As Children's Hospital of Philadelphia (CHOP) expands into a rich suburb, a small community hospital faces closure
“American Hospitals: Healing a Broken System,” a documentary I helped produce with businessman Richard Master and filmmaker Vincent Mondillo, details the unequal fortunes of U.S. hospitals. While a few tax-exempt hospitals are sitting on mountains of cash and paying their executives millions of dollars, hundreds of others that serve rural and poor urban communities have either closed in recent years or are on the verge of being shuttered.
Nowhere is that more true than here in Pennsylvania. A few days ago, the Philadelphia Inquirer reported that Children’s Hospital of Philadelphia paid its CEO, Madeline Bell, a record $7.7 million in 2021. Days later, with no reference to Bell’s good fortune, unfortunately, the newspaper published a brief item about a last-ditch effort a small rural hospital in Pennsylvania has launched to keep the lights on.
On Sept. 13, in a top-of-the-fold story, the Inquirer reported that CHOP, as people here call it, paid Bell more than it has spent on charity care in three years — in a town with a poverty rate of 21.7%. That makes Philly the poorest of America’s biggest cities, a dubious distinction we’ve carried for many years.
Although CHOP has devoted a relatively scant amount of its revenues to charity care in recent years, it has spent lavishly on shiny new buildings in Philly’s rich suburbs. As I write this, I could throw a rock and come reasonably close to hitting CHOP’s new $289 million, 52-bed hospital in King of Prussia, which opened last year.
For those of you who aren’t familiar with this area, King of Prussia is part of Philadelphia’s richest cluster of suburban communities (home of the well-to-do soccer moms cable news pundits obsess about every election year) and also the home of the second-largest shopping mall in the country. CHOP’s new hospital is no more than a five-minute drive from Nordstrom and Neiman Marcus and hundreds of other high-end shops and restaurants. And it sits next to a big and equally shiny specialty care and ambulatory surgery center CHOP opened in 2015.
So far in fiscal 2023, CHOP’s revenues are up 11% over the same period last year, to $3.05 billion, although its operating income (another term for profits) fell to $101 million because of rising expenses.
As the Inquirer’s Harold Brubaker reported in May:
Despite the narrowing of its operating profit margins, CHOP remains extraordinarily strong financially. The organization has huge cash reserves — enough to keep paying its expenses for 398 days without bringing in another dollar. It has little debt relative to its unrestricted assets. (Emphasis added.)
When CHOP opened its new hospital (which it calls the Middleman Family Pavilion in honor of mega-donor Stanley C. Middleman, founder and CEO of Freedom Mortgage and a member of the CHOP Foundation board of directors) last year, Philadelphia Magazine published a glowing review. Here are a few excerpts:
So what did CHOP get by cutting in the Middlemen?
A bright, spacious and cheerful facility designed to make both patients and their families feel comfortable, with room to expand as it grows.
The cheeriness begins on the outside, where multicolored glass panels dot the facade of the Ballinger-designed building. Visitors now enter both the hospital and the specialty care clinic via a shimmering glass trapezoid the hospital calls “the beacon.”
Once inside, patrons are greeted by both the security staff and a member of the Family Visitor Services staff. The main lobby just beyond the greeters features a full-height wall of glass, bright tray lighting and colorful furniture, all elements that will be found throughout the hospital — even in the emergency department.
All of the patient rooms there are decorated with colorful photomurals, and some of them even have windows, which most emergency department patient rooms lack.
And the same attention to comfort carries over into the rooms both on the inpatient floor and in the pediatric intensive care unit. Nowhere in this hospital do patients share rooms with other patients, and the regular inpatient rooms have alcoves where caregivers can relax next to their windows.
“It’s a way for them to disconnect from the clinical environment,” says (Cheryl) Gebeline-Myers, (associate vice president of operations at the Middleman Family Pavilion). “We also thought it was important for them to have their own TVs, so they’re not fighting over who’s watching what.” And while their parents and caregivers are watching what’s on their TV, the kid can not only watch regular TV channels but also download educational videos and stream content from their own devices onto the TV screen in their part of the room….
And thanks to the Family Visitor Services staff, families get as much care as patients do at the Middleman Family Pavilion. The hospital has a prayer and meditation room, a cafeteria and a coffee shop, and Family Visitor Services staff will gladly fetch items from the latter two places and bring them to patient rooms.
You don’t have to put the Middleman Family Pavilion and King of Prussia very far in your rearview mirror before reaching parts of Pennsylvania that are not so glitzy.
By the time you get to Renovo, Pennsylvania, a little over an hour’s drive northwest of Penn State and deep in what some city snobs here call Pennsyltucky, you’ll meet folks who might soon have to drive 29 miles to the nearest emergency room.
The people there who run the community-owned Bucktail Medical Center are so short of cash they’ve resorted to GoFundMe in a Hail Mary to keep the doors open and their neighbors out of the cemetery.
