UPenn, CHOP stand ready to help as new owners take over Philly’s St. Chris children’s hospital

Drexel University and Tower Health have completed their purchase of St. Christopher’s Hospital for Children out of bankruptcy for $50 million, effective Sunday, but the two nonprofits won’t be alone as they learn the ropes of running a children’s hospital in an impoverished section of North Philadelphia.

Children’s Hospital of Philadelphia is offering technical assistance, and two other local health-care giants, Independence Health Group and the University of Pennsylvania Health System, are also on standby, ready with unspecified general support.

“It was interesting, knowing what we’re up against, to see those three emerge and say what can we do to support the things that you’re trying to do. It was incredibly gratifying to see that kind of collaboration,” Drexel University president John Fry said in a recent interview.

It’s not clear exactly what CHOP will do.

“Based on regulatory constraints, there are limitations to the nature and scope of our discussions,” CHOP’s chief executive, Madeline Bell, said in an emailed response to questions. “However, CHOP stands ready to engage in open and collaborative dialogue with the new owners about how we may be able to assist, where and when appropriate.”

Bell said she could not speculate about any changes in services at the 188-bed St. Christopher’s, which employs 2,105, including 1,580 full time. The medical staff totals 440, according to Tower. CHOP does not have a contract with Health Partners Plans, a Medicaid insurer that counts for a large share of St. Christopher’s patients.

Asked what the potential financial impact could have been on CHOP if the North Philadelphia safety-net facility had not survived bankruptcy, Bell said that was not the point, because both children’s hospitals are needed. “CHOP is routinely operating at capacity, and the closure of St. Christopher’s would have created a strain on our ability to care for some of the area’s most vulnerable children.”

Independence’s chief executive Daniel J. Hilferty and Kevin Mahoney, CEO of the University of Pennsylvania Health System, both said they were involved because they wanted to ensure St. Christopher’s continues to be there for children and their families.

Tower and Drexel bought the St. Christopher’s business but not the buildings, which are owned by Joel Freedman, the California businessman who bought Hahnemann and St. Chris in early 2018 for $170 million, and a Chicago real estate firm. The Tower-Drexel partnership assumed a long-term lease on the properties.

Meanwhile, Penn and Independence are supporting a separate effort to acquire the real estate from Freedman and Harrison Street Real Estate, according to sources.

“We anticipate that we will work with the clinical staff and determine what the needs are and continue to expand the capabilities of St. Chris. It’s contracted over the last several years, and we want to get it back,” said Clint Matthews, Tower’s chief executive.

One thing that could change is the direction of pediatric transfers. In the year ended Dec. 1, Tower’s flagship Reading Hospital, in West Reading, transferred 247 patients to CHOP and 50 to St. Christopher’s.

Temporarily, officials from EisnerAmper, the restructuring firm Freedman hired before the June bankruptcy of Hahnemann and St. Christopher’s, will continue running the hospital at 160 E. Erie Ave. Ultimately Tower, which is based in West Reading, will manage the hospital on behalf of its 50-50 joint venture with Drexel. A search for a St. Christopher’s CEO is underway.

St. Christopher’s adds to Tower’s rapid expansion in Southeastern Pennsylvania. In addition to the community hospitals it bought in 2017 for $418 million from Community Health Systems Inc., a year ago, Tower spent $24.3 million for Premier Urgent Care, which has 19 locations in the Philadelphia region. Next month, 58 Drexel doctors and 80 support staff will join Tower Health Medical Group.

Tower had an operating loss of $179 million on $1.75 billion in revenue in the year ended June 30. The losses came from the new hospitals and the Tower medical group.

When it downgraded Tower’s credit rating by two notches this month, Standard & Poor’s described St. Christopher’s as an important addition to Tower. The ratings agency also noted that details on St. Christopher’s historical financial position were limited and said it expects the children’s hospital to be a drag on Tower’s bottom line. “We anticipate a need to reinvest in service lines and restore volumes,” S&P said.

Tower is getting off to a rocky start with 500 St. Chris nurses represented by the Pennsylvania Association of Staff Nurses and Allied Professionals. The new owner first refused to assume the nurses’ labor contract and last week told them that they would lose most of their accumulated paid time off.

Nurses held a rally Friday to protest Tower’s proposal. A union official said the value of the time is $1.75 million to $2 million, but it would not be an immediate cost.

The change is devastating to Amanda Gilson, 34, who works in the neonatal intensive care unit and just had a baby two weeks ago. She was counting on the time she had saved to allow her to have 12 weeks off with her new son.

“I feel like I planned as best as I possibly could for this situation, but you’re still stealing precious time away from me and my family. That’s not fair," she said.