Drexel University says it’s working on a deal to save Hahnemann Hospital from financial ruin

Drexel University and American Academic Health Systems LLC are engaged in talks over the future of Hahnemann University Hospital and St. Christopher’s Hospital for Children, according to a top Drexel official.

Still, the fate of the two Philadelphia health-care institutions, which are Drexel’s primary teaching hospitals, remains uncertain, Drexel president John Fry said this week in an email to faculty.

Joel Freedman, chief executive of American Academic — which bought Hahnemann and St. Christopher’s early last year from Tenet Healthcare Corp. for $170 million — had warned in April that Hahnemann was losing $3 million to $5 million a month and might have to close. That would cause a last minute scramble for Drexel’s third- and fourth-year medical students and residents from other medical schools that Drexel faculty help train at the hospital.

“We are actively engaged in discussions with AAHS to fully understand the financial situation with the hope that we might be able to arrive at a mutually acceptable long-term plan for the hospitals,” Fry told Drexel faculty in an email Wednesday. “It is too early to predict the success of these efforts but Drexel’s financial advisers and the AAHS advisers have been working diligently for the last few weeks on several options.

“Since my last update, the College of Medicine leadership team and our external advisers have continued to meet regularly with government officials, insurers, local health-care leaders, and key contacts at AAHS to pursue all options to keep the hospitals open and financially viable for the future. I have also had productive meetings with Gov. Tom Wolf and Mayor Jim Kenney to apprise them of the gravity of the situation, and to ask for their assistance and support. Those conversations are continuing.”

Soon after its purchase of Hahnemann and St. Christopher’s early last year, American Academic realized that Hahnemann’s financial condition was much worse than expected. Antiquated computer systems have made it hard to accurately document patients’ conditions and virtually impossible to get solid financial information on the hospital’s operations.

Hahnemann, which opened in 1848 as a homeopathic medical college, employs 2,500 people. St. Christopher’s, where 45 jobs in the doctors’ practices were cut last August, employs 1,300. The two hospitals have $600 million to $700 million in annual revenue, down from $790 million when Freedman’s company bought them.

The number of patients in the 496-bed hospital has fallen to a range of 200 to 250 a day, down from the high 200s in early 2018. A closure would affect not only medical students, but also the city’s poorest patients, who have come to rely on the North Philadelphia hospital for their health-care needs.

Fry said contingency plans are in place to ensure that the clinical training of Drexel’s medical students is not disrupted if American Academic ends up having to close Hahnemann. Drexel has one of the nation’s largest medical schools.

“I realize that this is a frustrating and extremely stressful time brought on by the financial struggles at hospitals we do not own,” Fry said. “However, I remain optimistic that we will come through this better positioned for the long-term, and I ask for your support and patience as we work through this difficult and complicated situation.”

American Academic, which has hired external consultant EisnerAmper to aid in its restructuring, declined to comment on negotiations with any party. Lawrence G. McMichael, of Dilworth Paxson LLP, is the company’s legal counsel on the restructuring.