FL MORRIS / FMORRIS@STARBULLETIN.COM Drs. Charlie Sonido, left, William Dang, Danelo Canete and Eugene Wong were among 100 local physicians involved in the sale of two St. Francis hospitals.

Doctors join
team to buy
St. Francis hospitals

St. Francis' two Oahu hospitals will be run by physicians and get tens of millions of dollars in upgrades as part of their sale to a Kansas hospital operator and a Hawaii doctors' group.

Wichita-based Cardiovascular Hospitals of America, making its first acquisition of a hospital, and a local physicians group led by St. Francis cardiologist Danelo Canete have reached a tentative agreement to buy the two medical centers from St. Francis Healthcare System of Hawaii.

Canete and about 100 doctors have committed to put in between $100,000 and $200,000 apiece to collectively own 49 percent of St. Francis Medical Center-Liliha and St. Francis Medical Center-West. Cardiovascular Hospitals of America, founded in August 2002 by President and Chief Executive Badr Idbeis, will own the other 51 percent.

The physicians will have a majority of the seats on a new board of directors.

No purchase price was disclosed, but Canete said the transaction would retire all of St. Francis' $30 million debt "and then some."

"The nuns are going to be happy," Canete said.

Due diligence will be conducted over the next 90 days, with the final sales contract expected by the end of September. The sale also will need approval from state and federal regulatory agencies, as well as the pope. The transaction could close by the end of the year, the buyers said.

St. Francis' outpatient dialysis program, which serves about 1,000 people, is expected to be sold to a separate joint partnership between a mainland dialysis company and local physicians. That deal is still being negotiated, according to Eugene Tiwanak, chief foundation officer of St. Francis Healthcare System.

Canete, who spearheaded the local group, said making the physicians responsible for operational decisions, rather than administrators, can turn around St. Francis' fortunes.

"The secret sauce is obviously physician partnerships because they control where the patients go," Canete said. "The problem with St. Francis is two things -- volume and length of stay -- and both of those are controlled by doctors."

The hospitals essentially want to bring in more patients and have them stay a shorter time.

"It was time for doctors to take over hospital management," Canete said. "The standard model is administrators telling us what should be done, and in this model, we're going to tell administrators what to do."

Idbeis, of Cardiovascular Hospitals, said he was interested in St. Francis because it represented "a very good opportunity for a turnaround operation."

"We don't think there is anything inherently wrong with the business part of it," he said. "It was the way it was run, the way it was developed."

Idbeis said some of the hospital's technology is outdated, and Cardiovascular Hospitals and the physicians are planning a modernization program over the next five to 10 years.

"What will be very important is that the physicians, as equity owners, will be a lot more in tune with the patients' needs than they were before since they are now able to do something about it," he said. "CHA believes that the strength of this alliance with our physician partners is based on our commitment to the ethical and religious Catholic directives, top quality health care for the citizens of Hawaii and the welfare of the employees of St. Francis."

Although Cardiovascular Hospitals is not a Catholic institution, Idbeis said the new owners will support the sisters' mission of treating anyone regardless of their ability to pay.

"We don't think that charity is going to be a problem to keep at least at its current rate," Idbeis said. "We are committed to the indigent care."

St. Francis Healthcare System, whose roots in the state go back 78 years, is sponsored by the Sisters of the Third Franciscan Order of Syracuse, N.Y.

"This would be the first time in Hawaii that such an arrangement will be made," said Sister Beatrice Tom, St. Francis Healthcare System's chief executive. "We ask for the community's continuing support as we move to complete the transaction over the next few months."

St. Francis, which employs 1,700 full-time workers in its health care system, had been shopping the St. Francis-Liliha and St. Francis-West medical centers for the past couple of years to gain relief from declining earnings and its $30 million debt.

The debt was incurred when bonds were issued to pay for building St. Francis-West and to fund improvements and buy new equipment at St. Francis-Liliha.

The deal is expected to have little or no effect on the medical centers' employees, Idbeis said.

St. Francis-Liliha, which opened in 1927, has 188 acute-care beds and 52 skilled-nursing long-term beds. St. Francis-West, which opened in 1990, has 100 acute-care beds.

It hasn't been determined if St. Francis' name will remain on the hospitals. However, the St. Francis name will continue to exist under several remaining subsidiaries, plus parent corporation St. Francis Healthcare System of Hawaii.

Tiwanak said St. Francis wanted to sell the centers because earnings have been declining due to decreased Medicare reimbursements. The hospitals were expecting further payment cuts from Medicare and other insurers.

Changing hands St. Francis Healthcare System of Hawaii reached a tentative agreement yesterday to sell its two Oahu medical centers. What: St. Francis Medical Center-Liliha and St. Francis Medical Center-West. Buyers: Cardiovascular Hospitals of America, 51 percent, and a local physicians group, 49 percent. Cardiovascular Hospitals of America was founded in Wichita, Kan., in August 2002 by President and Chief Executive Badr Idbeis. He previously co-founded the Kansas Heart Hospital and has been listed by Money magazine as one of the top 10 heart surgeons in the country. CHA has hospitals either under construction or in development in the United States, India, China, Australia and the Philippines. The local physicians' group is led by St. Francis cardiologist Danelo Canete. Purchase price: Undisclosed, but includes the retirement of $30 million in St. Francis debt. Final negotiated sales contract expected by the end of September. Closing date: End of year, pending state, federal and papal approval.

St. Francis history

1927: St. Francis Medical Center-Liliha opens.

1929: A three-year course leading to eligibility to take the licensing exam for registered nurse was instituted at St. Francis Medical Center. The first St. Francis School of Nursing class of six students graduated in 1932.

1969: St. Francis became the major organ transplant center of the Pacific by performing its first kidney transplant. It is the only medical center in Hawaii to perform kidney, liver, pancreas, bone marrow and heart transplants.

1969: The Renal Institute of the Pacific was established.

1972-2000: St. Francis broadened its dialysis program to the neighbor islands with facilities on the Big Island, Kauai, Maui and Molokai.

1987: Physicians Richard Moreno, Judson McNamara and Livingston Wong performed the first heart transplant at St. Francis Medical Center.

1988: The St. Francis hospice, the Sister Maureen Keleher Center in Nuuanu, opened as the state's first free-standing in-patient hospice facility.

1989: The state's only bone marrow registry was established at St. Francis Medical Center-Liliha.

1990: St. Francis-West is completed.

1991: A hydroxyapatic orbital transplant, a new type of eye transplant, was performed in Hawaii for the first time at St. Francis Medical Center-Liliha.

1997: The St. Francis Medical Center-West Maurice J. Sullivan Family Hospice Center, a 24-bed facility, opens.

2005: Cardiovascular Hospitals of America and a local physicians group led by St. Francis cardiologist Danelo Canete reach a tentative agreement to purchase St. Francis Medical Center-Liliha and St. Francis Medical Center-West.