Tower is selling Chestnut Hill Hospital, closing Jennersville, as it digs out from massive losses

Tower Health announced Tuesday that it will close Jennersville Hospital in West Grove while preparing to sell Chestnut Hill Hospital and more than a dozen urgent care centers to Trinity Health Mid-Atlantic.

The price for Chestnut Hill and the urgent care centers has not been set, and it could take months to reach a final agreement, officials said. Tower, which is anchored by Reading Hospital in West Reading, is still examining alternatives to closure for Brandywine Hospital.

Tower’s latest moves amount to a substantial unraveling of the nonprofit’s bid under former chief executive Clint Matthews to become a major health-care force in Southeastern Pennsylvania, competing with regional leaders including the University of Pennsylvania Health System, Jefferson Health, and Main Line Health.

The push started with the $423 million purchase four years ago of five hospitals from Community Health Systems Inc. In addition to Brandywine, Jennersville and Phoenixville in Chester County, the deal included Pottstown Hospital in Montgomery County and Chestnut Hill in Philadelphia.

During the three years ended June 30, those five hospitals recorded operating losses of $426 million — causing Tower to bleed cash and jeopardizing Reading Hospital’s long history of financial strength.

“These decisions were made after an intensive process by which Tower’s board sought to balance long-term sustainability and impact upon our team and the communities we serve,” Tom Work, chair of Tower’s board, said in a news release. “Opportunities for our employees to work at other Tower Health facilities or at Penn Medicine were important to the Board and leadership.”

Jennersville, the smallest of Tower’s hospitals with just 52 beds, according to state data, has 317 employees, while Chestnut Hill has 817. Tower said it will help Jennersville employees find jobs at other Tower facilities or with Penn Medicine. Most health-care employers are struggling to fill jobs. Tower employs 13,000.

“It’s a step in the right direction,” Anne Cosgrove, director and lead analyst at S&P Global Ratings, said of the moves announced Tuesday. Tower is trying to focus on its core, around Reading Hospital, she said.

Tower had $2.19 billion in revenue and an operating loss of $244 million overall for the year that ended June 30. The loss would have been greater without $50 million in aid from the federal government under the CARES Act.

In fiscal 2020, Tower had an operating loss of $415 million, a figure that would have surpassed $500 million without $98 million in CARES aid.

P. Sue Perrotty, a former banking executive and Tower board member, replaced Matthews as CEO on an interim basis in February and took the permanent job in early spring. She announced in July that Tower’s board had decided it would not sell the entire system, but instead would remain independent with the help of an alliance with Penn.

The terms of the alliance are being worked out, but one of the goals is to enhance certain clinical programs at Tower’s remaining hospitals, while giving Penn a broader net to capture the relatively few patients who need the most complex care available only at top academic medical centers.

The news of that affiliation was well-received by bondholders, but hard to quantify, said Kevin Holloran, a senior director at Fitch Ratings. He said Tower bondholders ― owed $1.3 billion — would see a “hard positive impact” from the closure of Jennersville and the sale of Chestnut Hill.

The possible purchase of Chestnut Hill represents a turnabout of sorts for Trinity Health, which had been trimming facilities in the region. Trinity sold Our Lady of Lourdes Medical Center in Camden and Lourdes Medical Center of Burlington County in Willingboro. Trinity also sold Mercy Philadelphia to a nonprofit, with Penn’s help, and reduced the hospital component there to an ER with a small number of beds.

Trinity Health also owns Mercy Fitzgerald Hospital in Darby, Nazareth Hospital in Northeast Philadelphia, and St. Mary Medical Center in Langhorne. Penn and Trinity collaborate in cardiology, liver transplant, and cancer care. Penn operates a radiation oncology office at Chestnut Hill Hospital. Penn also has similar alliances with Virtua Health in South Jersey and Grand View Health in Bucks County.

Tower said it continues to work with state and local government officials as well as with rival health systems on a way to secure the future of St. Christopher’s Hospital for Children in North Philadelphia. A joint venture of Tower and Drexel University bought St. Chris out of bankruptcy in late 2019 for $58 million.

During an online town hall meeting on Sept. 15 with Tower physicians, Penn Medicine CEO Kevin Mahoney said the city, the state, and other heath systems have to help preserve St. Chris. “It’s not a Tower problem, and Tower can’t solve it on its own,” he said.

Brandywine Hospital, near Coatesville, has lost significant market share since it was sold to Community Health in the early 2000s to Penn’s Chester County Hospital in West Chester and Main Line Health’s Paoli Hospital.

But it may have a fighting chance to stay open because it has something no other acute-care hospital in Chester County has: beds devoted to psychiatric care. Talk in the industry has been that Brandywine’s 64 psychiatric beds are sorely needed in the county.

Pat Bokovitz, director of the Chester County Department of Human Services, said Brandywine’s behavioral health unit is one of the best in the region. “The facility is an important resource not just for Chester County but for residents in many surrounding counties too,” he said.