This article was published in Scientific American’s former blog network and reflects the views of the author, not necessarily those of Scientific American
Oh that thou mayest be kept from the evil that would overwhelm thee…
in the life of righteousness thou mayest be preserved to the end.
My soul prays to God for thee that thou mayest stand in the day of trial…
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—William Penn's Prayer for Philadelphia, 1634
On a recent visit to the City of Brotherly Love in August, I was sipping a bubble tea while walking through the colorful streets of Chinatown. A short distance away, a building towered above Broad Street. A building that had been serving this city since 1848. A building that had seen the Civil War, two World Wars and the Civil Rights movement—but was not able to survive something seemingly far less momentous: a private equity investor.
Hahnemann University Hospital, a 496-bed facility that had been serving mostly the poor of Philadelphia, a city of over 1.5 million, for more than 170 years, had closed its doors. On June 26, 2019, Joel Freedman, a private equity investor in California who owns a for-profit healthcare management company called American Academic Health System (of which a subsidiary, Philadelphia Academic Health System, owned Hahnemann Hospital) announced that he had filed for Chapter 11 bankruptcy and immediate liquidation of his assets.
In this case, the "assets" included 571 medical residents and fellows in over 30 specialties who now found themselves out of a job. Many of them had just started their graduate medical education on July 1, moving themselves and their families across the region or country only to find out days later they would have to start over again. The "assets" also included 40 percent of the clinical staff, who had now been laid off. For a doctor, this would seem to be a rare, almost unheard-of occurrence—but no longer.
Most troublesome of all, the "liquidated assets" included tens of thousands of patients who now had to look much farther afield for their medical care, deepening the crisis of already overburdened emergency rooms and inpatient and critical-care beds in the city.
Hahnemann was the first closure of a major urban hospital and primary affiliate of an academic medical center (Drexel University) in the U.S. It was, however, the inevitable culmination of years of hospital consolidation. 350 miles west of Philadelphia, the Ohio Valley Medical Center in Wheeling, West Va. (which has a small osteopathic residency program), and its partner, East Ohio Regional Hospital, owned by another California-based for-profit company, Alecto Healthcare, also recently announced their closure if they could not find a buyer within two months.
Since 2010, 102 rural hospitals have closed across 27 states. Of note, many of these closures occurred in states that did not expand Medicaid. The top six states for hospital closures have been Texas, with 15, Tennessee (9), Georgia (7), Alabama, Mississippi and North Carolina (5 each). These individual hospital closures are catastrophic to local communities—a fact that was vividly demonstrated in a three-part NPR series on the closure of St. Louis–based Catholic nonprofit Mercy Health System's facility in Fort Scott, Kans. These hospitals are often the towns' largest employer. Without them, hundreds of people and local business are without jobs and revenue. Furthermore, residents have to travel much further to get the medical care they need. If they have an acute issue, like a heart attack, they may not survive at all.
In the case of Hahnemann, it is easy to lay blame on the for-profit health system. A cynical person might think that Joel Freedman had bought Hahnemann from its previous owner, Dallas-based for-profit Tenet Healthcare, with only the intent to sell the valuable Philadelphia Center City land underneath it, unconcerned about the people, patients and providers in the building.
This is not the whole story, however. Closures are happening with nonprofit hospitals as well. Even the famed nonprofit Mayo Clinic, which has purchased rural hospitals around eastern Minnesota, has been consolidating its services. For example, it closed the intensive care and obstetrics units in its rural hospital in Albert Lea, Minn. In my own hometown of Cleveland, Ohio, the famed Cleveland Clinic has also shut down the obstetric services in its hospital in Medina, between Cleveland and Akron, forcing pregnant women in the city of about 30,000 to drive 20 or 30 miles to the larger cities.
Healthcare is a business, like any other. My father's longtime employer, Ford Motor Company, is synonymous with the "assembly line" and "economies of scale." But what does this look like in the hospital? Healthcare systems are very dependent on the payer mix. In large health centers, like my own, private insurers will often pay higher prices to the hospital for their patients' inpatient care, and in turn, this subsidizes the lower reimbursements given by Medicare, Medicaid and a small amount set aside for charity care.
In an inner-city hospital like Hahnemann, there were very few patients with private insurance. Many had Medicare or Medicaid, which in many states reimburses at half the Medicare rate. There were likely many uninsured who were unable to pay for their hospital beds. Hennepin County Medical Center in Minneapolis, one of the only free-standing county hospitals left in the country, was very dependent on state funds from its progressive governor across town in St. Paul, but as state funds have declined, job losses have mounted. Pennsylvania and Minnesota had expanded Medicaid under the Affordable Care Act, but this payer-mix bottleneck is even more acute in states that did not expand Medicaid. Hospitals are unable to recover their costs, up to the point they are no longer able to operate.
What is the solution? If I knew the answer, I would be running for President of the U.S. (or perhaps not, as it would violate Article 2 of the Constitution!). During the Democratic Presidential Primary debates, healthcare has often come down to sound bites like "Medicare for All," but that does not capture the complexity of healthcare policy.
Our healthcare system is broken, and needs to be fixed. Unless we can work through the details of insurance payment reform and address financial inefficiencies in our current fee-for-service medical model, more hospitals like Hahnemann will not make it through their day of trial.