Bankrupt Hawaii Medical Center plans to become a nonprofit

The Hawaii Medical Center announced at the end of March plans to emerge from Chapter 11 bankruptcy and turn its two for-profit hospitals in Ewa and Liliha into nonprofits. The plan is a compromise between HMC and its creditors and is an effort to end almost two years of bankruptcy proceedings by June.

The plan creates a new 11-member public board of directors to govern the Hawaii Medical Center West and Hawaii Medical Center East. It would also pay approximately $49 million that it owes to one of its biggest lenders and the hospitals’ former owners, St. Francis Healthcare System of Hawaii, over a period of seven years.

The plan to go nonprofit does not require court approval. HMC executives are preparing to apply for its 501(c)3 nonprofit status with the Internal Revenue Service and to file a certificate-of-need application with the State Health Planning and Development Agency.

“The decision to go not-for-profit is a business decision,” said Salim Hasham, HMC’s chief operations and restructuring officer. “Administratively, there are a whole bunch of steps we have to go through and we are being advised on ... the different mechanisms needed to go not-for-profit. The process could take three to six months in terms of getting all the approvals and exemptions for tax. It’s a fairly onerous and lengthy process but also a necessary one.”

Meanwhile, a competing reorganization plan filed by the sisters of St. Francis, who are seeking to take back the hospitals they once owned, remains to be addressed.