CEO: No decision yet on asset sales
If doctors at Tower Health Medical Group see just one more patient a day, Tower Health can “meaningfully increase” its revenue, President and CEO Clint Matthews told the health system’s 14,000 employees in a letter last month.
“Work is already underway toward the changes we need to make to achieve this goal,” Matthews
wrote in the Jan. 29 letter sent after the nonprofit hospital’s board met.
It’s one of several changes that health care consultant Guidehouse is advising to turn around the financially troubled system based in West Reading of hospitals, doctors offices and other health care operations.
In November, D.C.-based Guidehouse’s David Burik told investors that loss, revenue and productivity of each of the medical group’s 800 primary care and specialty physicians would be evaluated.
The medical group finished fiscal 2020 with an operating loss of $248.7 million.
That’s more than the $235 million combined deficit of Tower’s five hospitals outside of Berks County. Fiscal 2020 ended June 30.
In the first fiscal quarter of 2021, which ended Sept. 30, Tower’s unaudited disclosure showed the medical group lost $61 million.
Tower Health has been struggling financially after growing quickly. The system has been posting losses, which grew steeper when exacerbated by the pandemic. Its bonds, which fueled years of growth and building, were hit with a three-notch downgrade to junk status.
Executives had said Tower might have to sell hospitals or other assets in Chester, Montgomery and Philadelphia counties as soon as the first calendar quarter of 2021.
Reading Hospital would not be up for sale. As the lead hospital of the Tower system, it was the only one to make a profit, $66.6 million, in fiscal 2020.
In addition to Reading Hospital, Tower operates six hospitals in the Philadelphia region. Tower purchased five from the Franklin, Tenn.-based Community Health Systems in 2017. The other, St. Christopher’s Hospital for Children, was purchased in partnership with Drexel University in Philadelphia in 2019.
Tower’s unaudited disclosure for the first quarter of fiscal 2021 showed Reading Hospital had $54 million income. Chestnut Hill showed $2.5 million in operating income.
Jennersville Hospital showed $1.2 million income while Phoenixville showed $1.5 million income. Brandywine Hospital had a $7.8 million loss while Pottstown Memorial showed a $10.3 million operating loss. St. Christopher’s had a $11.6 million loss, according to the unaudited disclosure.
Tower also includes Reading Hospital Rehabilitation at Wyomissing; Reading Hospital School of Health Sciences in West Reading; home health care services provided by Tower Health at Home; and a network of 22 urgent care facilities.
The system is also in a partnership with Acadia Healthcare that opened a new behavioral health facility in Bern Township.
The process
Matthews said in the letter that no decisions have been made regarding facilities or services.
“There are many complex and important elements that we must thoughtfully consider,” Matthews wrote. “The board’s decisions will be made following a careful, thorough process that we expect to continue over the coming months. We are determined to get this right and must take into account the many factors shaping our future as we work to build a stronger health system.”
Closing a hospital requires 90 days notice by law. Selling a hospital — if a buyer is found — is complicated. The Pennsylvania Department of Health and state attorney general are involved if it is sold to another medical entity.
The attorney general has the authority to approve or disapprove the sale but does not determine whether the new operator is eligible to run a hospital.
The attorney general’s office
declined comment on Reading Eagle’s inquiry about sale of any of the Tower Health hospitals.
If a hospital is sold and a new owner intends to operate a health care facility, the state Department of Health is responsible for issuing a hospital license or transferring an existing license.
The department determines whether the new operator is a “responsible person” through review of responses to a series of questions that are submitted with the change of ownership application, said Maggi Barton, deputy press secretary.
Hospitals must give the department 90 days notice and publish a public notice prior to shutting down.
According to the regulations, a hospital is required to give 90 days written notice to the department of its intent to close, and as part of that notification submit a
closure plan that addresses financial stability; changes in the governing body, administration and medical staff; staffing changes; transition plan; status of payments; policies and procedures and a communication plan.
Ways to save
Tower’s board has established a special Tower Health board Transformation Committee, led by Tom Work, wrote Matthews. The system’s Assessment Steering Committee and Implementation Committees are working closely with Guidehouse under Matthews’ direction.
He said the committees’ representatives are from leadership, physicians and expert advisers.
“Through these committees, Guidehouse and Tower Health leadership have already identified significant
additional cost-saving and revenue improvement opportunities in broad areas that include: revenue cycle (including cash acceleration), supply chain, pharmacy, physician services, and managed care contracting,” Matthews wrote.
Teams are engaging staff to find savings by eliminating waste and duplication of work.
Matthews wrote that “significant savings” were identified through centralizing and standardizing supply chain and pharmaceutical purchases.
Cash has been accelerated by focusing on Tower’s Top 100 patient accounts.
Tower closed its cardiac catherization lab at Brandywine Hospital on Dec. 11.
What’s to come
In the coming weeks, Guidehouse will provide Tower Health management
with final recommendations for review, with a presentation to the board in February, Matthews wrote.
The Tower Health board will then consider the information and engage in further discussion and deliberation. Tower Health management has contracted with Guidehouse to assist in implementing the final recommendations over the coming months and year.
“I know you are seeking answers and details,” Matthews concluded the letter to the employees. “I can assure you our work is focused on ensuring our ability to meet the ever-changing healthcare needs of those we serve. I can also assure you of my commitment to providing you with information as it becomes available. When there are details to share, we will do so in a timely and open manner. I look forward to that opportunity.”