Hawaii Medical Center hopes to exit from bankruptcy late this summer, but may face a battle over a plan to pay creditors less than what they loaned or sold to the company.

The operator of the two former St. Francis Medical Centers on O'ahu has filed a plan that calls for repaying a portion of most debts owed to creditors while also proposing to turn its hospital in Liliha into a nonprofit entity so it can lower its state tax bill and do fundraising to finance improvements.

"We are very confident that we have a plan that will work," said Salim Hasham, who was brought in by the current owners to restructure HMC's finances while overseeing its operations.

The company, the only for-profit hospital operator on O'ahu, filed for bankruptcy last August, some 20 months after purchasing the 188-bed hospital in Liliha and 102-bed hospital in 'Ewa for $46.5 million from St. Francis Healthcare Systems.

HMC, which is 54 percent owned by Kansas-based Cardiovascular Hospitals of America, 45 percent by a group of 130 local doctors and 1 percent by St. Francis, had come in with high hopes to turn around the money-losing hospitals.

At the time of the purchase, HMC chairman Badr Idbeis said the company planned to pump at least $32 million in improvements to the two hospitals over five years while pledging to set new standards for patient care in the state.

But those plans were undone by continued losses, and HMC now owes creditors around $80 million. Much of that is owed to St. Francis, which provided HMC $40 million in seller financing, a 25-year lease at $1 million a year, and a $6 million working capital loan.

St. Francis, which now has hospice, home health, mobile and other health services, yesterday expressed concern about the proposed reorganization's treatment of what it was owed. It noted it had been patient with HMC both before and during the bankruptcy proceedings.

"We have not received payments on or loans to them for a year, and the past due amount has now reached more than $9 million," Sister Agnelle Ching, St. Francis chief executive officer, said in an e-mailed statement.

"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."

Ching said St. Francis will review the plan in detail, but already was bothered by the proposed HMC claims determination processes and the overall treatment of what was owed.

HMC's proposed plan calls for repaying unsecured creditors about 70 cents on the dollar and secured claim holder Siemens Financial Services the full $3.9 million owed.

But it is disputing what it owes St. Francis, noting in its court filing they believe the debts are "subject to either disallowance or reduction." The plan also asserts property leases with St. Francis are a form of financing.

Disagreements aside, Hasham said the hospitals have been making financial progress, with the operations showing positive cash flow before interest, depreciation, amortization and bankruptcy costs. Moreover, he said there had been improvements in patient care and that the Liliha hospital has upgraded its imaging center after taking over a joint venture.

Hasham said the hospital also sees itself rebuilding its patient census as it exits from bankruptcy. Currently, it operates as many as 60 of its 136 acute care beds at Liliha, along with the 52 skilled nursing care beds. At the 'Ewa facility, which will remain a for-profit entity, it operates more than 60 of its acute-care beds.