As Hahnemann University Hospital shutters, its owners are trying to sell its 570-slot residency program to the highest bidder -- a move never before attempted in the history of medicine.
And now the attempt is raising questions about whether hospitals' residency programs are even theirs to begin with, given that they are largely funded by the federal government.
"It's such an unprecedented thing that's happening," David Aizenberg, MD, who was the director of Hahnemann's internal medicine residency program until it recently ended, told 乌鸦传媒.
"This is really unusual in that the owners are trying to mitigate their debt by selling off as many assets as they can, and one thing they consider an asset are residency programs," he said.
While residency programs have been transferred following previous hospital closures, none has ever been sold before.
In this case, a consortium of six Philadelphia-area hospitals bid $55 million for the positions, but the Centers for Medicare & Medicaid Services (CMS) recently won an appeal in bankruptcy court that . Lawyers for CMS argued that residency programs are contracts between each hospital and CMS, and those contracts are only transferable if there's a change of ownership -- which isn't the case since Hahnemann is closing.
"Making a commitment to resident education is ... financial, it's cultural, it's everything," said Ivy Baer, JD, MPH, senior director of policy at the Association of American Medical Colleges (AAMC). "We would hate for residency slots to all of a sudden be about money. Having money isn't enough to train a good doctor."
A sale could also "set a dangerous precedent, particularly for other safety-net hospitals," she added, noting that underserved populations would suffer most.
"There's the worry that other hospitals that have financial issues see that they could do this as well," she told 乌鸦传媒.
Aizenberg : "If this sale is upheld, who is to say a California company can't swoop in when a Detroit hospital closes and buy residents to run their Los Angeles hospital?"
He noted that CMS already has an established process for transferring residency slots in scenarios like this -- one that prioritizes factors like geography and need.
Many have acknowledged that a benefit of the consortium's offer is that it would keep the jobs in Philadelphia. At the same time, the benefits to the buyers can't be ignored, they said.
CMS pays around $100,000 per resident, though a typical salary is in the range of $50,000 to $60,000. There are other educational expenses and overhead like malpractice insurance and benefits, but hospitals still typically make a profit on the deal.
"It's a perpetual cash cow," Aizenberg said. "Every year, they will get millions of dollars for those slots, as long as they have trainees in them."
Questions have also been raised as to whether programs at the six hospitals will expand, or if Hahnemann's slots will be put toward positions that have been created beyond each program's "cap." Hospitals that have reached their federally mandated cap can self-fund new positions, but they won't get additional Medicare dollars. Having additional federally-funded positions could pay for some of those self-funded spots.
Baer noted the AAMC has long advocated for increasing those caps, as programs "are doing so much training but they can't get more payment from Medicare."
If caps were gone, the perceived value of those residency slots would be diminished, she noted.
'The Right Business Decision'
In June, Hahnemann announced it was closing, and filed for bankruptcy. Medical residents -- many of whom had just started their positions -- scrambled for new jobs, and some initially ran into challenges getting their funding released.
At the time, Tower Health said it would pay $7.5 million for the residency programs, but an auction was set and the came from a consortium of six local health systems: Jefferson Health, Temple University Health System, Einstein Healthcare Network, Main Line Health, Cooper University Health Care, and Christiana Care Health System.
When a bankruptcy court judge subsequently approved the deal, CMS filed an appeal, and on Monday, a federal judge in Delaware . It's unclear how long the temporary stay will last.
CMS's existing process for redistributing residency slots when a hospital closes is one that Stephen Klasko, MD, MBA, president and CEO of Jefferson Health, knows well.
Klasko was at Drexel University when Tenet Healthcare closed the Medical College of Pennsylvania in 2003 and transferred its 200-plus residency program to Hahnemann, another Tenet hospital.
"We faced what was potentially the largest disaster in GME history, but our story has no villains," Klasko and a colleague wrote in . "The officials at Tenet behaved as managers of an investor-owned company should, trying to protect their assets and make the right 'business' decision."
Most Residents Resettled
Most Hahnemann trainees have found new jobs. Aizenberg said nearly all of his 148 internal medicine residents have new placements.
Bill Boyer, DHSc, who served as chief academic officer and at Hahnemann, said finding new positions for all 583 trainees -- including podiatry and pharmacy residents -- with a staff of three dedicated full-time employees was "chaotic."
"We weren't just closing programs, we were closing a hospital," Boyer told 乌鸦传媒. "We were under time pressure."
He said his team "relied heavily on the program directors and residents. They did an amazing job."
Not only did they have to worry about program placements, but related issues like mental health and financial hardships were also his team's concern. "I never thought I'd be dealing with predatory landlords" when he signed up for the job, which he'd taken only last October, following a stint overseeing medical education at HCA's Miami-area facilities.
"I have expertise in building programs, not in killing programs," he said.
All of the hospital's residents who were on J-1 visas found a new job and were able to stay in the U.S., he added.
But advanced matched residents -- those who did an internship elsewhere and were set to start at Hahnemann on July 1, 2020 -- had a tough time. They didn't qualify for CMS funding since they weren't at Hahnemann at the time of closure.
Justin Steinman, DO, a radiation oncology advanced matched resident, said he had two offers that fell through because the funding couldn't follow him, but he ultimately secured a spot at the Medical University of South Carolina.
"My road to finding my new spot was not an easy one," he said.
And now the controversy has caught the attention of Congress.
House Energy & Commerce Chairman Frank Pallone Jr. (D-N.J.) and House Ways & Means Chairman Richard Neal (D-Mass.) Sept. 10 urging CMS to appeal the bankruptcy court's decision to allow the sale.
"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," they said in the statement. "This sale cannot stand."
Boyer said if the sale doesn't go through, the residency slots will revert back to CMS, and programs that took on additional spots -- like Temple University and Jefferson Health -- will be first in line to keep them.
"The final ruling on the residency program 'assets' is critical," he said. "If it stays in favor of the bankruptcy judge, residency slots will be seen as a commodity that can be sold at will."
"That can't happen," he said. "It will be a disaster for residency training in the U.S."