changalang wrote:
Yeah, but she is done in November. The district will be better served with Cabanilla on their side.
on December 16,2011 | 02:49PM
KekoaBradshaw wrote:
Anyone wanna bet that the top administrators for HMC, such as CEO Maria Kostylo, walk away from this with $$$$$ "severance packages" or "golden parachutes"?
on December 16,2011 | 01:48PM
alikarx03 wrote:
Stop talking "KekoaBradshaw" you do not know what you're talking about. Maria Kostylo is not walking away with anything, like the rest of us HMC employees. What severance package?!! When your employer shuts down, there is no severance. Do you even know what a severance package is?!!!
on December 16,2011 | 02:15PM
mudsprkt1 wrote:
Yes. You are so right. Apparently some people have never been in a situation such as this. Someday, should it happen to this person, they will understand what it is like NOT to HAVE.
on December 16,2011 | 07:50PM
WesleySMori wrote:
on December 16,2011 | 02:38PM
Changalang wrote:
Now, the real bidding war begins. Prime is slick, but I do not think they know about the influence of the "Aloha Spirit" on ALL island decisions. They may want to re-think the value of entering this market. Remember Summerlin? They were going to low ball everybody and change the market? R.I.P. It will come down to real asset value and whichever bidding entity has the $ and the connect. It would have been better for the community if this deal went through in the short term, but the page has turned now. Chapter 7 is like a reset button. All the past stuff just died with HMC, as it should have. What are the positives? The bodies will stay buried and when the employees re-apply for their positions, it will probably be good for them that they will be working for a better run organization, if worthy of re-hire. In HMC's defense, they did their best with what they had to work with. Local organizations should take a long look at what the collateral damage from going hardball with each otherwill mean to their respective futures. Mainland style sees business as war, but sometimes the way you fight a war depends on whether it ends or not; just like Vietnam, Afghanistan, and Iraq/Iran Jr. We all hope services will soon be re-established. Let's get those patients taken care of and get those employees back to their good works. I wonder if the Sisters at the top realized that God was no longer on their side today; if they have known it for years.
on December 16,2011 | 02:47PM
maunawili1 wrote:
Hey, wake up! St. Francis Health Care Systems does not own the hospitals! They are not the ones shutting them down Its HMC, whose inept management of the facilities brought this on.The Sisters are as troubled by this decisionas anyone else. Should they just walk away from the $39 mil that is lawfully and justly theirs and then have to shut down their hospice and eldercare facilities? Anti-Cathoilc venom is clouding a lot of these comments, I fear!
on December 16,2011 | 04:12PM
Changalang wrote:
Perhaps you need to awaken. The best Catholics I know are not employees of the Church. The worst Catholics I know, are employees of the Church and are the same types of Administrators that let mass molestation occur unchecked and hospitals to close to save a buck. The bad people hiding in the Church behind a collar or a habit or the ones who are anti-Catholic. No question that sister B ran that place into the ground, begged to the Drs. to come up with a solution, approved the first mainland partner, and used remnants of controlling interest to block the best and final offer. As the secured creditor, they will get more from a Chapter 7 sell off than anyone. Their loyal employees and dependent patients get the boot. It goes to show that the ones closest to those you protect, always get it in the end. Pun intended, and peace be with you.
on December 16,2011 | 06:09PM
JunJun wrote:
Thank you to all the family of Doctors, RN's, Staff who have sacrificed time and time again to serve Hawaii. St. Francis did what many of the other hospitals had refused to do through the years, provide charity and service to the most needy. It was once a proud institution, rivaling even Queen's in innovation and cutting edge (like Transplant) and a key member of this medical community. It has fallen on the worst of times and "HMC" is a pretender to say the least. I wish all the members of the St. Francis Medical Center family the best of luck as they move on. Bring what made that place special to the rest of the community and above all don't forget.
on December 16,2011 | 07:16PM
Bdpapa wrote:
This is a terrible disservice to the Leeward communities!
on December 16,2011 | 07:39PM
kaleboy wrote:
So let me get this straight if no deal is done, doesnt the nuns loose everything. If they made a deal wouldnt they get something, is it not better to get something then nothing? Shutting down this hospital is going to impact the Leeward side and it counld come down to a matter of life and death, Can the nuns live with that?
on December 16,2011 | 07:54PM
Anonymous wrote:
Very, very sad. The nurses at St Francis were wonderful when my parents passed. I really felt like they cared. I get very tired of people complaining about anything medical costs and care being about greed, though. With the number of uninsured patients St. Francis saw, the lowballing that Medicare and Medicaid do, and the constant threat of malpractice suits, hospitals have a hard time just getting by. Queen's manages because of all the land holdings it has elsewhere. No hospital can survive on Medicare and Medicaid alone, and yet that's what hospitals are being asked to do now. Unless the Supremes strike down Obamacare you can expect to see more and more hospitals shut down with fewer doctors, more difficulty getting appointments, and less access to specialty care.
on December 16,2011 | 08:38PM
whateva-works wrote:
Our Government cannot stop children from learning now our government cannot keep Health Care for many patients.
on December 16,2011 | 10:13PM
Jufelarca wrote:
This is a very sad and heartbreaking moment. For my family and I, the HMC/St Francis system cared for my family and nurtured my beginnings of becoming a RN. I fear, now, for those that utilized their services. And fear even more for the already fractured and highly sensitive healthcare system of Hawaii. It's too bad that QMC or HMC could not step in to keep these resources open. There has to be a way. The leeward coast will suffer from this loss.
on December 16,2011 | 10:43PM
TfizzleBizzle wrote:
on December 16,2011 | 11:32PM
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