'Nobody Wants to Be the Guy That Shuts Down a Hospital'
Yet that's exactly what Gary Samms had to do
Published in 2020 Pennsylvania Super Lawyers magazine
on May 28, 2020
Updated on June 16, 2020
From June 20, when Gary Samms first received warning, to August 16, when the doors of Hahnemann University Hospital finally closed, the civil defense attorney fought the following: an injunction, a cease-and-desist, political protests and public scrutiny. Meanwhile his client scrambled to relocate doctors, patients and residents; file for bankruptcy and triage a public relations crisis.
“It was a busy couple of months,” Samms deadpans.
His task: Close Hahnemann, a historic, beloved 185-year-old institution, major employer and health care provider for a Philadelphia neighborhood that didn’t want to see it go. It was, he says, the largest and most complex situation he’s handled. And he had to do it in less than two months.
“It was fun,” he says, before adding quickly, “from a legal standpoint—not that a hospital closed or people lost jobs. People put their heart and soul into Hahnemann. There were generations of people that worked at the hospital; it was really tough from that perspective. Nobody wants to be the guy that shuts down a hospital.”
But nobody wants a client losing $3 million to $5 million a month, either. That was the situation his clients—hospital operating entities American Academic Health System (AAHS) and Philadelphia Academic Health System (PAHS)—found themselves in. “And they had done everything they could do to right the ship,” Samms says.
Samms had worked for AAHS and PAHS since they bought Hahnemann in 2018, mostly high-exposure medical malpractice cases. Early in 2019, news circulated about Hahnemann’s struggling finances and likelihood of closure. On June 20, Samms got the call. His clients said they feared a lawsuit was coming from Drexel University College of Medicine, their academic partner. The following day, Drexel filed an injunction in Philadelphia Court of Common Pleas, contending that a closure would violate the Academic Affiliation Agreement the parties signed two decades earlier.
“We ended up having conferences with the judge and we were able to proceed, until the secretary of health sent a cease-and-desist,” Samms says. “The harm they were alleging was that all of their residencies would be lost and these doctors would have no place to practice, and the public wouldn’t get quality care. From a factual standpoint, we tried to advise and persuade that this was going to happen whether there was an injunction or not, so it made sense to allow us to wind it down in a safe manner where we could try to place residents, and ensure patient safety. The judge ordered the parties to work together, and include the state and city in our discussions, and there were countless hours in meetings trying to reach the best possible resolution.
Hahnemann and Drexel, represented by F. Warren Jacoby and Kevin Kerns, “had numerous conversations to see what could be done,” Samms says. “We got close a few times, but it all fell through.”
Another complication: Three years prior to Hahnemann’s financial woes, PAHS had bought St. Christopher’s Hospital for Children. Sinking money into Hahnemann was beginning to impact St. Christopher’s.
“Everybody wanted to say, ‘Let’s save Hahnemann,’ but not closing it would have been irresponsible,” Samms says. “If we failed to close Hahnemann appropriately, we would have been closing two hospitals, including St. Chris.”
Both sides sought a temporary solution where Hahnemann could continue to operate without toppling St. Christopher’s. “St. Chris is really a safety-net hospital for children in the city that is a must,” Samms says. “We had to protect it. It would have been a disaster if both hospitals went under. There’d be a whole population of underserved and underrepresented people.”
But once the injunction was filed, it opened the proverbial floodgates. “It became a political hotbed because everybody wanted to look like they were trying to save the hospital,” Samms says.
On June 27, Gov. Tom Wolf and Rachel Levine, of the Pennsylvania Department of Health, issued a cease-and-desist letter. “The secretary of health didn’t want us to close without an appropriate 90-day closure plan,” says Samms. “We had a closure plan that was detailed and well thought out, but did not have the buy-in from all the necessary parties, and so it hadn’t been formally filed with the state. As a consequence, we had lengthy negotiations with the secretary of health for the state, secretary of health for the city; and while everybody wanted to protect the patients, the fact that it was so political made it difficult.”
