Tower Health’s cash reserves — already extraordinarily low — fell by $49 million this summer

Tower Health lost twice as much money during July, August, and September this year as it did during the same period in the year before. The loss would have been even greater if Tower had not counted toward its revenue $14.1 million of federal aid that the Berks County nonprofit hospital system received early in the COVID-19 pandemic, Tower said Tuesday.

Hospital owners all over the country have struggled financially this year because payments from government and private insurers have not kept up with higher costs for labor and supplies. Tower has been under extra pressure as it tries to unwind a financially disastrous expansion toward Philadelphia from its base in Reading.

» READ MORE: Tower Health recently cut its corporate staff.

In the two years through Sept. 30, Tower’s cash reserves — money needed keep its hospitals, doctors’ offices, and urgent-care centers running if no more revenue came in — have plummeted by more than $400 million, to $320 million. That’s extraordinarily low for an organization with more than $2 billion in annual revenue and more than $1.5 billion in debt.

Over the summer, cash reserves fell by $49 million, Tower reported.

“When you have a hospital with enormous debt, significant operating losses, and dwindling cash, that is a recipe for disaster,” said Joshua Nemzoff, chief executive of StoneBridge Healthcare LLC, a new health-care investment firm based in New Hope that has made multiple unaccepted bids to buy Tower or parts of it.

“It’s getting better, but it’s still very bad,” said Nemzoff, referring to Tower’s operating loss of $212 million in fiscal year 2022 compared with an operating loss of $244 million in fiscal year 2021.

In emailed comments, Tower highlighted that smaller operating loss in its fiscal 2022 audited financial statement, also released Tuesday.

“Every health system in the country has been adversely impacted by the national shortage of frontline caregivers, inflationary pressure that has driven up costs, and a downturn in investment portfolios. We are already moving with increased urgency to implement our financial turnaround,” Tower said.

The financial cleanup included a new $113.6 million charge to recognize that certain assets are no longer worth what they cost Tower. That brings total write-downs over the last three years to $508 million, which is more than the $498 million total Tower paid for five Community Health Systems Inc. hospitals in 2017, 19 urgent-care centers in 2018, and its share of St. Christopher’s Hospital for Children in 2019.

Tower closed two of the hospitals it bought from Community Health Systems, Brandywine and Jennersville. At Tower’s remaining hospitals in Reading, Phoenixville, Pottstown, and Philadelphia — where Tower owns Chestnut Hill Hospital and St. Christopher’s Hospital for Children in a joint venture with Drexel University — business fell significantly.

» READ MORE: Tower Health discloses price for Chestnut Hill Hospital, agrees to report more to bondholders

Admissions fell 3.5%. Emergency-room visits that led to a hospital admission fell 3.7%. Other ER visits fell 5.9%, inpatient surgeries fell 7.9%, and outpatient surgeries fell 1.1%, Tower reported.

On the plus side for Tower, bondholders recently approved the sale of Chestnut Hill Hospital to a consortium led by Temple University Health System, and the Pennsylvania Office of Attorney General, which had to review the sale of nonprofit health-care assets, said it had no objection to the sale.

The final hurdle for the sale is approval by Orphans’ Court in Philadelphia.