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Hospital Doctors’ Training at Risk in Drexel Sale, Court Told

Steven Church

(Bloomberg) -- The bankruptcy sale of Hahnemann University Hospital’s education program is treating more than 570 doctors as financial assets and threatening their ability to complete the final stage of their specialized medical training, a group of hospital residents told a judge overseeing the case.

About 20 hospital residents, most wearing medical coats bearing the Drexel University College of Medicine logo, asked U.S. Bankruptcy Court Judge Kevin Gross to force the hospital’s owner Philadelphia Academic Health Systems LLC to guarantee the doctors have continued access to the federal Medicare money that pays their salaries.

“The residents of Hahnemann are not assets,” said Dr. Raluca McCallum, a resident who spoke from a prepared statement in court on behalf of her colleagues. McCallum said the residents have continued to provide the highest level of patient care possible “for Philadelphia’s sickest, poorest and most downtrodden population.”

McCallum said the hospital’s current owner and whoever buys the program should be required to set aside the money necessary for the residents’s training.

Auctioning Programs

Gross gave the company permission to set up a potential auction for the residency program with an initial bid of $7.5 million from Tower Health, a health care company that owns hospitals in the region. They are an owner of hospitals and related medical facilities in the area. A key part of their opening offer is future access to the Medicare funding, said Robert Lapowsky, an attorney for Tower.

Under auction rules Gross approved on Friday, doctors in Hahnemann’s residency program have the option to transfer to any of the 375 positions reportedly open in the Philadelphia area.

Most of the doctors have decided to find a new program, said Lauren Macksoud, a lawyer for Association of American Medical Colleges who came to advocate on behalf of the residents. But moving is extremely difficult unless the federal money paying Hahnemann’s resident doctors can be transferred as well, said Doug Carlson, an attorney for Accreditation Council for Graduate Medical Education, which also attended the court hearing to argue on behalf of the residents.

Residents are doctors who work for several years at a hospital while perfecting a specialty, like radiology. The hospital typically pays the doctors using federal funds that are guaranteed through various licenses and contracts. The licenses and contracts behind Hahnemann’s residency program are being sold and the hospital will be shut down.

Clearing Out

Should Tower win the auction, scheduled for next month, the company has agreed to release enough of the Medicare funding so the doctors can complete their residency no matter where they decide to go, Lapowsky said.

Since the hospital is closing and there are fewer and fewer patients, the doctors are eager to leave as quickly as possible, McCallum told the judge. With each passing day the quality of the training residents are receiving is deteriorating, McCallum said.

Before approving the rules for the auction, Gross pressed Tower and Philadelphia Academic Health, a company controlled by health care investor Joel Freedman, to help the doctors find new residency programs.

‘Terrible Situation’

“This is a human tragedy involving the residents and there has to be a solution provided for here,” Gross said. “It’s almost insulting to tell people you can leave but you won’t be able to get a position because the Medicare funding won’t be there.”

Mark Minuti, an attorney for the current owner, said the company would release half the funding for the program next week and the rest by mid-August.

“We recognize this is a terrible situation and we wish it was different,” Minuti said.

Philadelphia Academic Health filed for bankruptcy June 30 with plans to close Hahnemann and sell another hospital the medical group owns.

Founded in 1848, Hahnemann employs about 2,500 people and operates as a teaching hospital for Drexel University College of Medicine with more than 570 medical students in residency. It trains about 500 rotating medical students and 800 nursing students annually.

The case comes just 18 months after owner Philadelphia Academic Health took on at least $68.5 million in debt to buy the two hospitals from Tenet Business Services Corp.

The case is Center City Healthcare, 19-11466, U.S. Bankruptcy Court, District of Delaware (Wilmington)

To contact the reporter on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Adam Cataldo

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