Jefferson group bows out of bidding for St. Christopher’s Hospital for Children

The Jefferson Health consortium of nonprofits decided not to submit a bid for St. Christopher’s Hospital for Children by the deadline for a bankruptcy auction of the North Philadelphia facility.

Two other bids were submitted, though it was not yet clear whether both of them qualified as valid bids. If there is more than one valid bid, an auction will be held Thursday in the Center City offices of Saul Ewing Arnstein & Lehr LLP, which is St. Christopher’s law firm for the bankruptcy.

Drexel University and Tower Health said they had submitted a joint bid. “The partnership’s mission is to ensure that access to pediatric services continues uninterrupted for the vulnerable, underserved community that depends on St. Christopher’s for its care,” Drexel said in a statement.

A lawyer for KPC Global said the California company that also wanted to purchase the shuttered Hahnemann University Hospital also submitted a bid.

The amounts of those two bids were not available.

The other members of the Jefferson consortium are Einstein Healthcare Network, Philadelphia College of Osteopathic Medicine, and Temple University Health System. Jefferson did not give a reason for its decision not to submit a bid. The consortium had announced its intention to explore the acquisition of St. Christopher’s on July 17.

“As a consortium responsible for 60% of patient activity to St. Chris with three safety-net hospitals, we remain very interested in collaborating with whoever the winning bidder is to ensure continued access and quality of care for our pediatric patients. We look forward to supporting the provision of these needed services for the children of our community,” Jefferson said in a statement.

Jefferson declined to comment further.

Jefferson has exploded in size through acquisitions since 2015, from three hospitals to 18, including the pending deal for Einstein Healthcare Network. Jefferson also acquired Philadelphia University.

All but one of those deals were completed without any cash outlay. Under a pending deal with Temple, Jefferson is expected to pay an undisclosed amount of cash for Fox Chase Cancer Center and Temple’s interest in Health Partners Plans, which manages Medicaid benefits for almost 250,000 people in Southeastern Pennsylvania.

Jefferson said in June that the price for the Temple operations could be “significant” and require Jefferson to add to its debt, now more than $2 billion. Jefferson was the winning bidder for Hahnemann University Hospital’s residency program, but that $55 million deal is on hold pending the outcome of an appeal by federal regulators.

The acquisition of St. Christopher’s could have put Jefferson in a better position to compete with the University of Pennsylvania Health System, which has a close relationship with the Children’s Hospital of Philadelphia. Sources said Penn and Independence Health Group were said to be supporting the Drexel-Tower bid, though neither of them has commented.

Because so many of St. Christopher’s patients come from members of the Jefferson-led consortium, the prospect of being owned by that group lifted morale among St. Christopher’s employees. Such a deal, they believed, may have secured the future of advanced care at the hospital.

Tenet Healthcare Corp. sold St. Christopher’s and Hahnemann in January 2018 for $170 million to Joel Freedman, a California investment banker. Freedman’s company that owns the hospitals filed for bankruptcy at the end of June. Hahnemann discharged its last inpatient on July 26.

The synergies from a Drexel-Tower purchase are not as evident as they would have been if the Jefferson group had ended up owning St. Christopher’s. Tower is anchored by Reading Hospital, and its closest hospital to St. Christopher’s is Chestnut Hill, but that facility does not have maternity services.

Tower in 2017 acquired Chestnut Hill and four other hospitals in Montgomery, Chester, and Berks Counties from Community Health Systems Inc. for $418 million. Those hospitals had an operating loss of $129 million in the year ended June 30.