Feds fight Hahnemann residency program sale

Lawyers for the Department of Justice are appealing a bankruptcy judge's decision to allow six health systems to buy Philadelphia-based Hahnemann University Hospital's residency programs, reports Philadelphia radio station WHYY.

Hahnemann entered Chapter 11 bankruptcy in late June, just a few days after its owners announced plans to close the hospital. Hahnemann was originally slated to completely shut down by Sept. 6, but the hospital pushed back the closure by one week after a bankruptcy judge approved the sale of its residency programs on Sept. 5.

Six Philadelphia area health systems teamed up to place the winning $55 million bid for Hahnemann's more than 550 residency slots. CMS opposed the sale, and lawyers for the Justice Department are appealing the judge's decision to allow the transfer of the residency programs.

Lawyers for the Justice Department argue HHS should distribute the residency slots. "There is no property right in a residency slot," Marc Sacs, an attorney for the Justice Department, said during a recent hearing on the sale, according to WHYY.

CMS pays hospitals across the country roughly $100,000 annually per resident slot, a portion of which helps cover resident salaries and the costs hospitals incur to host the residents. The agency has provider agreements with hospitals that allocate a certain number of residents.

"Residency slots are mere authorizations for a hospital to receive certain forms of Medicare reimbursement, but custody and control over the residency slots belong exclusively to the Secretary [of HHS]," Mr. Sacks wrote in the government's request for a stay, according to WHYY. "Contrary to the debtors' claims, Hahnemann's provider agreement is not the debtors' property. It is not a part of the estate and cannot be sold."

Reps. Fran Pallone Jr., D-N.J., and Richard Neal, D-Mass., back the government's appeal of the judge's decision, arguing the sale of the residency program would set "a dangerous precedent."

"Hahnemann's decision to auction off their residency program in this manner was a clear violation of the law from the start," the representatives said, according to WHYY. "The approval of this $55 million sale sets a dangerous precedent and sends a signal to Wall Street that there is money to be made off the downfall of community hospitals."

During the fight over Hahnemann's residency programs, Reading, Pa.-based Tower Health announced it established an institute that will be the new home for Hahnemann's kidney and liver transplant program. Roughly two-dozen surgeons, nephrologists, hepatologists and other staff members from Hahnemann are joining Tower Health. The surgeons making the move have collectively performed more than 3,000 organ transplants, according to the Philadelphia Business Journal.

Access the full WHYY report here.

Access the full Philadelphia Business Journal article here.

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