Chester County officials were elated when Tower Health announced on November 22 that the Jennersville Hospital would remain open under a new owner, instead of closing on January 1.
But questions remain as to whether the proposed buyer, Texas-based Canyon Atlantic Partners LLC, which has also agreed to buy the Brandywine Hospital, can be successful in making the facility financially viable.
âBoth hospitals have faced challenges for a long time,â said Dan Grauman, managing director of Veralon, a Philadelphia-based healthcare consulting firm. âIn general, it is very difficult to manage, operate and successfully balance the accounts of very small community hospitals. A new owner or new management does not change this fact.
Tower’s most recent results, for the three months ended September 30, show Brandywine with a loss of $ 5.2 million on $ 21.5 million in revenue and Jennersville with an operating loss of 2.9 million of $ 9.3 million in revenue. The entire Tower system suffered an operating loss of $ 16.8 million.
Employment at both hospitals has fallen 20%, from 1,018 workers combined a year ago to 810 recently.
The price for the two hospitals was not disclosed. Tower acquired them in 2017 as part of a $ 423 million deal for five small hospitals and has since suffered huge losses.
READ MORE: The future of Brandywine and Jennersville Hospitals has worried Chester County officials for over a year.
David Kreye, chief executive of Canyon, and Michael Zwetschkenbaum, the company’s chief financial officer, did not respond to requests for comment on their plans for hospitals or their track record of turning around financially struggling hospitals.
Public officials have greeted the news of the deal enthusiastically, after hospitals were on sale for a year, with Jennersville in West Grove ultimately due to close on January 1.
âIf the hospital had closed, the closest emergency rooms to neighboring residents would be 40 minutes away. This is unacceptable, âMarian Moskowitz, chair of the county commissioners council, said on Facebook.
Brandywine near Coatesville is a major Chester County site for inpatient psychiatric care.
But little is known about the new owner, Canyon Atlantic.
David McKeighan, executive director of the Chester County Medical Society, said he and other members of the group, who advocated keeping hospitals open, were due to meet with Canyon management on Jan.4 and were eager to hear more about the company.
CEO Kreye has the most visible track record, according to news reports, having jumped from one hospital CEO role to another in the past 15 years or so while working for a series of community hospital companies. for profit.
His career included a stop in Waynesboro, Pa., South of Chambersburg, where he was CEO of the Southwest Regional Health Center.
Kreye then reported to Naples, Florida as CEO of Physicians Regional at Collier Boulevard. He told the Naples Daily News in 2008 that he was ready to take root. In 2010, he briefly introduced himself as CEO of the Ottumwa Regional Health Center in Ottumwa, Iowa.
The investors building the Lakeway Regional Medical Center, a new hospital near Austin, Texas, hired Kreye as their first CEO in 2011, the year before it opened.
Shortly after, in 2013, Lakeway defaulted on a $ 167 million mortgage guaranteed by the US Department of Housing and Urban Development. Last year, it was discovered that hospital lenders had fraudulently obtained the collateral and misused the loan funds and agreed to repay $ 15 million, the US Department of Justice said.
Kreye was not named in the federal lawsuit against Lakeway, now part of Baylor Scott & White Health.
In January 2014, Kreye became CEO of University General Hospital, a small facility in Houston, Texas, according to a Securities and Exchange Commission filing.
Kreye’s LinkedIn profile does not mention University General. Instead, he says that from 2014 to 2017, Kreye was senior vice president of operations at Nobilis Health Corp., a publicly traded company that bought surgery centers. She filed for bankruptcy in 2019.
Public records show that Kreye formed Canyon Atlantic in 2017.
Tower said she plans to close the sale of Brandywine and Jennersville to Canyon on January 1.
That’s an optimistic timeline, given that the deal has to go through the Pennsylvania Department of Health for licensing and the Attorney General’s Office and Orphans Court for nonprofit asset transfer. to a for-profit business.
The state health department did not respond to whether it had received any license applications on Friday. A spokesperson for Attorney General Josh Shapiro said the office was aware of the emergency and would work to complete its review as “quickly as possible.”
READ MORE: Tower Health’s plan to get big has gone wrong.
Tower said it “has taken the necessary steps to proceed with this transaction and will continue to cooperate with all authorities and parties concerned.”
It is crucial for Tower to close the sale as quickly as possible, as they want to eliminate the constant losses of these two hospitals. They contributed to a $ 96 million decline in Tower’s cash reserves over the summer.
Operating cash flow is a standard way to assess the financial health of hospitals. Excluding $ 118.5 million in Medicare cash advances that it must repay, Tower had enough cash on September 30 to continue operating for 77 days if it did not take any more money.
This figure is down from the 348 days of June 30, 2017, a few months before it embarked on this massive expansion that brought it into its current state of financial crisis.