Hahnemann University Hospital was founded in 1848, and according to a Philly.com report that came out this morning, it will be closing in 2019. We are sorry to say that we predicted that this might happen a little under two years ago. At that time, an investor group had a deal in place to purchase Hahnemann and Saint Christopher’s Children’s Hospital for $170M after both hospitals underperformed during two decades of Tenet ownership. When the deal was struck, Hahnemann was losing money to the tune of $15M per year, while Saint Chris was making a modest profit. We hoped that the new ownership would implement systems to turn Hahnemann around, but recognized the possibility that competition in the market and/or the nature of the health care industry and/or the abilities of ownership could conspire to keep the hospital in the red. The latter scenario has sadly played out, as the hospital has continued to lose money over the last year and a half, seeing losses of $3M to $5M per month in 2019 as the patient population has declined.
When we covered the sale of the hospital back in 2017 and considered the possibility that Hahnemann wasn’t viable, we wondered whether the owners could use the value of the underlying real estate as a hedge for their investment. After all, Hahnemann sits on roughly 6 acres on North Broad Street, properties that are collectively worth tens of millions of dollars. Assuming the hospital closes and the owners sell off the real estate, we’d predict that the large sized existing buildings would be maintained and converted into residential or office buildings, while the smaller buildings and the parking lots would be torn down and redeveloped. Just a few blocks away, we’ve seen the adaptive reuse of the former St. Joseph’s Hospital into an apartment building called the Civic, and we imagine we could see a similar type of project here, though on a much larger scale.
It’s important to note that we’re a long way away from any of this right now. The hospital has announced that it will be closing in September, but there’s a possibility that the City, State, or medical school partners Drexel will act to delay or prevent the closing. Even if the hospital does close, it’s certainly possible that Penn or Jeff or Temple would come forward to buy Hahnemann and operate a satellite campus just on the edge of Center City. Just because the last two owners weren’t able to succeed here doesn’t necessarily mean another hospital system couldn’t make things work. Still, we think redevelopment is the most likely outcome at some point in the future. In the meantime, we’ll be sending positive thoughts to the 2,500 people that just learned that they need to find a new job. Here’s to hoping that most of these folks are able to quickly find new situations in the region.