Hahnemann University Hospital announces 175 layoffs. CEO describes shaky financial condition

Hahnemann University Hospital, on a financial precipice and facing closure if monthly losses of $3 million to $5 million at the Center City institution continue, plans to lay off 175 nurses, support staff, and managers on Thursday, hospital officials said.

“We are in a life-or-death situation here at Hahnemann,” said Joel Freedman, chief executive of American Academic Health System LLC, which early last year bought Hahnemann and St. Christopher’s Hospital for Children from Tenet Healthcare Corp. for $170 million.

“We’re not Tenet with endless cash. We’re running out of money,” said Freedman, a Californian whose background is in investment banking. He said he would do everything he could to preserve St.

Christopher’s, but emphasized that Hahnemann needs help from government, insurers, and its academic partner, Drexel University, to survive.

Thursday’s layoffs of 65 nurses, 22 service and technical employees, and 88 nonunion workers and managers are effective immediately for most. The cuts follow the elimination of 30 management jobs in January and the decision to close three primary-care offices, in Chinatown, Fishtown, and South Philadelphia. The moves are expected to save $18 million a year.

Hahnemann, which opened in 1848 as a homeopathic medical college, employs 2,700 people. St. Christopher’s, where 45 jobs in the doctors’ practices were cut last August, employs 1,300. The two hospitals have $600 million to $700 million in annual revenue, down from $790 million when Freedman’s company bought them.

The number of patients in the 496-bed hospital has fallen to a range of 200 to 250 a day, down from the high 200s in early 2018, Freedman said.

Freedman, whose health-care investment firm is Paladin Healthcare, said Hahnemann’s financial condition was much worse than expected when he took over in January 2018, which forced him to immediately start conserving cash. “We’ve kept up as well as we could,” Freedman said, referring to payments to vendors.

Since American Academic took over, Freedman said, Hahnemann has been dogged by information technology problems that make it impossible to get the performance data that management needs quickly enough to make a difference.

The hospital has had profound problems with the documentation of patients’ conditions, which means that 15 percent of claims are being denied by insurers. Hahnemann officials say that figure should be no more than 2 percent or 3 percent. The hospital has an extremely high rate of so-called observation stays, which pay far less than regular inpatient stays.

American Academic’s ownership of the hospitals has been marked by management turmoil. In October, Freedman announced the departure of Barry A. Wolfman, American Academic’s president when the deal was announced and a Tenet veteran who ran the company’s Philadelphia-area operations in the early 2000s.

Suzanne Richards, with experience in Southern California, took over in January as chief executive for both facilities but was fired two months later, leaving Freedman in charge. Freedman said the managers he appointed did not perform well.

As Freedman and his current management team work on a plan to keep Hahnemann in business, health-care executives farther north on Broad Street, at Temple University Health System and Einstein Healthcare Network, are contending with similarly difficult financial conditions because they also serve a large percentage of patients with Medicaid insurance, which does not cover the full cost of care.

Temple is in exclusive talks with Thomas Jefferson University over the potential sale of Fox Chase Cancer Center as part of a restructuring designed to strengthen its core North Philadelphia operations for the long term.

Einstein agreed last year to become part of Jefferson Health, but that deal is still pending. Meanwhile, Moody’s last month downgraded Einstein’s credit rating to junk bond status, citing lower levels of liquid financial assets. Fitch had already downgraded Einstein to junk a year ago.

For patients, the shifting sands at Hahnemann can be distressing.

Lifelong Fishtown resident Paul Morawski, 72, said he learned last week from his Hahnemann primary care physician, Keino Johnson, that the office would close this month. Morawski, who switched doctors about a year ago when his family doctor retired, said he doesn’t know about going to an office at Broad and Vine, where Johnson said he will practice.

“It’s a trip,” he said, not like the eight-minute walk he has to the doctor now.