Judge approves nonprofit status for Hawaii Medical Center

Judge Robert Faris of the U.S. Bankruptcy Court on May 26 confirmed a reorganization plan for the Hawaii Medical Center hospitals, ending nearly two years of Chapter 11 bankruptcy proceedings and leading to their conversion from for-profit to nonprofit status.

The judge approved a joint reorganization plan filed by the hospitals’ physician shareholders and unsecured creditors at a confirmation hearing that was twice delayed as the parties worked out a number of concessions and agreements. The decision completes the case, which involved three competing reorganization plans, and allows Hawaii’s only for-profit hospitals to pay down millions in debts effective July 1 and convert to nonprofit status. Highlights of the plan include:

• Hawaii Medical Center will pay the approximately $40 million it owes to one of its biggest lenders and the hospitals’ former owners, St. Francis Healthcare System of Hawaii, over seven years at 8.04 percent interest.
• The Ewa and Liliha hospitals, Hawaii Medical Center West and Hawaii Medical Center East, become nonprofits.
• A nine-member public board of directors will be created.
• The hospitals’ collective bargaining agreements remain in effect with local labor unions.

Hawaii Medical Center is a partnership between CHA Hawaii, an affiliate of Cardiovascular Hospitals of America, a Wichita, Kan.-based hospital-management company, and the more than 130 Hawaii-based physicians who form Hawaii Physician Group LLC. Hawaii Medical Center bought the hospitals formerly known as St. Francis Medical Center in Liliha and St. Francis Medical Center West in Ewa Beach from St. Francis Healthcare System of Hawaii for $68 million in January 2007. Hawaii Medical Center filed for Chapter 11 bankruptcy in August 2008.