The federal government on Monday threw up a roadblock to the proposed bankruptcy sale of Hahnemann University Hospital’s residency programs to Tower Health for $7.5 million.
The Centers for Medicare and Medicaid Services (CMS) said the sale proposal is “contrary to law and contravenes CMS regulations” because it limits to $3 million the amount of money Medicare could recoup for overpayments at Hahnemann, and amounts to an illegal transfer of a Medicare provider agreement.
Hahnemann’s residency slots are a part of that agreement and managed by Drexel University School of Medicine faculty. The Medicare agreement is valuable because the residency slots would go to the owner of the Hahnemann agreement after the current residents complete their training.
Hahnemann officials declined to comment on the federal government’s objection, filed by a Justice Department lawyer. Tower, which operates Reading Hospital in West Reading and five community hospitals in Southeastern Pennsylvania, did not immediately provide a comment.
It’s not clear what impact the federal government’s objection to the sale of the Medicare provider agreement will have on the auction of the asset scheduled for Thursday morning at the Center City offices of Saul Ewing Arnstein & Lehr LLP, which is representing Hahnemann and St. Christopher’s Hospital for Children in the bankruptcy filed June 30.
If the auction still happens, the $7.5 million bid by Tower Health will set the baseline for bidding. Additional bids are due Wednesday.
Medicare objected to both the $3 million clawback cap and the transfer of its agreement with Hahnemann unless Tower — or any buyer — were to take on all the “burdens” that come with the agreement . However, it did not object to the transition of Hahnemann’s residents and fellows to other hospitals to finish their training.
As of Monday, fewer than five of 583 Hahnemann residents and fellows still need to find places to continue their medical training, a Hahnemann spokesperson said.
In at least two cases, whole programs have moved to new hospitals in the Philadelphia region.
Urology, with 10 residents, is moving to Main Line Health’s Lankenau Medical Center and Bryn Mawr Hospital.
In family medicine, 20 of 22 residents have agreed to follow faculty members to Tower’s Chestnut Hill Hospital.
Editor’s note: The story was updated at 6.06 p.m. with information from a new filing in bankruptcy court.