Hawaii Medical Center files for bankruptcy protection

Hawaii Medical Center, the former St. Francis Medical Centers in Liliha and Ewa, filed for Chapter 11 bankruptcy protection today, less than a year after emerging from bankruptcy.

As part of the Chapter 11 bankruptcy reorganization, HMC will relinquish ownership of the hospitals to lender and former owner St. Francis Healthcare System of Hawaii.

"Filing for bankruptcy protection was a strategic financial decision to ensure the sustainability of the hospitals and enable the continuing provision of healthcare services to the community," said Dr. Collin Dang, chairman of the HMC Board of Directors.

St. Francis exited the acute care business when it sold its two medical centers in January 2007 for $68 million to HMC LLC, a joint venture between Hawaii Physician Group LLC, comprised of local doctors, and Kansas-based Cardiovascular Hospitals of America.

At the time, St. Francis said it would use the proceeds from the sale to better fulfill its mission of caring for Hawaii’s growing senior and poor population through hospice and other proj­ects. The Roman Catholic religious order provided the bulk of the financing for the sale — $40.2 million — and is HMC’s main creditor.

St. Francis has said that HMC’s inability to repay its loan has thwarted its expansion proj­ects, which include a rental complex for low-income seniors at Ewa Villages.

HMC’s financial difficulties also have hurt at least 125 doctors who invested between $10,000 and $400,000 in cash, according to Danelo Canete, HMC’s former president and chief executive officer from 2007 to 2009.

HMC was forced into bankruptcy in August 2008, a little more than a year and a half after acquiring the hospitals, when lender Sie­mens Finance refused to extend existing loan agreements, threatening the shutdown of the hospitals, HMC said last year.

HMC, which became a nonprofit entity when it emerged from bankruptcy, failed to gain enough support from Oahu’s independent physicians, whose referrals are a significant source of revenue.

The company was also hoping to increase referrals for higher-priced procedures — a critical piece in reversing money-losing operations — and increase the number of patients with commercial health insurance to offset the large population covered by Medicare and Medicaid, whose reimbursement rates are significantly lower.

When it came out of its first bankruptcy in August, HMC’s court-approved plan required the company to pay $46 million owed to St. Francis over seven years and $21 million to unsecured creditors over 14 years.