Hawaii Medical Center, stung by losses at the former St. Francis Medical Center hospitals, is asking state legislators for a break on the estimated $6 million a year it owes in general excise tax payments.

The state's only for-profit hospital operator also is asking the Legislature to approve issuance of up to $40 million in special purpose revenue bonds to help with the purchase of new equipment and technology in addition to renovation of hospitals in Liliha and 'Ewa Beach.

"We do continue to suffer significant losses with the additional burden of the general excise tax," said Catherine Tanaka, Hawaii Medical Center chief operating officer.

Hawaii Medical Center LLC bought the two hospitals in January 2007 from St. Francis Health Care System, which had searched for a buyer as it rolled up losses. The buyers consisted of Kansas-based Cardiovascular Hospitals of America LLC that owns 51 percent and a group of local doctors that owns the remaining 49 percent.

The owners came in hoping to nurse the hospitals back to financial health while pledging to set new standards for patient care locally. But Hawaii Medical Center apparently has been unable to right the two hospitals' finances as quickly as possible.

Tanaka and Toni Downs, Hawaii Medical Center chief clinical officer, also said they did not know if Cardiovascular Hospitals of America had made all of the $7 million to $8 million capital injection it promised for the renovation and improvements during the first year and $5 million every year thereafter. But because of the continuing losses, the company has not met that timetable for all of the funding improvements.

Much of the loss at the hospitals stems from their desire to continue serving a large number of Medicare, Medicaid and uninsured patients.

A study prepared by the Hawaii Health Information Corp. last year found Hawai'i hospitals are being reimbursed at about $8 for every $10 of treatment they provide to Medicare, Medicaid and state Quest patients.

The Hawaii Health Information Corp. study reported in 2006 that Medicare, Medicaid and Quest losses for all hospitals statewide were more than $240 million. Tanaka said she understands Hawaii Medical Center has the highest percentage of Medicare, Medicaid and Quest patients in the state.

Downs said there have been improvements made to lower losses, including improving efficiencies through a staffing change involving registered nurses and reviewing the way it admits, treats and discharges patients.

Tanaka said Hawaii Medical Center West closed down about a dozen or so beds because it was operating more efficiently.

Two bills being considered by the Legislature ask for a tax break, with one, House bill 2759, seeking a six-year exemption for a for-profit hospital with 60 percent or more of its patients under Medicare, Medicaid and Quest payments.

The hospital, like nonprofit hospitals in Hawai'i, would be exempt from paying taxes on these payments.

The other bill, HB 2757, would defer excise tax payments for such a hospital until some time in the future. Owners would be prohibited from taking any profit distribution while the exemption exists.

A third bill, HB 2757, allows for the issuance of revenue bonds.

Lowell Kalapa, head of the Tax Foundation of Hawaii, said the exemption for excise taxes wasn't a good idea because it sets a precedent. Other for-profit social service corporations that have contracts with the state could seek similar legislation in the future if Hawaii Medical Center is successful, he said.

"The deferral would set a precedent, too," Kalapa said.

"But I can understand where some of these legislators are coming from. They feel that Hawaii Medical Center is providing care for the poor, so let's give them a hand."

Reach Greg Wiles at gwiles@honoluluadvertiser.com.