Residency Program Sale After Hospital Closure a Mistake, Reps Say
Policymakers and local stakeholders urge CMS to appeal the court’s approval of Hahnemann University Hospital’s residency program sale following hospital closure.
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By - Two House Representatives are questioning a bankruptcy judge’s decision to approve the sale of Hahnemann University Hospital’s medical residency program following the hospital closure.
“The approval of this $55 million sale sets a dangerous precedent and sends a signal to Wall Street that there is money to be made off the downfall of community hospitals,” Energy and Commerce Chairman Frank Pallone, Jr. (D-NJ) and Ways and Means Chairman Richard Neal (D-MA) said in a joint statement on Tuesday.
The statement came days after US Bankruptcy Judge Kevin Gross approved the sale of Hahnemann’s residency program to six hospitals and health systems in the Greater Philadelphia and Delaware Valley areas, including Christiana Care Health System, Einstein Healthcare Network, and Jefferson Health, despite CMS objections to the purchase.
CMS considers the sale of over 500 residency slots, which are paid for by federal funds, illegal, local news sources reported. The federal agency warned that the judge’s decision could result in private equity firms and other purchasers to consider residency programs at financially distressed hospitals to be valuable assets available for purchase.
Judge Gross, however, deemed the sale of the residency program, which went from an initial $7.5 million bid to $55 million, a “stunning success” for Hahnemann, The Philadelphia Inquirer report stated. The sale of the program would generate as much money as possible to pay back creditors, the judge ruled.
But local and national stakeholders are calling on CMS to appeal the decision, arguing that letting the sale stand could harm community hospitals across the country.
“Hahnemann’s decision to auction off their residency program in this manner was a clear violation of the law from the start,” Representative Pallone and Neal stated. “While we are thankful that Hahnemann’s current residents have found new programs to complete their education after the hospital’s unfortunate decision to close, the long-term redistribution of Hahnemann’s residency positions should be determined through the processes established by Congress.”
The Pennsylvania Association of Staff Nurses and Allied Professionals (PASNAP) has also urged CMS to speak out against the sale of the residency program.
“We’re very disappointed to see Jefferson and an unelected bankruptcy judge finish what Joel Freedman started and shutter an important safety-net hospital,” a spokesperson for the Pennsylvania Association of Staff Nurses and Allied Professionals, which represented 800 Hahnemann nurses, told The Philadelphia Inquirer. “We hope the federal government will appeal to prevent this from establishing a truly dangerous precedent.”
The ruling could be especially problematic for rural hospitals, according to the attorney who represented CMS in the Hahnemann case. US Department of Justice Attorney Marc S. Sacks asked Judge Gross for a longer-term stay of the ruling, contending that the decision could encourage struggling rural hospitals to sell their resident slots to wealthier areas.
One in five rural hospitals are currently at a high risk of closure based on their current financial position, consulting firm Navigant recently reported. Of those rural hospitals, 64 percent are considered essential to the health and economic well-being of their communities, meaning the at-risk rural hospitals have trauma status, deliver services to vulnerable populations, and/or are geographically isolated.
Residents in rural areas already face healthcare challenges, including physician shortages, hospital closures, and decreased access to care. Moving residency programs out of the rural community through a sale could exacerbate these challenges, stakeholders argue.
However, Jefferson Health is optimistic about the purchase of Hahnemann’s residency slots by local institutions, saying the sale will keep residents in the community where they are needed.
“The move ensures access to patient care services—especially for the underserved—and stabilizes the education of hundreds of residents who will be the region’s healthcare providers of the future,” the health system stated in an August 9 press release.
To have the decision reconsidered, CMS must appeal the decision this week.
