SLA: When Tenet announced in December 2003 that they were going to close the hospital, the Governor tasked the Office of Healthcare Reform to get involved and I was assigned as the Governor’s point person to negotiate with Tenet in an attempt to forestall the closing of the hospital. Prior to that time, I had been one of the community board members of MCP hospital, because I live in East Falls. From the time Tenet announced closure until September 2004, when we finalized the deal with Tenet, I led the team that did all the negotiations. An independent, not-for-profit – WMCH Inc. – was formed that took title to the campus, and I became chair of that not-for-profit. We met with the CEOs of all of the area health systems, and although nobody indicated that they were willing to step in, most of the area hospitals said there was a need for MCP Hospital’s emergency room to stay open, because their ERs were very crowded. The Governor concluded that the site should maintain a minimal level of health care services on the site – not an acute care hospital, which we were convinced, from having conversations with Tenet and with the other health care systems, was not something that was going to be feasible, financially. We all know, generally, that most hospital systems in Pa. are either breaking even or are operating at loss. One of the major concerns with regard to the site was capital improvements that were needed for the buildings.

SLA: No, none. We put together a list of "skinnied-down" health care services that we wanted to be delivered at the site, including dialysis, an emergency room and the attendant services that go along with an emergency room – the kind of care that you would expect to be needed by the community, with the idea that patients requiring further hospital care would be transported elsewhere. We first asked Tenet if they would do this, and they said no. Then we talked with Temple Health System and Drexel College of Medicine, and asked if either was willing to do this. They both said yes, and that they would submit proposals to us. In addition, a group of doctors at the hospital, led by Nancy Pickering and some other doctors, also said they wanted to give us a proposal to offer health services on the campus. The key – which people don’t understand – was to get the campus from Tenet. It was not to "save the hospital." We said from the very beginning that we didn’t think it could survive. We accomplished what we set out to do, and Tenet sold to campus to WMCH Inc.

SLA: They said early on, "If somebody is willing to take this over, we will sell it for a dollar." Then-Governor-elect Rendell’s anger at them for announcing their intention to close the hospital without having told any of us ahead of time was also part of it. They were still in Philadelphia, and this would perhaps help with goodwill. There were other issues, not related to debt, which I can’t share, that allowed us to encourage them to make the deal they did.

SLA: Temple and Drexel offered to do the minimal things that we had asked them to do, but each entity was requesting approximately $100 million from the Commonwealth to take over the facility, after running financial models pointing to the services and capital improvements that would be needed, and the run/loss they anticipated. The Commonwealth couldn’t bankroll that. There are hospitals all over the Commonwealth that have financial problems. The offers from Drexel and Temple, therefore, were non-starters. Nancy [Pickering] and the other doctors said they thought they could run an acute care hospital. They were not requesting any money from the Commonwealth. They had lined up financing from various sources and they had charitable contribution commitments. It wasn’t $100 million, but it appeared to be sufficient. The plan was that they would run the clinical services of the hospital and be WMCH’s anchor tenant – we would give them a lease of $1 a year and we would proceed to "lease up" the rest of the space and create a health care mall on the campus with other tenants.

We were concerned about the doctors, who had never run a hospital, doing it alone. We thought, considering Temple’s location in relation to the campus, that it made sense to have there be a partnership between Temple University Health System and the doctors’ group. There would be Temple doctors on the site and, to the extent that Temple needed extra space, they might move certain units to the MCP site. Nothing was ever formalized or finalized. Drexel wasn’t in the picture at that point because they donrun hospitals. The odd thing about Drexel Medical School is that it doesn’t have a hospital – their hospitals are owned by Tenet. We wanted somebody in there who has experience running hospitals, and there was not a choice – clearly it ought to be Temple.

But we didn’t get to the point of doing the deal with Temple. We ended up making a lot of concessions in the deal with Tenet that we didn’t want to make, which ended up helping Drexel, but basically stripping the site of things it needed to be viable. A critical piece involved residency slots at MCP that we really needed to have continue there. Also, in order for there to be prompt payment of Medicaid and Medicare claims, it was important that the hospital keep its provider number. The only way we were able to get the campus from Tenet was to give up on those things. Loss of the provider number meant that cash flow for the hospital would be dragged out for several months. Drexel said that they could not survive financially if they lost those residency slots. Tenet would not agree to do the deal unless we agreed that the provider number of MCP was merged into Hahnemann, and that all the residency slots that were at MCP be transferred to Hahnemann. We knew that we had lost a critical piece. We knew we needed about 90 residency slots on the campus, and the hospital had no residents or interns after that. If you don’t have residents or interns, you don’t have any way of covering your physicians in the hospital. You’ve got to find "regular docs" who are willing to cover, and you have to pay them to do that.

