Tower Health’s desire to cut its losses from St. Christopher’s Hospital for Children, which it co-owns with Drexel University, reached a critical new stage in the last week.

Instead of providing a long-term renewal of an $85 million line of credit it has given the North Philadelphia safety-net hospital, Tower is awaiting the results of negotiations with other health systems it hopes will take over Tower’s role at St. Chris, Tower’s chief executive P. Sue Perrotty said Thursday.

“Certainly if we were in a different financial position maybe these discussions would be different, but as you know we have been asking for support from the community to relieve Tower of the burden of supporting St. Chris,” Perrotty said. She did not provide details on the status of Tower’s credit line to St. Chris, which was set to expire March 31.

The move by Tower comes as St. Chris is showing improved results, according to John Fry, president of Drexel University, which renewed the line of credit it gave St. Chris for the next four years.

The projected loss was $23.6 million for the year ending June 30, down from $97.6 million in fiscal 2021, Fry said.

“We will stand behind this hospital and we will find a solution. We just need more help than the help that Drexel and Tower can provide,” Fry said in a joint interview Thursday with Perrotty. He said he was not at liberty to identify which organizations had been asked this week to form what he called a “bigger tent of supporters,” though the Temple University Health System acknowledged that it is part of the discussions.

St. Chris, at the intersection of North Front Street and East Erie Avenue, was part of the American Academic Health System bankruptcy in 2019 that led to the closure of Hahnemann University Hospital in Center City that summer.

For 20 years before that, the hospital was owned by the Tenet Healthcare Corp., which bought it and other hospitals in 1998 following the bankruptcy of the Allegheny Health, Education, and Research Foundation.

Another troubled owner

Now, it’s Tower’s financial difficulties — brought on by a rapid expansion through acquisitions from its Berks County base at Reading Hospital into Southeastern Pennsylvania — that have put St. Chris at another inflection point.

When Drexel and Tower bought St. Chris’ business operations for a total of $58 million, each institution provided an $85 million line of credit to St. Chris. (The sale did not include the hospital’s real estate, which sold separately for $65 million to a local real estate firm and is now rented by St. Chris.)

Those lines of credit are used as a backstop for the expenses of running the hospital and affiliated physician practices. St. Chris has drawn $70.5 million on each of the credit lines, which were set to expire on March 31.

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Drexel renewed its line of credit to St. Chris though March 31, 2026. Drexel’s audited financial statement for the year ended June 30, 2021, said the university recorded a reserve of $35.25 million on that loan, which means it’s not certain it will get all of the money back.

Tower is taking a wait-and-see approach, given its difficult financial position overall, with operating losses of more than $900 million in the last 4½ fiscal years.

“As we work through these negotiations, the Tower board will decide what next steps are,” Perrotty said. “We are waiting to see what the financing looks like to see what’s required of Tower.”

In a bid to stem losses, Tower has closed two of the five Southeastern Pennsylvania hospitals it bought in 2017 for $423 million. It is still trying sell the shuttered hospitals, Brandywine and Jennersville.

It is also trying to sell Chestnut Hill Hospital in Philadelphia and a set of suburban urgent-care centers it bought for $24 million in 2018.

Improving results for St. Chris

Fry said St. Chris, which has 103 staffed beds and employs 1,857, is on an upward financial trend. He said that it’s been 10 months since St. Chris has needed money from Tower and Drexel and that the anticipated need for the current fiscal year has dropped to about $5 million from $20 million.

“I’m very confident, knowing what I know about potential public and private funding sources, that we’re going to be able to take care of that gap,” Fry said.

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Philadelphia gave $2.5 million to St. Chris in the current fiscal year. Mayor Jim Kenney’s proposed budget for fiscal 2023 included the same amount. St. Chris had requested $10 million, Fry said. “In effect, this is a public hospital. We think it’s fair to ask the city to do its share to support this.”

The state provided $22 million to St. Chris for the year ending June 30. Perrotty said she hopes the state agrees to provide annual support.

A spokesperson for Gov. Tom Wolf said in an email: “We recognize that St. Christopher’s is a valuable resource for the community. We are monitoring the situation and we hope Tower Health makes a responsible decision for the vulnerable population that relies upon this hospital.”

Who might step in?

In 2019, Jefferson Health, Temple University Health System, Philadelphia College of Osteopathic Medicine, and Einstein Healthcare Network (now owned by Jefferson) formed a consortium to bid for St. Chris. But they did not to participate in the bankruptcy auction after concluding that St. Chris’ financial condition was too dire.

Temple confirmed that it is in discussions on whether it can have a role in “preserving access to care for the children of North Philadelphia.” Jefferson and PCOM did not comment.

Children’s Hospital of Philadelphia, which was not part of the consortium, said it has offered an unspecified grant to support clinical services for children in North Philadelphia.

Jefferson has a significant interest in the fate of St. Chris because it now owns 100% of Health Partners Plans Inc., a major Medicaid insurer for children who rely heavily on St. Chris. The same is true of Independence Health Group, which owns AmeriHealth Caritas, the city’s largest Medicaid insurer.

Gregory E. Deavens, Independence’s president and CEO, has been deeply involved in negotiations over the future of St. Chris, Fry said.

Independence did not answer a question about how much money it is willing to contribute to St. Chris, expressing only general support in a statement.

“St. Christopher’s provides outstanding care to vulnerable children and underserved families in our community, and we believe it is a vital asset that must be preserved,” Deavens said.