HONOLULU (HawaiiNewsNow) – The St. Francis sisters, who sold their hospitals but were never paid for them, have decided not to take them back.
The sisters told Judge Robert Faris in Honolulu federal bankruptcy court Wednesday that the hospitals are burning through cash at a higher rate than they feel able to provide.
"We were all hoping for a better outcome, but taking on these financial responsibilities would put our current programs and services at risk," said Jerry Correa, chief operating officer of St. Francis Healthcare System.
In 2006, the St. Francis sisters decided to sell their Liliha and Ewa hospitals and refocus on eldercare. Since then they have built an Ewa development that mixes regular housing with assisted care housing with a medical center at the center. The development recently reached 100 percent occupancy.
The sisters sold their hospitals in 2007 for $68 million to a Kansas-based hospital management company that partnered with doctors serving at the two facilities. Cardiovascular Hospitals of America vowed to bring the hospitals to profitability without layoffs. Instead it placed the hospitals into bankruptcy, did extensive layoffs, and failed to make its payments to the St. Francis sisters. In 2010 Cardiovascular Hospitals of America handed full ownership over to Hawaii Medical Center.
Resolution of the problem appeared in June when the bankruptcy court approved the idea of the Hawaii Medical Center returning the hospitals to the St. Francis organization, along with a payment of almost $5 million. But the sisters spent months checking hospital expenses – a process called due diligence that is part of any company sale – and concluded that those expenses, and the total debt of the two hospitals, was too great to be borne by the sisters.
"It was a very difficult decision," Sister Agnelle Ching said in an internal memo to hospital employees that was obtained by Hawaii News Now. She said the decision was made "after detailed analysis and much prayer."
St. Francis Healthcare believes the bankruptcy court will allow the mainland company to seek a buyer for the properties – the next court hearing is likely to be in November – and it is expected that the hospitals will continue to operate in the meantime with financial support provided by Midcap Financial.
However, it's unknown how long that support will continue. And that has raised concerns that the hospitals could close, especially HMC-West in Ewa. It's the only hospital and emergency room for the fast-growing area.
"It's going to continue to grow, and the need is going to be out there, so hopefully someone, the parties, government, whoever's out there, can work on something that can provide us with the heath care that we need," said Sen. Will Espero (D-Ewa Beach, West Loch, Honouliuli, Lower Waipahu).
"Unless somebody has some very deep pockets and some creative ways to make a health care institution like that work in West Oahu, it's possible that you will have a closure, and unfortunately people may be losing their jobs just as the holidays are approaching," he added.
In a statement, HMC chief executive officer Maria Kostylo said "While we are disappointed by this recent development, Hawaii Medical Center continues to move forward with its reorganization efforts."
The statement continued, "We are in discussions with potential buyers and will continue to provide medical services to the community. Our current lender will continue to support the hospitals while we pursue a new buyer."
While St. Francis Healthcare has not been supplying operating cash to the hospitals since the June agreement was announced, it has been spending its own resources to conduct the due diligence.