Temple Health and its partners agree to purchase Chestnut Hill Hospital from Tower Health

Temple University Health System, Redeemer Health and the Philadelphia College of Osteopathic Medicine have formed a consortium to buy Chestnut Hill Hospital from Tower Health, the nonprofit health systems announced Monday.

The price has not been announced.

“Together, our organizations bring the expertise, resources, operational excellence and skilled clinical care to ensure Chestnut Hill Hospital remains an enduring and sustainable resource for the communities of eastern Montgomery County and northwest Philadelphia,” said Michael A. Young, CEO of Temple issued a press release.

Temple Health will own and operate 60% of the newly named Temple Health-Chestnut Hill Hospital. Redeemer and PCOM each own 20%. The acquisition, which is expected to close later this year, must first be approved by state regulators and Tower Health’s bondholders, which are owed $1.3 billion. The hospital employs 827 and is licensed for 148 beds.

No layoffs are planned and the hospital’s CEO, John D. Cacciamani, is staying, the buyers said.

The announcement comes seven months after Tower and Trinity Health Mid-Atlantic ended talks on a Chestnut Hill deal.

When the sale to Temple and Partners is complete, Tower will be relieved of another of the five loss-making hospitals it acquired for $426 million in 2017, which will result in massive losses to Berks County’s healthcare system.

In June, Tower sold the closed Jennersville Hospital in western Chester County for $8 million. Tower Health closed Brandywine Hospital earlier this year and continues to operate Phoenixville Hospital and Pottstown Hospital. Tower’s flagship hospital is Reading Hospital in West Reading.

According to Philadelphia-area healthcare industry sources, other healthcare systems, including the University of Pennsylvania Healthcare System and Prime Healthcare Services, also made bids for Chestnut Hill over the past year, either just for the property or as a functioning hospital, but that tower turned down.

Chestnut Hill reported an operating loss of $13 million on sales of $92 million for the nine months ended March 31. The deficit would be even larger if the losses of the 45 doctors employed at Tower in Chestnut Hill were taken into account. Tower’s total operating loss for the period was $137 million on revenue of $1.7 billion.

More importantly, Tower’s cash reserves, which it needs to run its businesses on a day-to-day basis, have continued to shrink.

“This transaction helps advance Tower Health’s new strategic focus on our coverage area in Berks, Northern Chester and Western Montgomery counties, as well as St. Christopher’s Hospital for Children and Drexel University College of Medicine at Tower Health,” said Tower CEO P. said Sue Perrotty.

The tower turbulence was a challenge for Chestnut Hill, Cacciamani said. “In turbulent times like this, you usually see the exodus of leadership. You’re seeing the exodus of key doctors, and honestly we haven’t seen that happen,” he said. “We continue to focus on our patients. We continue to focus on quality.”

The acquisition of Chestnut Hill contributes to Temple’s expansion under Chief Executive Mike Young. Last year, Temple Health acquired the former Cancer Treatment Centers of America facility in Philadelphia’s Crescentville neighborhood and turned it into a women’s hospital. Temple paid $12 million.

Four years ago, Temple University’s board of directors began restructuring its healthcare system, including the potential sale of Fox Chase Cancer Center and Jeanes Hospital, with the goal of securing its future as a major healthcare services provider in the North Philadelphia market.

Temple Health is better financially than it has been in years thanks to improved operations and a $305 million cash injection last fall from the sale of its half of Health Partners Plans Inc., a Medicaid insurer, to Thomas Jefferson University, but gradually expanding an accelerating shift toward less profitable outpatient care, widespread staff shortages and tight — if any — profit margins is inherently risky, experts say.

Jefferson had also agreed to buy Fox Chase, but went out of business in the early months of the pandemic, leaving Temple to adjust its strategy. Temple has since more fully integrated Fox Chase into its overall health care system, allowing the cancer center to make a larger financial contribution to Temple than the sale could have done, Young said in an interview Monday.

Young also said Temple no longer had room at its current facilities. “This gives us a capital expansion that would otherwise have taken several years to build,” he said.

Montgomery County-based Redeemer Health, which has reported operating losses for five straight years, is in a somewhat unusual position to make an acquisition, having announced in May that it was testing the market to see if anyone could 239-bed Holy Redeemer Hospital in Meadowbrook is interested in partnering with the company.

Whatever happens at Holy Redeemer Hospital is separate from the Philadelphia acquisition, said Michael B. Laign, Redeemer CEO.

For the Philadelphia College of Osteopathic Medicine, which has also helped St. Christopher’s Hospital for Children by providing financial backing to owners Tower and Drexel, the acquisition of Chestnut Hill could help secure college places for its medical students.

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