It’s early in the process but the total fees paid to accountants, lawyers, and other outside help to navigate the bankruptcy and financial restructuring could reach $5 million to $7 million.
The closure of Hahnemann University Hospital was sad news for the 2,500 employees who are now out of work, thousands of patients forced to find a new health-care provider, and hundreds of doctors-in-training who had to scramble to find a new place to complete their medical residencies.
But the bankruptcy, like most, is proving to be a boon for dozens of lawyers and accountants hired to figure out a way to pay off the Philadelphia company’s debts and find a new owner for St. Christopher’s Hospital for Children. Regardless of the eventual outcome, these professionals are getting paid up to $795 per hour.
Joel Freedman, a California investment banker who bought the two hospitals in early 2018 for $170 million, hired EisnerAmper LLP, a New York financial advisory firm, three months before the June 30 bankruptcy to devise a restructuring plan for the hospitals.
EisnerAmper and other firms were paid almost $2 million before the bankruptcy, according to court filings. At least 10 prominent Philadelphia firms are now involved in the case. An EisnerAmper official estimated in court that total professional fees could reach $5 million to $7 million.
EisnerAmper’s first bill after the bankruptcy: $729,799. That was knocked down to $442,305 to comply with the rate cap imposed by the bankruptcy judge.
The bill, for the period from June 30 through July 31, included $28,543 in expenses. The biggest expense item was $6,000 in July rent for an apartment for Ronald Dreskin, the interim chief executive officer for Philadelphia Academic Health System LLC — the immediate parent company of the two hospitals.
The fees don’t sit well with a union that represents 800 Hahnemann nurses who may not even get anything in severance after the hospital, which cared for mostly poor patients, officially closes Sept. 6.
“While Joel Freedman cried poverty while shutting poor and working-class Philadelphians out of the services they need, he’s been paying his consultants enormous sums of money,” said a spokesperson for the Pennsylvania Association of Staff Nurses and Allied Professionals. “It’s just another example of how the 1% are profiting off the closure of this important hospital.”
EisnerAmper had already collected $964,659 from Freedman for work done before the bankruptcy. The firm’s weekly rate for services led by partner Allen Wilen increased to $92,250 from $69,650 a week before the bankruptcy.
EisnerAmper declined to comment on its fees.
Wilen’s hourly rate of $630 is lower than rates for his counterparts at higher-profile firms, such as FTI Consulting and Alvarez & Marsal, which can top $900 an hour.
Experts said it is hard to judge professional fees in bankruptcy because they vary so much relative to the size of the company and the complexity of the case.
“Fees have become an easy thing to pick on in Chapter 11 bankruptcy because they are public,” said Christopher Ward, chair of the bankruptcy group and managing partner in the Wilmington office of Polsinelli, who suggested that fees might even be higher in private transactions.
It’s no surprise that EisnerAmper’s fees went up in June, Ward said. “There’s more work once the bankruptcy happens,” said Ward. Plus, there’s the cost of lost opportunities to work on other matters because the bankruptcy takes up so much time.
The EisnerAmper bill is just a start.
Lawyers from a Who’s Who of Philadelphia firms are collecting fees from Freedman, creditors, and others involved in the case.
Even before the bankruptcy was filed, the hospitals’ bankruptcy firm, Saul Ewing Arnstein & Lehr LLP, received $770,000 in retainers. Saul Ewing, whose top partner on the case bills $745 an hour, hasn’t yet filed its first post-bankruptcy fee application.
Other firms deeply involved in the case include Fox Rothschild LLP and Sills Cummis & Gross P.C. for the unsecured creditors committee. The highest hourly rates for those firms’ attorneys on case are at $610 and $795. Klehr Harrison Harvey Branzburg LLP, with a top hourly rate of $660, is special counsel for the hospitals’ parent company in connection with matters related to the Drexel University School of Medicine.
SSG Advisors LLC, a West Conshohocken investment banking firm charged with selling the Hahnemann residency program and St. Christopher’s Hospital for Children, collects a monthly fee of $50,000, plus a commission.
Selling St. Christopher’s has become the mission of the bankruptcy, Mark Minuti, a Saul Ewing attorney -- whose hourly rate is $745 -- told Bankruptcy Judge Kevin Gross on Aug. 19.
An auction of the North Philadelphia hospital is scheduled for Sept. 18.