Hahnemann University Hospital in Philadelphia is closing its doors after 171 years. A private equity firm called Paladin Healthcare bought the hospital in early 2018, promising to “make it work.” Now, the hospital may soon become a slew of new luxury condos. But a nurse at the hospital, Sue Bowes, is speaking up against the private equity firm, urging other healthcare facilities to be wary of firms that promise to keep the light on.
Take a look at the rise of private equity in healthcare and how firms are putting healthcare providers out of work.
The End of Hahnemann University Hospital
Paladin Healthcare paid $170 million for Hahnemann University Hospital and St. Christopher’s Hospital for Children in 2018. When the new owners took over, Paladin founder Joel Freedman promised big changes, but now the company is putting the hospital on the market and selling it to the highest bidder.
Hahnemann University Hospital is known for serving a primary low-income community, but those goals don’t always align with those of a private equity firm like Paladin. The hospital continues to suffer through layoffs, bankruptcy, and other financial woes, and now reports are spreading that the hospital could soon be redeveloped as luxury condos. As Sue Bowes told CBS News, “It’s the first time I know for a hospital being bought by a private equity company in what appears to be a pure real estate play.”
Bowes and the other staff members were told last month that the hospital would be closing its doors. Once the announcement was made, Bowes, who also serves as the President of the Hahnemann chapter of the Pennsylvania Association of Staff Nurses and Allied Professionals Union, says new supplies have dried up. Bowes added, “There wouldn’t be scrubs, washcloths, towels – the basic things we needed. That’s when the full scope of it hit us.” It became clear the firm had little interest in helping staff members serve patients throughout the Philadelphia area.
As more private equity firms get into the healthcare business, Bowes issued a final warning to other healthcare facilities: “This will happen more and more, and they will lose their hospitals. Be scared.”
The Rise of Private Equity in Healthcare
Private equity firms are turning their attention to hospitals and other medical facilities in hopes of turning a profit. Private equity firms spent a total of $10.4 billion last year to buy hospitals and clinics. This marks a steep increase from 2009 when private equity firms spent just $250 million on healthcare facilities. Considering everyone needs healthcare, buying up these facilities seemed like a solid financial bet in uncertain economic times.
But private equity firms aren’t always interested in saving the businesses they acquire. In many cases, firms will buy companies that are struggling financially but still have value. The new owners will then promise to change the company for the better to increase profits and business performance. Once business has improved, the firm will then turn around and sell the company in order to make a profit.
Some firms can also make matters worse by issuing debt from newly acquired companies, which can make it more difficult for struggling companies to recover. Some firms may even push these businesses towards insolvency by taking on new debt.
Bowes argues Paladin Healthcare could have done more to make Hahnemann a financially viable facility, such as buying hospitals in wealthier neighborhoods to diversify its revenue and opening smaller urgent care clinics throughout the area to increase profits.
From a real estate perspective, Hahnemann represents a solid investment on the part of Paladin. The facility is located near an up-and-coming arts district in central Philadelphia and Temple University, making it a prime location for condo developers. It’s now clear that Paladin hopes to turn a profit by selling the hospital to developers instead of trying to help low-income residents in Philadelphia. Hospital employees will soon be out of a job and low-income residents will need to find another place to receive care.
Stay tuned for more information as we continue tracking the rise of private equity in healthcare.