When PAHS filed for Chapter 11 on July 1, the jurisdiction shifted to bankruptcy court and the 90-day plan for closure was able to proceed. But so did the politicking.
“It was clear that those in power in the state and city did not want the residents of Philadelphia to believe they weren’t fighting to save the hospital, even though closing the hospital was the only real option to ensure patient safety,” Samms says. “Because of the political pressure, and the notoriety of the closure, Bernie Sanders, the unions, the governor and the mayor all took positions so as not to alienate the residents. It was politically expedient to demand the hospital remain open, so ours was an unpopular position.”
Owner Joel Freedman took the brunt of it.
“It was unfortunate that Joel took all the heat for the failure of the hospital. Hahnemann had failed to make money for the last 20 years. I do believe Joel, who had previously turned around Howard University Hospital in D.C., came here with the intent to turn the hospital around,” Samms says. “Unfortunately, there had to be a scape goat, and Joel was an easy target. But I believe he had good intentions.”
The writing was on the wall long before 2019. Hahnemann contributed to the Allegheny Health, Education, and Research Foundation bankruptcy that grabbed headlines in 1998. “Subsequently, Hahnemann continued to lose money, every year after the Allegheny bankruptcy,” Samms says. “And in fact, it lost approximately $125 million in the two years PAHS owned it.”
The financials were so dire, Samms says, they discussed transferring the ownership to Drexel. But there were reasons to be hesitant. One was the already-hefty financial liabilities—reportedly about $300 million. The other: viability going forward.
“The fact that no one wanted to buy and continue to operate the hospital—including Drexel—is telling what the stark reality was from a health care business standpoint,” Samms says.
The 500-bed hospital, in years past, had a census closer to capacity, Samms says. But in the months leading up to its closing, the hospital wasn’t even half full. But the staff was. “We had 500 doctors, 500 residents and 800 nurses,” he says. “Plus, 85 percent of our patients were Medicare and came through the ER. There are a great many people that didn’t have primary care physicians, so they essentially use the emergency room as their primary care doctor. The lack of referrals from private physicians to Hahnemann led to an imbalance in the payors that detrimentally affected the numbers.”
Initially, the plan was to close the hospital in September 2019, but the legal battle increased costs and expedited the timeline to mid-August.
“The internal counsel at the hospital and all the dedicated employees were able to position the closure, and accomplish the largest hospital closing that I’m aware of in Pennsylvania, in less than 90 days, in the face of bankruptcy, injunction proceedings and political grandstanding,” he says.
Samms counts it as a win, but is hard-pressed to find many bragging points. He does note that no patients were put at risk due to the way the closure was handled, residents who wanted to remain in the program were successfully relocated, and facilities like Jefferson, Temple and Einstein stepped up to accept patients.
On Dec. 4, St. Christopher’s was sold to Drexel and Tower Health. And while the bankruptcy is still winding down, the matter is otherwise closed.
“We did it the right way. It was just a terrible, unpopular political decision,” Samms says. “However, sometimes, the law has to prevail over politics or emotion.”
Some noteworthy timeline stops between Hahnemann’s 1848 founding and 2019 closing
1888 Hahnemann professor Rufus B. Weaver becomes first to dissect the complete nervous system
1920 Hahnemann opens the country’s first school of X-ray
1928 A new Hahnemann Hospital opens up at its present location on N. Broad Street, becoming the first “skyscraper” teaching hospital in the U.S.
1941 Hahnemann Medical College admits its first female students
1963 Hahnemann doctors perform the region’s first kidney transplant
1986 Supermodel Gia Carangi dies of AIDS at the hospital, later becoming the subject of Thing of Beauty
2001 A patient at Hahnemann becomes the fifth in the world to receive a new type of totally implantable artificial heart
2017 Hahnemann becomes the second academic medical center in the country to offer a transgender surgery fellowship
July 2019 Last patient is discharged