Here’s some of what they wrote in their plea for donations:
The residents of Western Clinton County are the owners of this facility. If you, as owners of the facility, want the hospital to survive, we need your donation today. Using the facility for your healthcare needs is just as important. If you live in any other rural area and you have healthcare available in your community, please pay attention. Your facility will be facing these same challenges soon.
Why this urgent call for help?
Despite our best efforts, we simply do not have the cash available to continue providing services.
Our budget is extremely tight. Over the past year we have monitored cash carefully, routinely updated projections, and focused on collecting revenue as quickly as possible.
But any single unexpected event can be catastrophic.
Last week, we learned that our final Employee Retention Credit (ERC) payment of $381,941.00 is delayed indefinitely. That event is catastrophic.
Today we learned the Department of Human Services wants reimbursed $255,467.00 for care for 2018-2019 fiscal year. FOUR years ago! That event is catastrophic.
What’s at stake?
BMC is the largest employer in Western Clinton County, employing about 85 people.
Jobs will be lost.
The local economy will suffer a sharp decline.
What about healthcare?
The next closest emergency room is UPMC Lock Haven, 28.6 miles away from BMC – 37 minutes down a two-lane country road that winds along the West Branch of the Susquehanna River. That facility closed all inpatient and surgical services in April 2023.
The next closest hospital with inpatient services is Geisinger Jersey Shore 40.4 miles away from BMC — 50 minutes away down the same road.
Patients west of our facility will have even longer distances to travel.
BMC is the only hospital in the entire county. Without BMC, the only medical care available in Clinton County will be a single ER in Lock Haven.
Should BMC close, no healthcare services would be available. No ER, no blood tests, no X-Rays, no medical appointments, no nursing home, and no ambulance. Every medical need will require a trip down the road. Lives will be lost.
BMC currently has the only ambulance service in the area.
The two next closest ambulance services are 28.4 miles down the road – 36 minutes – and 29.2 miles down the road – 37 minutes.
A patient would have to wait for one of these ambulance services to drive nearly 40 minutes just to get to the patient, then drive another 40 minutes back down the road to one of the other hospitals.
Rural hospitals across the US are closing at an alarming rate: 136 from 2010 to 2021. Nineteen occurred in 2020, a record for hospital closures. The Center for Healthcare Quality and Payment Reform (CHQPR) reports: “Small rural hospitals are being forced to close because they are not paid enough to cover the cost of delivering care to patients in rural areas. Most small rural hospitals lose money delivering services to patients, while most urban hospitals and larger rural hospitals make profits on patient services.”
The CHQPR goes on to explain “Small rural hospitals lose money on patient services because of inadequate payments from private insurance plans, whereas urban hospitals and larger rural hospitals make large profits on services to patients with private insurance. Most hospitals, regardless of their size, lose money on Medicaid and uninsured patients. However, while large hospitals can offset these losses with the profits they make on patients who have private insurance, small rural hospitals cannot.”
It’s important to note here that few health care pleas on GoFundMe succeed. Still, a third of all funds raised by GoFundMe in the United States went to medical campaigns. As an understated headline in The Hill put it last year, “GoFundMe medical campaigns reveal a big problem with health care.”
So far, Bucktail has raised a little more than $15,000 of its $1.5 million goal. There is no evidence that CHOP’s Madeline Bell or the Middleman family have pitched in yet, but maybe they’re among the anonymous donors.
By the way, if you have an extra $50,000 and would like to have something at CHOP named after you so the public will know how generous you are, give the good folks at CHOP a call.
Or, you could help those good folks in Renovo keep their hospital open.
P.S.: Considering that CHOP paid its CEO more in 2021 than it provided in charity care over three years, it’s possible the hospital might not be fulfilling the “community benefit” requirement to hold on to its nonprofit, tax-exempt status.
Last month I reported that a bipartisan group of senators including Elizabeth Warren (D-Mass.), Charles Grassley (R-Iowa), Bill Cassidy (R-La.), and Raphael Warnock (D-Ga.), sent a letter to the IRS and U.S. Treasury Department calling on both agencies to more clearly define community benefit and to enforce the law.
They wrote that they were alarmed by reports that despite their tax-exempt status, certain nonprofit hospitals might be taking advantage of an overly broad definition of “community benefit” and engaging in practices that are not in the best interest of patients. “These practices — along with lax federal oversight -– have allowed some nonprofit hospitals to avoid providing essential care in the community for those who need it,” they wrote, adding that many hospitals were including spending on administrative functions that should not have been allowed under the community benefit standards.
I’ll be reaching out to the senators’ offices to see if they’ve heard back from the IRS and Treasury — and to share this tale of two cities with them. Maybe they could hold a hearing on this issue and invite Ms. Bell and some of the Bucktail staff to testify. I’d for sure go down to D.C. to cover that hearing, like I used to do for a living back in the day before I became the insurance industry flack who saw too much.
CHOP has abandoned North Philadelphia and refused to work with strong local organizations because the people are poor and have no insurance. Very immoral.
Minor point of order: Pennsyltuckians call that part of the Commonwealth Pennsyltucky. It is not a slur from city snobs. It is, rather, a name people use to highlight the very tensions you righly outline here.