If the nonprofit exits the hospital business, it still will offer hospice and home-care services and will continue with plans to build a senior living facility in 'Ewa, officials said.

Queen's Health Systems, Hawaii Pacific Health — which operates Straub Clinic and Hospital, Wilcox Health and Kapiolani Health — and Kaiser Permanente confirmed that they are in preliminary discussions with St. Francis, the largest kidney dialysis provider in the state.

St. Francis said avenues it is considering include a sale, merger, lease, management contract or a combination, according to an article published yesterday in the Hawaii Catholic Herald newspaper.

"It has to do with our mission and where we believe we need to put our energies at this time," said Sister Grace Anne Dillenschneider, chairwoman of St. Francis Healthcare System and a member of the leadership team at the Sisters of St. Francis in Syracuse, N.Y., which oversees Hawai'i.

St. Francis' mission is to care for the sick and poor, but it has had to operate more as a business in an increasingly competitive industry, CEO Sister Beatrice Tom told the Herald.

"You're trying to compete, you're trying to pay for this and pay for that. I don't really feel that's our mission," Tom said.

At a St. Francis board meeting on Jan. 25, directors made a final decision to shift away from providing acute care directly and move toward long-term care and care for the dying — which better fit its original mission. More than a year ago, St. Francis broke ground on a seniors' residential care community in 'Ewa. The first apartments should be available in 2007.

St. Francis began to get financially squeezed in 2000, a few years after the government reduced payments for Medicare and Medicaid patients. Medicare is a federal health insurance program for seniors and certain disabled people while Medicaid is a state and federal health insurance plan for the low-income and disabled. About 70 percent of the people St. Francis serves are on Medicare or Medicaid.

Also contributing to its problems have been staffing shortages, new technology requirements, needed capital improvements and a lack of admissions.

St. Francis still hasn't fully recovered from the nurses strike in 2003. An agreement with the nurses' union called for raises and no staff-level reductions. But the strike cost the hospitals more than $4 million at the time. St. Francis said it has taken two years to rebuild the employee base and physician network.

In December 2003, St. Francis said it would lay off 40 employees as part of a restructuring.

Last April, lawmakers approved $85 million in special-purpose revenue bonds for St. Francis, to be used for construction and improvement projects and to buy equipment for two medical centers on O'ahu and the Neighbor Island clinics.

While the restructuring has helped, St. Francis is forced to seek new alliances as financial challenges continue.

"Although we don't know the form of any changes yet, with your support and faith in the Lord, we will come through these challenging times as a stronger organization and better able to focus on our original mission and continuing Catholic healthcare in Hawai'i," Tom said in a statement yesterday.