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.