Can cash-strapped Delaware County Memorial Hospital make money by pivoting to mental health care?

When the decision was announced to turn Delaware County Memorial Hospital into an inpatient mental health facility, even fierce opponents of the system’s for-profit owner saw a silver lining: an opportunity to help people struggling with addiction and psychiatric issues.

But following nearly a year of turmoil at Delaware Memorial’s parent company, Crozer Health, including layoffs early this year and a series of service cuts, some high-profile officials remain torn on the plans for the hospital.

For Rep. Mike Zabel, a Democratic state representative from Drexel Hill, the plan represents a mixed bag: He laments the loss of an acute-care hospital in his community while viewing the addition of behavioral health services at a time of great need as “certainly a positive.”

The acute-care facility in Drexel Hill, which is part of the Crozer system that is owned by the California-based for-profit Prospect Medical Holdings Inc., shut its doors in early November.

What happens next is up to the courts to decide, but it would be highly unusual for the hospital to reopen in its traditional form, experts said. It is also not a sure bet that Prospect can turn a profit by pivoting to mental health.

» READ MORE: Crozer Health will turn Delaware County Memorial into a mental health hospital

Crozer loses $1.5 million for every month that Delaware County Memorial sits empty, said Tony Esposito, Crozer’s chief executive. He estimated that it would be slightly profitable under the plan for inpatient psychiatric and drug-treatment services.

“It’s not a moneymaker, but we go from losing $18 million a year to making $3 million and providing needed services to the community,” Esposito said.

That’s not a slam dunk, though. From 2019 to 2021, 23 psychiatric hospitals in Pennsylvania, on average, fell just short of break-even financial results, according to a recent report from the Pennsylvania Health Care Cost Containment Council.

The low reimbursement rates for the mental and behavioral health services contribute to the nationwide shortage of psychiatric facilities, said Lisa Dailey, the executive director of the Treatment Advocacy Center, a national nonprofit advocating for treatment for people with severe mental illness.

“There’s not a lot of financial incentive to do a behavioral health facility.”

“There’s not a lot of financial incentive to do a behavioral health facility or psychiatric hospital,” she said.

A positive for Crozer is that a psychiatric and drug-treatment facility has less financial risk, said Dan Grauman, chief executive of Veralon, a Philadelphia health-care consulting firm.

“It’s a much lower-cost operation. The downside of that financial scenario isn’t nearly as bad as it is for an acute-care hospital where you have to staff everything to a certain minimal level whether you have one patient or 500 patients,” Grauman said.

Not all the services Crozer wants to move to Delaware County Memorial would be new.

Under Crozer’s proposal, Delaware County Memorial would have two inpatient psychiatric units — about 40 adult and 20 geriatric beds — that would move from Chester Crozer Medical Center. The move would increase the number of adult beds by single digits, said Esposito.

Crozer also plans to open an adult inpatient acute detox and rehab unit with 40 beds at Delaware County Memorial. In February, Prospect closed an inpatient addiction treatment center with similar capacity at Crozer-Chester that it does not plan to reopen.

The new detox and rehab unit, which was built out on a floor of Delaware County Memorial last spring but didn’t open because of staff shortages, was supposed to be an additional location for the eastern part of the county, Esposito said.

A crisis center for mental health care at Delaware County Memorial would have been new, replacing one that Trinity Health Mid-Atlantic closed in 2019 at Mercy Fitzgerald Hospital, just two miles away in Darby.

But the Delaware County Council in October awarded a contract to Philadelphia’s Public Health Management Corp. to provide behavioral health services at Mercy Fitzgerald. Public Health Management in August hired Crozer’s head of psychiatry, Kevin Caputo, as chief medical officer.

“A key factor in deciding which programs to support is reliability and focus on patient needs. These are areas where Prospect-Crozer has come up short,” the county said in an e-mailed statement.

Crozer plans to keep Crozer-Chester’s crisis center, where the number of patient visits exploded after the Mercy Fitzgerald closure, Esposito said. But the County Council still has to approve a contract extension beyond Dec. 31.

Delaware County Memorial also plans to maintain a new urgent care center and maintain maternal-fetal medical services for high-risk pregnancies, a microbiology lab, a home health and hospice unit, and an ambulance substation at the facility.

In 2024, Crozer would like to add child and adolescent psychiatric units, Esposito said.

Delaware County Memorial is a good location for treatment of substance use disorders, said Nito Gan, interim chair of psychiatry at Crozer. It’s not far from the 69th Street Terminal, an area that has become another epicenter of the region’s overdose crisis.

“Having a place for people with primarily a substance use disorder come in and get treatment and possibly do a detox or a rehab, it’s really a great option,” Gan said.

At the level of care that DCMH wants to offer, people seeking treatment for substance use disorder will also be able to get care for psychiatric and medical needs.

There aren’t enough places in the region where people can get that kind of care, said Carla Sofronski, the executive director of the Pennsylvania Harm Reduction Network. That is crucial with the advent of xylazine in the drug supply, she said. The strong sedative is notorious for causing serious skin lesions that could get infected, requiring IV antibiotics.

» READ MORE: A powerful sedative in Philly’s drug supply is causing severe wounds and agonizing withdrawals. It’s quickly becoming unavoidable.

Gan said the patients who would receive mental health care at the revamped Delaware County Memorial are now scattered throughout Crozer-Chester. “They are on medical floors; they’re in our emergency rooms. Putting them all in one area consolidates the resources,” he said. “When the patients are spread out throughout the hospital, it’s not really as efficient and also not really as good for the patients.”

“Putting [patients who need mental health care] all in one area consolidates the resources.”

Inpatient psychiatric beds are in high demand, hospital executives say. Bryn Mawr Hospital, for example, immediately filled the 20 beds it added early this year for psychiatric patients.

In September, Crozer announced its plan to close the emergency department at Delaware County Memorial and focus the facility on behavioral health and addiction treatment. That was about a month after ChristianaCare, a large nonprofit hospital system in Delaware, ended negotiations with Prospect on a possible acquisition of Crozer, which, according to Crozer’s CEO, had an operating loss of $93 million on $644 million in revenue in the fiscal year ended Sept. 30.

Plan B included not just the changes at Delaware County Memorial but also the conversion of Crozer from for-profit to nonprofit and the development of Springfield Hospital as a center for outpatient care. Crozer had already closed the emergency department at Springfield in January — initially temporarily ― during the pandemic’s omicron surge because of staff shortages.

Delaware County Memorial The hospital is at least temporarily closed under a Nov. 4 Pennsylvania Department of Health order issued because it didn’t have staff for X-rays. A lawsuit, supported by county officials and the state attorney general, to force Prospect to reopen the Upper Darby property as an acute-care hospital is now in Commonwealth Court, leaving Crozer’s plans in limbo.

A hearing is scheduled for Wednesday. Prospect wants the court to overturn a preliminary injunction that blocked it from going forward with its plans.

Grauman, the Philadelphia health-care consultant, said he has never seen a hospital reopen. “They get used for alternative purposes,” he said.