Delco delegation reintroduces healthcare reform package

They’ve done it again — the Delaware County state Senate delegation has re-introduced health care reform bills aimed at what they call the "financial looting" of Pennsylvania hospital systems by private equity and for-profit companies.

"We need people to have confidence that health care is going to be there for them," state Sen. Tim Kearney, D-26, of Swarthmore said, adding that physicians and nurses also need to

know they will have stable work.

In a statement, Crozer Health said, "We believe the proposed legislation is ill-advised and would limit much-needed investment options for struggling hospitals across the state."

The three-bill package was introduced recently by Sens. Amanda Cappelletti, D-17; John Kane, D-9; Anthony Williams, D-8; and Kearney and came even before the nurse-to-patient ratio bill, also known as the Patient Safety Act, passed out of the state House Health Committee Tuesday along party lines by a 12-9 vote.

The bills being advocated by the Delco lawmakers include three components.

One aspect is prohibiting for-profit entities from owning or managing hospitals in Pennsylvania.

"We have reached a crisis moment in health care where the hospital industry must be redirected to its original intent of protecting all patients’ health as well as the well-being of its employees," Williams said. "Profit should never supersede the ethics of care."

Another bill in the package would provide for a minimum severance package for mass layoffs, providing for one week of pay for every year of employment. It would be applicable in situations where 50 or more employees are being laid off in a 30-day period. Employees will have had to work at least 20 hours per week to be eligible.

"Predatory, for-profit health care systems have caused significant harm to our communities by closing hospitals and laying off health care staff. This leaves folks without access to affordable and local health care," Kane said. "We have already seen the devastating effects of this toxic system from Crozer Health laying off over 215 hardworking nurses and staff this year and discontinuing medical services. These closures and layoffs are destroying our communities and taking advantage of those in need of medical attention."

In March, Crozer Health announced that 4 percent of its workforce, or approximately 215 employees, would be eliminated as the system was going through another restructuring.

The third piece of legislation focuses on preventing harmful healthcare deals by requiring

involvement of the state attorney general in critical transactions.

‘They seem to be the linchpin to trying to preventing bad deals for Delco," Kearney said. "Currently, there's little to no oversight when the deals involve for-profit hospitals."

An example of a transaction that would have been applied to this was the $375 million refinancing announced by Medical Properties Trust Inc. involving Crozer Health properties.

In 2016, private equity firm Leonard Green & Partners purchased the then nonprofit Crozer Health system through one of its portfolio companies, Prospect Medical Holdings Inc. Prospect agreed to keep all of Crozer's five hospitals open for five years.

During that time, Leonard Green took out $458 million in dividends across the systems, paid for by selling Crozer's and other hospital system's real estate to another portfolio company, Medical Properties Trust. Kearney said that move left Crozer with impossibly large lease obligations and destined to fail.

In May Medical Properties Trust announced that it had completed a third-party refinancing that included a first lien mortgage loan of $150 million and equity interests in managed care business valued at $100 million, resulting from the transfer to Prospect of Pennsylvania real estate with a book value of $250 million.

Kearney said Prospect has failed to be a responsible owner of Crozer Health.

He said that when Crozer transitioned from a nonprofit to a for-profit, "Supposedly the market's supposed to take care of everything."

He added, however, "It's amazing how often bad stuff occurs … afterwards."

"With Prospect in particular, there are so many self-inflicted wounds, its hard to listen to them," Kearney said.

According to the Crozer Health statement, its system was financially troubled when Prospect bought it in 2016 — and without that purchase, it would not have survived.

"During Prospect's ownership, Prospect has invested over $200 million in new capital and contributed more than $193 million to the Crozer Health defined benefit pension plan, securing the retirement resources of thousands of health system employees and directly impacting the economic health of local communities," the statement continued. "Prospect has also paid over $80 million in taxes to the state of Pennsylvania."

Crozer Health also stated that almost every hospital in the commonwealth is struggling financially.

Reasons included "inadequate reimbursement for the medical services they provide as well as unprecedented increases in the cost of labor and supplies in the aftermath of the global pandemic and worldwide economic downturn — all without any corresponding increases in reimbursement from the insurance companies."

It noted that as of September, the American Hospital Association estimated that more than half of all 6,000-plus hospitals in the country, nonprofit and for-profit, are operating at a loss.

The Crozer Health statement also pointed out its plan to transform the Delaware County Memorial Hospital site into a location for much-needed behavioral health services, as well as the fact that it has filed the paperwork to convert to not-for-profit status.

It also addressed the refinancing.

"With the recent announcement by MPT that it has converted its sale-leaseback agreement for Crozer Health's real estate to a mortgage with favorable terms, Crozer Health is in a significantly improved financial position going forward," it concluded.

Last year, members of the Delaware County delegation introduced a similar legislative package in light of hospital service cuts and closures Crozer Health was rapidly making.

In January 2022, Crozer Health suspended emergency department services, pathology, lab and medical imaging at Springfield Hospital. Earlier that month, the inpatient Acute Substance Abuse and Residential Substance Abuse (First Steps) Program was closed at Crozer-Chester Medical Center in Upland.

That same month, Crozer Health closed the maternity unit at Delaware County Memorial Hospital. By year's end, emergency services at the Upper Darby facility were suspended amidst fierce community opposition.

Kearney said the recent package of bills won't solve everything, but the legislation will help.

"The overall problems we’re having in health care are not going to be stopped by this," Kearney said. "But, it's a step in the right direction."

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