The Hawaii Medical Center and its creditors have filed a joint reorganization plan to get the two hospitals out of bankruptcy.

The center's original plan called for turning only its Liliha property into a nonprofit. The company announced yesterday that its new plan would convert both the Liliha and Ewa Beach hospitals to nonprofit companies.

“;The shareholders will cease to exist,”; said Salim Hasham, HMC's chief operating and restructuring officer. “;When you are for profit, you're not as fully integrated into the community.”;

Nonprofit status would also relieve the hospitals of up to $6 million in taxes paid annually, including general excise and property taxes.

U.S. Bankruptcy Judge Robert Faris initially faced three different reorganization plans for the hospitals, from HMC, its unsecured creditors and its largest creditor, former owner St. Francis Healthcare System of Hawaii.

The new plan now competes with the St. Francis plan, which seeks to regain ownership and take control of the facilities' management.

St. Francis officials reserved comment yesterday, saying they had not yet finished reviewing the plan.

“;Our expectation right now is to amicably find a way to resolve the differences with their plan,”; Hasham said. “;We hope there is a way to come forward with one consensual plan. We're paying them out in full anyway.”;

The plan would pay St. Francis, owed $46.3 million in loans, in seven years with interest. It would also pay the $21 million owed to unsecured creditors in full over several years.

Hasham said he does not expect resistance from St. Francis officials. The two plans have similar goals in mind, including turning the hospitals into nonprofit operations.

“;The only issue is that St. Francis wants to take over the governance and management,”; Hasham said.

“;Our contention is that we've already demonstrated success with management and governance anyway. So why would we want to change that and shift it?”;

A confirmation hearing for the St. Francis plan is scheduled for May 24. Hasham said he expects the hospitals to emerge out of bankruptcy by July.

The center must also pay back $4.5 million to St. Francis. Faris ordered the center to make the payments because it used St. Francis cash collateral for hospital operations.

CHA Hawaii, the hospitals' current owner, filed a motion earlier this week to hire Gemino Healthcare Finance LLC for $75,000. CHA intends to obtain $10 million in exit financing from Gemino, half of which would pay for the cash collateral owed to St. Francis.

Hasham said the hospitals have turned themselves around into profitability by aggressively operating as a for-profit company. The center is asking the bankruptcy court to determine the value of the two properties.

Hawaii Medical Center filed for bankruptcy in August 2008 after suffering operating losses of about $21.8 million since it was sold to CHA Hawaii and Hawaii Physician Group LLC. St. Francis owns 1 percent of HMC.

The hospitals laid off close to 200 workers after the sale. Hasham said he expects the hospitals to start hiring again once the bankruptcy case is closed. The company currently has about 700 employees.

He also expects more infrastructure improvements at the aging facilities. While in bankruptcy, businesses must often seek court approval for many expenditures, like the motion filed this week to pay Gemino Healthcare Finance.

“;Once we emerge, we plan to be much more vibrant,”; Hasham said.