When the doctors’ group did their initial analysis of what they were going to need, in terms of money and how much they would have to borrow, it was based on having a provider number, and therefore only a certain time lag of their revenue. It was based on having residents and intern on the site, and not having to go out and find doctors who are willing to cover, at a tremendous increase in cost when you’re paying on a contractual basis as opposed to a staff basis. The Governor, however, got Drexel to agree that they would provide whatever the hospital might need as a result of having lost all this. It didn’t solve the problem of the hospital having no provider number and having to wait a long period of time without being paid, but they did agree that they would provide physician help.

SLA: Because we either agreed to that, or we didn’t get the campus, pure and simple. Tenet would have sold it to whomever they chose, and there was never any intention on Tenet’s part to sell it for health care. We wanted to make sure that there was health care at the site.

SLA: Temple didn’t have enough residency slots and there was no way Temple could do what we had anticipated they would do on the campus if there were no residency slots. When we had to make the deal, and lost the residency slots, it killed the potential deal with Temple. What we basically said to the doctors in the end was, "Okay, we’ve gotten the campus. You have no provider number. You don’t have any residency slots. But we do have a commitment from Drexel that they will provide the doctors that are needed. Are you willing to go forward?" They said they were willing to give it a try, and we said okay.

SLA: Our understanding of what Drexel was going to provide, with regard to the doctors, was not fulfilled. In addition to that, the medical school told the doctors who were on the MCP campus that they were not permitted to admit any of their patients to the hospital. What that did was leave the campus with a handful of Drexel doctors who chose to stay, and who didn’t need to use the hospital. Physicians who were there who would normally admit people to the hospital ended up leaving the campus because they weren’t permitted to admit to that hospital, and had to admit – I guess – to Hahnemann. The entire emergency room of Woman’s Medical Hospital, for example, was run by a team of Drexel doctors. The hospital received notice early on that they were all being pulled and the ER was going to end up with no physicians. Nancy [Pickering] had to go out and find physicians who she could contract with, and they stepped in.

SLA: Without the hospital having the physicians it thought it was going to have, it didn’t have the admissions. While Nancy was trying to deal with all of the financial issues, she was also trying to go out and find doctors to come to the campus and admit patients. Most of the patients that the hospital got were directly out of the emergency room. The most inpatients they ever had was about 50, and we knew the break-even point was about 70 to be self-sufficient. Everything that could have gone wrong, did go wrong. There were supposed to be contributions that had been pledged by various sources, which were part of the financial number that they had shown us. Those contributions did not materialize. This had nothing to do with Nancy. This was a doctor who was supposedly getting these pledges – about $10 million. He made representations as to how much money he had, and when the time came, there was no money. The hospital’s two lenders reneged, even though there were commitments from them. Here, we had a hospital that was supposed to be self-sufficient, money-wise, and all of a sudden – all of the money they thought they had – they had none. They also had no provider number, so they couldn’t bill out and, once they did get their provider number, they had another time lag for billing. The Commonwealth gave the hospital a $2.5 million Department of Community and Economic Development grant for operating expenses as a start-up, as well as $8.2 million in advances against its Medicaid billing. The problem in the end was, as with any start-up, you’ve always got cash flow problems. The Commonwealth eventually said, "We can’t just keep advancing you money against your Medicaid payments. We’re not going to continue to do that. We had already said from day one that the Commonwealth wasn’t going to be putting money into this hospital. We’ve got a lot of places that need funding, and we’re not going to single one out." I assume that the hospital board looked at their cash flow, at what was in the pipeline, at what debts they had, and concluded under all of the circumstances that there was not sufficient cash flow to enable them to get to the point where they would have the 70 people in the hospital, and therefore would level off.

SLA: The hospital’s next steps are within the purview of the board of directors of the hospital. As our tenant, they agreed to certain things in our lease in the event of what occured. If they got to a point where they said they were going to close, we would have the right to ask the Orphan’s Court to name a receiver to collect bills outstanding and to pay off debts. We have done that. I don’t know what the hospital is going to do. It could decide to file for bankruptcy, or it could go along with the fact that we are asking for a receiver to be appointed. WMCH owns the campus and the buildings. We have tenants who are still there. The dialysis unit is still there and will continue to operate. There is a large family practice of Drexel docs who are there. A pediatric group that was with Drexel, switched to Temple, and they’re still there. The Leadership Institute is still there. As landlords, we are meeting with them for what will hopefully be an orderly transition. At the present time, we don’t have any plans to close the campus. We have a long list of people who want to rent space from us on that campus. We have not consummated any deals other than the doctors who were there when we took over, and are still there, because we wanted to see whether the hospital was going to be able to make it and be stabilized. Some of the prospective tenants would need certain services and, if there was no hospital there for those services, the question would become, "Did we want them there, and were we going to provide those services?" WMCH is exploring all of the possibilities as to what the next steps will be, with regard to the campus. Maintaining health care on the campus is the underlying goal of any of our alternatives.