Prime Healthcare Foundation Hawaii Inc. has offered a minimum bid of $25 million to purchase the bankrupt Hawaii Medical Centers in Liliha and Ewa.
HMC asked the U.S. Bankruptcy Court Wednesday to approve a sale to Prime Healthcare unless another bidder offers a significantly higher price.
Prime could become the new owner of the hospitals if there are no bids that are at least $875,000 more than Prime’s $25 million offer, according to court documents filed this week. HMC is scheduled to update the court on the sales process on Dec. 16.
"If no one actually tries to qualify (as a bidder), then we have a hearing set on Jan. 9 to approve the sale to Prime," said Chris Muzzi, HMC’s attorney. However, if there are other bidders, HMC will hold an auction on Jan. 5.
Prime, controlled by California hospital operator Prime Healthcare Services, also agreed to invest at least $15 million in capital improvements within five years, and has put down a $1 million deposit. If the company is outbid, Prime will be paid a $625,000 "break-up fee" for its work in preparing the deal, according to court filings.
Prime’s local attorney, Simon Klevansky, didn’t return calls for comment.
Meanwhile, HMC notified its 990 employees in a letter last week that it might no longer be the hospital owner as of Jan. 31 or later, which might result in layoffs.
Until late October, St. Francis Healthcare System of Hawaii, the former owner, was planning to resume control of the hospitals but backed out because of financial concerns.
"Hawaii Medical Center is actively pursuing other buyers since the transition back to St. Francis was unsuccessful," Maria Kostylo, HMC CEO, said in the letter dated Dec. 2. "HMC’s board of directors is reviewing several alternate strategies."
Court records show that HMC’s main creditor, St. Francis, is owed about $39 million, and unsecured creditors at least $19 million. If a sale is approved to Prime, St. Francis would receive just $11.3 million, while unsecured creditors would get $500,000, court documents show.
HMC has indicated that there are "several potential buyers" interested in the unprofitable hospitals, which have struggled for years to increase referrals for higher-paying procedures and privately insured patients to offset a majority of elderly and poor patients on Medicare and Medicaid, whose treatment is reimbursed at a lower rate.
Prime Healthcare Services owns and operates 14 acute-care hospitals in California and has been the focus of multiple news reports in recent years questioning its business and billing practices. The company recently acquired an interest in a Texas facility and is seeking also to purchase a hospital in New Jersey. California’s attorney general twice denied Prime from acquiring financially struggling hospitals, most recently in September, citing the sale was not in the public interest, according to a letter posted on the website of California’s Department of Justice.
California Watch, a media organization founded by the Center for Investigative Reporting, raised concerns about Prime transferring an unusually high number of patients from its emergency rooms to its hospital beds, gaining hundreds of millions of dollars by targeting people with Medicare.
Prime issued a news release in October responding to an investigative piece by California Watch, calling it an "attempt to smear Prime Healthcare."
