The Hahnemann Disaster

18th July, 2019

Though the news at first stayed local in Philadelphia and the northeast, it’s gaining traction nationwide. ZDoggMD is on it. Bernie Sanders held a rally.

What happened? The venerable Hahnemann University Hospital, the main teaching hospital for Drexel University College of Medicine in Philadelphia, is bankrupt and will soon close its doors after more than 170 years as a safety-net hospital serving inner city patients.

Why should we care? After all, there are other teaching hospitals in the immediate area with capacity to absorb the patients, and they had several months’ warning to prepare.

We should care for many reasons, but I’ll start with the plight of the 570 residents and fellows who are being displaced from their jobs. Getting a residency position in the first place is a perilous process – there aren’t enough spots for all the graduating medical students who want them. Only 79% of the more than 38,000 applicants in 2019 snagged a first-year or internship position in a residency program.

So the Hahnemann residents – the “Orphans from HUH”, as they’ve started to call themselves – are scrambling on their own to find new jobs at a time when most residents are thankfully settling in to the new academic year. There’s no organized program to help them.

Even for the residents who’ve already found new positions, there are other boulders in the road. To begin with, they haven’t been released yet. They can’t start their new jobs and the Medicare funding for their positions is still tied up in bankruptcy court.

They’re still at work, wandering around a nearly empty Hahnemann with only a handful of patients left. The ER isn’t admitting any new patients and will shut down completely on August 16. The labor-and-delivery ward has closed. The new interns aren’t gaining any real experience and will be lagging behind their peers wherever they go.

“Doctors have been writing notes to update plans of care and people have come in as part of the liquidation to take away their computers,” a third-year internal medicine resident named Tom Sibert, MD, told Medscape reporter Marcia Frelick last week.

Tom Sibert? Any relation? Why yes; he’s my son. You can understand, I’m sure, why I went into full-blown mama lion fury when the Hahnemann situation blew up, and why I was beside myself with worry until he locked in an acceptance to an excellent program where he’ll finish his training.

At risk for deportation

I’m still indignant and angry, though, over the chaos that reigns for the rest of the Hahnemann orphans. According to The Philadelphia Inquirer, 55 of them hold J-1 visas and could be deported if they can’t secure a position in an accredited program within 30 days of the hospital’s closure. Interns are in an especially tough position if they hold a “preliminary” spot in medicine or surgery without a guaranteed residency position to follow. The ACGME, the accrediting organization for residency programs, says it is “acutely aware of the uncertainty and stress”, but “is not directly involved in resident or fellow placement or decisions related to funding.”

Residents and fellows who can’t secure a position near Philadelphia will face moving expenses, penalties for breaking their leases, and possibly the substantial cost of obtaining a license in another state. The Educational Commission for Foreign Medical Graduates (ECGME) is offering some help. But for many residents and fellows – whether international or American graduates – who may be the sole supporters of their families, and often are heavily in debt from student loans, these costs will be devastating.

Residency programs across the country need to pick up the phone and help these residents find new positions. Too many are taking the attitude that their programs are already full and it’s not their problem. The ones that are stepping up – like UCLA and Creighton – deserve our gratitude. The others should realize that the Hahnemann residents are innocent victims who need help. They should realize also that their hospitals aren’t immune from the financial stresses that finally broke Hahnemann – more about that in a moment.

Meanwhile, Drexel University announced that about 40 percent of the 800 physicians and clinical staff will lose their current jobs, including 245 physicians who’ve received severance notices. Tower Health is working with Drexel to try to place employees in affiliated community hospitals, and is planning to increase its residency positions, but does not offer all the accredited programs it would need to accommodate all the Hahnemann personnel.

How did this disaster happen?

You can be sure it didn’t happen overnight. Hahnemann has been on shaky financial footing for decades. Tenet Healthcare Corp. acquired Hahnemann in 1998 following the bankruptcy of Allegheny Health Education and Research Foundation, but couldn’t make a financial go of it either.

In January 2018, Tenet sold the hospital to the private American Academic Health System LLC, an affiliate of Paladin Healthcare. Though new CEO Joel Freedman had prior experience in turning distressed hospitals around, this spring he announced that Hahnemann was losing $3-5 million a month and began layoffs. The official decision to close was announced on June 26.

Hahnemann’s payer mix was always its biggest problem, with more Medicare and Medicaid patients than its competitors. The bulk of admissions came through the emergency department, and it attracted few of the elective surgical cases that provide key revenue for successful hospitals. No rescue offers have come from the state or federal governments, and a bailout seems unlikely.

If you follow healthcare financial trends, the Hahnemann bankruptcy comes as no surprise. Hospitals are going bankrupt by the dozen. The Health Care Services Distress Research Index has experienced “record or near-record highs in each of the past eight quarters”, and is up 305 percent since 2010, which is when the rest of the economy started to turn around after the Great Recession. Since January 1, Becker’s Hospital Review reports that 12 other hospitals in addition to Hahnemann filed for bankruptcy. Dozens of others undoubtedly are in distress due to “reimbursement challenges”, the cost of new electronic health records, and dwindling inpatient volumes.

Just for clarity – no hospital or medical practice can stay afloat on what CMS pays, regardless of what Bernie Sanders thinks. Private insurance payments make up the difference. When private insurance payments shrink, patients can’t pay their high deductibles; and when outpatient centers pick up a growing share of revenue-generating surgical procedures, hospitals are at risk for failure – even teaching hospitals that you might think are too big or too important to fail.

Meanwhile, it’s likely that Hahnemann will be razed and some more profitable enterprise – a hotel, perhaps, or condominiums – will rise where a hospital once stood. The diaspora of its residents and fellows is just beginning.

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