Pennsylvania hospital shutdown strains area’s health care system
▶ Watch Video: “This really hit hard”: Pennsylvania hospital shutdown strains health care delivery, first responders say
First responders tell CBS News the closure last November of the nearly century-old Delaware County Memorial Hospital in suburban Philadelphia has stretched the area’s health care system to its limits.
“Everybody’s feeling this,” veteran paramedic Jim McCans told CBS News chief medical correspondent Dr. Jonathan LaPook. “This really hit hard.”
Pennsylvania’s Health Department shut down the hospital after learning the facility was inadequately staffed by its owner, Prospect Medical Holdings. The Los Angeles-based company has been one focus of an ongoing CBS News investigation into the role played by private equity in the collapse of hospitals serving some of America’s most vulnerable residents.
McCans, who is the EMS chief for Haverford Township, said the impact of the closure had rippled beyond the nearly 85,000 residents the hospital once served. He said nearby emergency rooms are slammed, and he shared data showing his department’s call volume is up about 25% this year because it is covering more territory. His team of 16 medics now has to spend more time taking patients to hospitals farther away, he said.
“EMS is [taking] longer getting to where they have to be, getting to offload their patient, and then longer getting back into their district,” said McCans. “So all that is compounding the problem.”
With the help of private equity investors, Prospect Medical acquired Delaware County Memorial in 2016 as part of its purchase of Crozer-Keystone Health System, a nonprofit Pennsylvania health system that was in danger of failing.
In a press release at the time of the purchase, Prospect Medical promised its investments into the health system would “dramatically increase the ability of Crozer-Keystone facilities to modernize, attract more patients, and expand service to the community.” Yet two of the four hospitals in the health system — now called Crozer Health — closed last year, including Delaware County Memorial.
Prospect Medical Holdings told CBS News in a statement it had “not been notified by EMS or any state agency that there has been a significant increase in EMS response times or that other local hospitals have been significantly impacted by the closure” of Delaware County Memorial.
The company cited recent comments by Christine Reuther, a Delaware County official, to suggest the county had conducted a preliminary study of the county’s EMS system that “showed no change in response time due to the closure” of the hospital.
When contacted by CBS News, Reuther said Prospect took “her remarks out of context” and “there are no findings, preliminary or otherwise.” She said the county had taken steps following the closure to alter how it dispatches ambulance services, which may be keeping response times down but increasing caseloads and coverage areas for first responders like McCans.
In January, 911 dispatch audio obtained by CBS News revealed two shooting victims who arrived at the closed emergency department at Delaware County Memorial had to be taken by ambulance to Lakeneau Medical Center — nearly five miles away.
Many of the nearby hospitals, including Lankenau, are operated by the nonprofit Main Line Health. Data provided by the company shows monthly emergency department visits at its hospitals were up about 14% between January 2022, when Prospect Medical began cutting services at Delaware County Memorial, and January 2023.
McCans said the hospital’s closure has left some residents of Delaware County “stranded for health care.”
“It did hurt them, it’s going to continue to hurt them,” McCans said. “It’s gonna cost some of them their lives.”
“Hospital systems are struggling”
In December, CBS News reported on a series of financial moves executed by Prospect Medical management and its private equity backers that legally siphoned money away from hospital operations before the closure. The first move was in 2018 when Prospect Medical’s owners took out a $1.12 billion loan and paid themselves a $457 million dividend.
Sam Lee, the CEO of Prospect Medical, took home about approximately $90 million, a sum confirmed to CBS News by Rhode Island Attorney General Peter Neronha, who investigated the company’s finances in 2019 for a proposed company transaction.
“It’d be like a homeowner going to a bank, taking out a $100,000 loan and instead of using it to invest in their property or pay for their kids to go to college, what they did was they just basically stuck it in their pockets as cash,” Neronha told CBS News in December.
In December and again for this report, Lee declined requests to be interviewed.
After paying themselves the $457 million dividend, Prospect Medical’s owners then sold off the land and the buildings of the Pennsylvania health system to a Birmingham, Alabama-based firm called Medical Properties Trust.
“Just put simply, they bought the real estate out of Prospect and leased it back to Prospect,” said Rob Simone, an analyst at a Connecticut-based research firm called Hedgeye.
The publicly-traded Medical Properties Trust has bought up the real estate of nearly 200 U.S. hospitals, often in low-income communities. The firm’s CEO, Ed Aldag, declined an interview, but in a statement, a company spokesperson said Medical Properties Trust is “a trusted and committed resource for hospital capital and has been proud to enable operators of hospitals to unlock the value of their real estate assets” to pay for improvements.
“They recognized an opportunity over the last decade and that was private equity looking to sell hospital systems,” Simone said.
Simone has advised clients to bet against Medical Properties Trust by shorting its stock, though he said neither he nor Hedgeye trade on the company. He said the firm has saddled several of its hospitals with unsustainable rents.
“Hospital systems are struggling, and individual hospitals are closing in some cases, which is very problematic,” Simone said, pointing to Delaware County Memorial as an example. Prospect Medical owes $35 million a year in rent to Medical Properties Trust for the health system.
The spokesperson for Medical Properties Trust said it has “no involvement” in the operational decisions of the facilities it owns and denied that any hospital in their portfolio “has ever failed or curtailed services due to an inability to pay rent — because rent constitutes only a small percentage of hospital expenses.”
Yet, on a March earnings call with investors, a Medical Properties Trust executive acknowledged that Prospect Medical had not paid its full rent this year.
On the call, Medical Properties Trust CEO Edward Aldag said, “Prospect management is focused on an aggressive cost-cutting measure that should enable them to return the Pennsylvania market to profitability in approximately 12 to 18 months.”
“It was a sad day”
CBS News was on site the day last November when Delaware County Memorial closed its doors for good, turning away residents from the emergency room. Twenty-eight-year-old Cecilia Vizuete was having trouble feeding her 1-year-old daughter because of a breast infection.
“They said I should look on Google Maps for another hospital,” Vizuete said.
Inside Delaware County Memorial, the hallways and patient rooms, normally bustling, were empty, except for a few nurses charged with cleaning the place out.
“It was a sad day,” said emergency nurse Angela Neopolitano, who worked at the hospital for 41 years and was president of the local union. “I’ll be honest, I cried.”
When the hospital closed, Prospect Medical pledged to save the facility by turning it into what it characterized as a “desperately needed 100-patient facility for those in need of behavioral health and other services.”
In a statement last week, the company said transitioning Delaware County Memorial into a behavioral health hospital “will have the greatest impact on our community’s health and well-being” and said its rent obligation to Medical Properties Trust was not a factor in the decision. The company did not respond to a question about the status of the transition.
McCans said he believes Prospect Medical’s financial moves are morally and ethically wrong.
“You found a way to navigate you making money and leaving those people in the lurch,” McCans said. “That’s what they did.”