Buyer¹s promises test community¹s faith

Michelle Karas , Mercury Staff Writer 06/02/2003

POTTSTOWN -- Community Health Systems has made a lot of promises in the deal to purchase the assets of the Pottstown Healthcare Corp.

The promises include hiring all employees at their current pay rates, recognizing seniority and providing competitive medical and retirement benefits; committing $46 million over the first five years of ownership to renovate and expand the Pottstown Memorial Medical Center emergency room and to pay for new equipment, services and programs; maintaining the hospital¹s existing programs and charitable care policies; putting $2.5 million toward physician recruitment; and continuing local board governance.

"We have reason to believe it¹s all going to work out," said Howard E. Kalis III, the chairman of PMMC¹s board. We¹ve done everything we can do. We think the employees are really protected, which is important. We are the biggest employer in town."

When it comes to patient care in Pottstown, not a lot will change, according to CHS officials.

"The hospital¹s name will stay the same, and you will still be treated by the same caring employees and medical staff you know and trust. In fact, it is likely that most people will not immediately notice the transition," a CHS press release said.

Community Health Systems has also promised to set aside about $65 million of the estimated $81.5 million selling price of the assets of Pottstown Healthcare Corp. to create a charitable foundation that will benefit the community.

At community forums held in February and April at PMMC, some residents expressed concerns that CHS would turn PMMC into something other than an acute-care hospital.

"No matter what you put into (the sale agreement), there¹s nothing to stop them from turning this into a nursing home," Pottstown resident Victor Jacketti said. "There are no guarantees."

The sale contract says CHS must maintain PMMC as an acute-care hospital for 10 years. After that time, if the owner decides to sell the hospital, the board of the charitable foundation will have the right of first refusal, said Henry Pollak, the chairman of Pottstown Healthcare Corp.¹s board of directors.

"CHS is a for-profit corporation putting about $100 million into this plant facility," Pollak said. "You have to believe they want to keep it a hospital. We have forced them, for economic reasons, to maintain it as a hospital."

Promises kept
Community Health Systems purchased Easton Hospital in Northampton County in October 2001 for $36.75 million. At that time, Easton Hospital was $32 million in debt and near bankruptcy as a result of declining reimbursements and a high number of indigent patients, officials said.

Earlier in the year, the hospital had explored a partnership with another for-profit health care company, Tenet Healthcare Corp., only to back out of the deal during due diligence, a period of mutual investigation. That partnership failed because Easton Hospital officials did not want the quality of care to suffer as a result of a private company taking over, according to the Easton Express-Times.

Promises made by CHS to make immediate capital improvements to the financially troubled hospital while maintaining programs such as indigent and charity care helped win over hospital officials. CHS brought some stability, according to Cornelio Catena, the hospital¹s president and chief executive officer, who was recruited by CHS to replace former Easton Hospital CEO Donna Mulholland.

"Prior to the purchase, this hospital had it very tough. It was difficult for us to compete with other hospitals in the area," Catena said. "Now, things are going well. It has been a good decision for Easton Hospital. We gave good care here before. We still give outstanding care."

Catena said CHS has lived up to its commitments very well. Initially, CHS committed $42 million for capital improvements and $2 million for physician recruiting.

"It looks like they will spend more at this facility and a planned outpatient facility near here," he said. "There has already been an expansion of this campus and renovations. They¹ve already spent a lot of money doing cosmetic upgrades and on new equipment. It¹s a good thing. It is necessary. It shows not only commitment to the hospital, but also potential."

CHS has a lot of power at the group purchasing level, which helps keep costs down, Catena said.

"They do things in a more efficient way," he said. "It¹s a great company to work for."

Many people in the immediate area didn¹t even notice the change of ownership, he said.

"If you look around the hospital, you¹ll see that CHS¹ name is not on anything. Their influence is pretty much invisible," Catena said. "I think CHS is very happy to be in the background. There are initiatives the company has for quality and programs, but I wouldn¹t say it¹s heavy-handed."

Community Health Systems also kept a promise to give $15.6 million from the hospital sale to a community benefit foundation, the Two Rivers Health and Wellness Foundation, according to Paul Brunswick, the foundation¹s president.

"In our situation here, it¹s really a win-win situation for the community," Brunswick said. "CHS will put millions into the hospital, so the community will end up with a much-improved hospital, and there¹s a foundation for the community."

At Brandywine Hospital in Coatesville, CHS has invested more than $10 million in upgrades since purchasing the facility in June 2001. Improvements include beginning a heart center and a psychiatric center for patients over 55, starting a clinic for the uninsured, recruiting eight physicians in the past year, and planning a new orthopedic and spinal unit.

Promises in question
Although CHS has made good on some promises it made to Brandywine Hospital, not everyone at Brandywine is happy about the new owner¹s methods. In January, Brandywine¹s registered nurses filed a petition with the National Labor Relations Board seeking union representation because of concerns about operations at the hospital.

Union organizers said the nurses need a unified voice to have input when it comes to patient care. A vote to form a nurses union failed in March.

Brandywine Hospital Trauma Center closed last year because the medical malpractice crisis in southeastern Pennsylvania has made trauma surgeons unavailable, officials said. However, some feel CHS closed the trauma center because it wasn¹t profitable.
"It seems pretty clear to me that the trauma center simply wasn¹t making money for the for-profit owner of the hospital," West Chester resident O. Hampton Brown said in a letter printed in The Daily Local News in West Chester.

A Clinton County newspaper is also dissatisfied with CHS. The Express of Lock Haven recently asked the state Attorney General¹s Office to release documents pertaining to the sale of Lock Haven Hospital to CHS. The paper made the Freedom of Information Act request because CHS has released little information about plans for $3 million it pledged to start a community foundation in Lock Haven as part of the sale agreement, according to The Associated Press.

Another strike against Community Health Systems is that the company paid the U.S. Department of Justice a $31 million settlement in 2000 to resolve allegations that it submitted false claims for reimbursement to Medicare, Medicaid and Tricare, the Defense Department¹s health care program.

According to a Justice Department press release, CHS hospitals in six states misused diagnostic codes "for the purpose of increasing reimbursement amounts." CHS voluntarily disclosed the billing problem to the government and was commended for its cooperation.