"It's not safe. We're in the middle of it all. Jefferson [University Hospital] isn't that far, but for a life-threatening situation, it's minutes that matter," said Maria Gutierrez, Hahnemann's oncology nurse who received a call on Wednesday from a manager who said that all of her shifts had been canceled. "That's why he wants the country."
Not included in the filing: The unit that owns the entire city block's worth of land under the hospital, as well as a few associated medical office buildings and parking garages, which Freedman had shared from the operating businesses when he and his co-investors bought them. The same central location that made Hahnemann valuable as a health professional ̵
"There is no way he is not making money in the country," said Patrick Clancy, president and CEO of Philadelphia Works, the city's workforce development agency, now accused of helping thousands of unemployed workers. "He wants to leave our city and go back where he calls home with money in his hands and 2,400 people walking around."
Freedman declined to comment on this story, commenting via email "I want to say a lot about the Hahnemann situation in a few weeks." In a statement released July 15, he said the state of Pennsylvania had declined to provide necessary financial assistance – as the state disputes – and that he remained open to any solution that would keep the hospital operating. Freedman has not commented publicly on what may lie ahead of the site.
Still moving away from ailing companies while earning real estate is straight out of the private equity playbook.
"Businesses know that even if everything else goes wrong, it's always this property to sell," said Jim Baker, who runs the Private Equity Stakeholder Project, a nonprofit that advocates for people who are adversely affected by private equity ownership. "It will be part of the deal from the beginning."
When it comes to a hospital, however, the efforts of the community are even higher. If the Hahnemann bankruptcy goes through as planned, advocates worry other private corporations could try it with demanding hospitals in gentrifying neighborhoods across the United States.
"If you have a success like Hahnemann – it will blow up," said Eileen Appelbaum, a private equity expert who is co-director of the Left-wing Center for Economic and Political Research. "Everyone wants to know that you can make money from properties in a hospital."
Private equity at the edge of the bed
The drama in Hahnemann plays on the background of a healthcare industry that private investors are rapidly transforming.
More broadly, wrote authors Suhas Gondi and Zirui Song of Harvard Medical School, private equity firms do not have the same incentives as hospitals and academic hospitals to use revenue streams from private insurance to subsidize nursing care and medical research. Their cost is first and foremost to increase profits for investors, usually by consolidating assets in a given geographical area or specialty, before selling them.
"In the last couple of years, there has been a tremendous acceleration in private equity deals in the healthcare system," said Joseph Bruch, a Harvard doctoral student studying how this trend affects patient care, and there are currently little definitive studies on. "We just don't know, and it's happening very quickly."
From the start, Hahnemann Hospital seemed like a strange target for a private equity investor.
Hahnemann, who largely served patients insured through Medicaid and struggled to stay afloat at the low reimbursement rates, would have needed large investments in equipment and IT systems to get a shot at attracting a more lucrative clientele. And the health care system has generally moved away from large residential institutions towards smaller community-based clinics that can offer most services at a lower cost.
Freedman said he would try to turn it around. "We are thrilled and proud to be the new owners of these venerable hospitals in Philadelphia and the outstanding clinical and academic programs they are recognized for," he said in a press release when the sale went through in 2018.
The city and state tried to keep the hospital open. A spokesman for Governor Tom Wolf told CNN Business that the state deferred taxes and offered to put Hahnemann on a payment plan, something the hospital management never agreed to. Jim Engler, Chief of Staff for Philadelphia Mayor Jim Kenney, said public officials had begun meeting with hospital management in April to find a funding scheme that would keep the hospital open but coy.
"During all that time, when we were discussing the future of the hospital, we asked for documentation to see what the actual financial condition of the hospital was," says Engler. "And they never provided any of that documentation."
Allen Wilen, chief of hospital restructuring, said in a statement that the talks had been fruitless." Although certain aspects of these discussions were initially promising, there were countless matters that were presented as was not feasible, "he said. Freedman accused the state of reducing the additional payments the hospital had received for its Medicaid population, and according to bankruptcy documents, a potential sale to Drexel fell.
last ditch effort, the city even ordered the hospital to stay open under a 1969 regulation requiring the city's health commissioner to cancel upon closure of an emergency room. But the hospital still stopped admissions on July 17. And there is little else the officials can do: Hahnemann is private property, and the regulation provides many different uses, so the city does not have much leverage.