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HMC hopeful for turnaround plan


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POSTED: Wednesday, April 01, 2009

Hawaii Medical Center LLC is planning to turn HMC-East in Liliha into a nonprofit, while keeping HMC-West in Ewa Beach a for-profit limited liability company as part of its plans to emerge out of bankruptcy.

;[Preview]  Hawaii Medical Center Details Bankruptcy Reorganization
 

Hawaii Medical Center says it hopes to stay in business and payoff its creditors over the next 4-10 years.

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This would align HMC-East with many other hospitals in Hawaii, which also hold nonprofit status, and result in significant tax savings, according to chief restructuring officer Salim Hasham.

HMC-West, however, has its best chance for success remaining as a for-profit entity, he said.

“;We are confident we have a plan which will work,”; Hasham said at a news conference yesterday morning.

HMC filed for bankruptcy in U.S. Bankruptcy Court in Delaware in August of last year to keep the two hospitals open and to buy time to turn around its finances. The reorganization plan was filed Monday in U.S. District Court in Hawaii following a change of venue approved in September.

As part of the plan, HMC also restructured its payment schedule for more than $80 million that is owed to creditors and lenders.

The plan includes a proposal to pay 70 cents on the dollar for about $20 million owed to certain creditors over four years. It also will repay $3.9 million in secured claims to Siemens Finance over one year. And it is asking the court to reduce the amounts owed to St. Francis Healthcare System—$46 million for the acquisition of the two hospitals plus $14 million for the land lease—which it has agreed to repay over 10 years, with interest only for the first two years. HMC acquired the hospitals in January 2007.

“;We intend to repay all of our obligations,”; said Hasham, who was initially brought in last year as a medical-finance specialist to reverse money-losing operations.

But Sister Agnelle Ching, chief executive of St. Francis Healthcare System, was skeptical of the plan.

“;We have been very patient with Hawaii Medical Center, both before and during the bankruptcy proceedings, and have tried to work with them to serve Hawaii's patients,”; she said in a statement. “;We have not received payments on our loans to them for a year, and the past due amount has now reached more than $9 million. These are funds we have been counting on to expand our healthcare services to the community. Our expansion plans have been put in jeopardy and we do not want to delay our plans any further.”;

Hasham said negotiations with various stakeholders are expected to continue over the next three to four months, so the plan is not a done deal. Depending on how they go, he said HMC could emerge out of bankruptcy some time in August.

The hospitals, which combined offer 342 licensed beds, are running more efficiently, said Hasham. Day-to-day operations at both hospitals are expected to continue as usual as the reorganization plan is negotiated.

Hasham said he was confident the hospitals would be able to generate sufficient cash going forward, based on a positive performance in the last two months. He said there were no plans for further layoffs at this time, although the number of employees fluctuate with the hospital's demands. HMC currently has a core staff of 750 full-time employees, and a total of about 1,000 employees.

Last year, HMC laid off nearly 150 employees during the company's initial restructuring.