By John George – Senior Reporter, Philadelphia
Business Journal
Sep 5, 2019, 3:57pm EDT Updated Sep 5, 2019, 4:00pm EDT
U.S.
Bankruptcy Court Judge Kevin Gross on Thursday approved the sale of
Hahnemann University Hospital's residents program assets to a group of six area
health systems for $55 million.
Last
month, Hahnemann reached a deal to sell the assets
to a group of area health systems led by Jefferson Health and also includes
Main Line Health, Einstein Healthcare Network, Temple University Health System,
Cooper University Healthcare, and Christiana Care in Delaware. The Jefferson
consortium emerged victorious after 15 rounds of bidding. Tower Health, which
was aligned with Drexel University and the University of Pennsylvania Health
System, dropped out of the bidding at $51 million. KPC Group of Santa Ana,
Calif., dropped out at $29 million.
More
than half of the 500-plus displaced Hahnemann residents are now receiving their
training at one of the consortium member hospitals.
The
approval of sale appears to mean a much larger pool of funds will be available
to the hospital's creditors.
The
Centers for Medicare & Medicaid Services (CMS), which reimburses hospitals
for their costs incurred training residents, has opposed the sale saying the
deal is "contrary to law" and amounted to an "illegal
transfer."
"[Residency
program slots] can't be transferred privately," said Department of Justice
attorney Marcus S. Sacks, who was representing CMS,
during a hearing on the sale Wednesday. "If CMS doesn't approve [a
resident program transaction], the court can't approve it."
It
could not immediately be determined if CMS will appeal the Bankruptcy Court's
ruling to approve the sale.
Sacks
also testified Wednesday CMS has rules in place governing the distribution of
residency program slots when a hospital closes that Hahnemann is seeking to
circumvent. Hahnemann countered by saying the hospital, while closed to new
patients, continues to operate as a functioning business with a staff of about
75 people helping former patients find new providers, coordinate the transfer
of patient medical records and handle bill processing.
Mark Minuti, an attorney representing
Hahnemann, said at Wednesday's hearing no federal rules or regulations exist
that prohibit the sale of a hospital's Medicare provider agreement that covers
residents' training.
Minuti
also said he believes Hahnemann has addressed government concerns about
potential overpayment liability by making the placement of $3 million in an
escrow account part of the agreement with the Jefferson consortium. Hahnemann
in 2018 was overpaid $800,000 by Medicare. Minuti said they would be willing to
increase the escrow amount if that eased the federal government's concerns.
"Nobody is trying to leave the government holding the bag," Minuti
said.
Hahnemann
University Hospital's owner, California-based American Academic Health System
(AAHS) , announced plans to close the hospital in June because of ongoing and
unsustainable losses. AAHS acquired Hahnemann and St. Christopher's Hospital
for Children in early 2018 for $170 million from Tenet healthcare Corp. On June
30, AAHS subsidiary Philadelphia Academic Health System (PAHS), Hahnemann
University Hospital and St. Christopher filed for U.S. Bankruptcy Court
protection. PAHS is in the process of seeking a new owner for St.
Christopher's.
The
ruling seemingly puts an end to efforts by two entities from outside the
region, KPC Group and SBJ Group, that have expressed an interest in buying all
of Hahnemann’s assets — including the residency program assets — and reopening
the Center City medical center. PAHC, which said it wanted to move forward with
its already negotiated $55 million deal with the Jefferson-led consortium, said
it viewed both private company’s interest as speculative and lacking solid
financial backing. Gross declined to reopen what he called the completed
auction process.
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