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February 15, 2022

Tower Heath must resume sale of Brandywine, Jennersville hospitals, judge rules

The health system and Canyon Atlantic Partners have 90 days to finalize an agreement over the two Chester County facilities

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Tower Health Brandywine Jennersville hospitals Street View/Google

Tower Health has been ordered to restart the process of selling Brandywine and Jennersville hospitals in Chester County to Canyon Atlantic Partners after the health system terminated an agreement in December.

Brandywine and Jennersville hospitals in Chester County could reopen to patients in the near future after a judge ruled Monday that Tower Health's decision to terminate an agreement to sell both facilities was "null and void."

Common Pleas Court Judge Edward Griffith ordered the Berks County-based health system to restart the process of selling both hospitals to Canyon Atlantic Partners, the Daily Local News reported.

After Tower Health canceled the $16.5 million deal in December, Canyon Atlantic filed an injunction to prevent Tower from walking away from the agreement.

Griffith wrote in his 10-page ruling that Canyon Atlantic's request was "justified" and that allowing Tower Health to close the hospitals would harm Canyon Atlantic and the local community.

"The harm to Canyon is substantial," Griffith wrote. "Absent enforcement of the agreement, Canyon will lose this opportunity forever. No harm is suffered by Tower Health if the relief sought by Canyon is entered.

"The hospitals provide significant health resources for Chester County and its citizens," Griffith continued. "The hospitals are critically important to their local communities. The impact of the hospital closures spreads beyond the local community. Neighboring hospitals will be overburdened rendering health resources scarcer to a greater community."

Griffith also wrote that Tower Health withheld important information from Canyon Atlantic during the sale process.

"Tower Health's conduct interfered with Canyon's ability to provide necessary information to its finance partners, respond to Tower Health's questions regarding financing, work through the regulatory process to secure licenses and complete other necessary tasks," Griffith wrote.

Tower Health and Canyon Atlantic now have 90 days to finalize a sale agreement. Canyon Atlantic has permission to access the hospitals and all relevant documents regarding the sale of each facility. The Austin, Texas-based health care company must also post a $10 million bond within the next 10 days. Tower Health must "maintain and preserve" the hospitals' physical settings while the sale is finalized. 

It is unknown if Tower Health will appeal the decision. The health system said it is currently reviewing the judge's ruling. Tower argued in hearings earlier this month that the injunction was invalid and said Canyon Atlantic waited too long to file it.

"Tower Health finds itself in the position it is in because of its own conduct," Griffith wrote. "Given this history, Tower Health cannot now be heard to say, with its unclean hands, that the entry of an injunction against it is unjust."

Tower Health agreed in November to sell Brandywine and Jennersville hospitals to Canyon Atlantic, a company that specializes in hospital ownership and management organization. Canyon had agreed to assume control of the hospitals in January and keep them open as acute care facilities.

But Tower terminated the deal in December, saying at the time that Canyon Atlantic "has not been able to demonstrate that it is capable of making an effective transfer of ownership and operation of these two hospitals."

Jennersville Hospital in West Grove closed at the end of December. Brandywine Hospital in Coatesville shut down at the end of January. The two hospitals combined to offer more than 200 beds and employ about 800 workers. 

The move to close both hospitals was strongly rebuked by local health and elected officials, who argued that it would make it more difficult for Chester County residents to access reliable medical care and put many people out of work.

Tower Health purchased the hospitals from Community Health Systems in 2017 in an effort to expand its reach into Southeastern Pennsylvania. The $423 million deal also included buying Chestnut Hill Hospital in Philadelphia, Pottstown Hospital in Montgomery County and Phoenixville Hospital in Chester County.

But Tower Health initiated a large-scale company restructure in September that will see the health system's footprint in the Philadelphia region dramatically decrease.

As part of the reorganization, Jennersville Hospital was initially set to close by the end of the year. Brandywine Hospital was expected to remain within the health system, but the facility's long-term future was still being assessed at the time.

The two hospitals lost more than $42 million in the last fiscal year and accounted for just 9% of Tower Health's inpatient admissions between April and June 2021.

Tower Health's downsize will leave the health system with half as many hospitals in the Philly region.

The health system agreed in September to sell Chestnut Hill Hospital and nearly 20 urgent care centers in the region to Trinity Health Mid-Atlantic.

Phoenixville Hospital and Pottstown Hospital will not be impacted by Tower Health's restructure. St. Christopher's Hospital for Children in Philadelphia remains within the Tower Health network, but its long-term future is still being evaluated.

The decision to decrease Tower Health's hospital and urgent care network in the Philly region comes as the health system seeks to become more financially sustainable.

Tower Health has lost more than $658 million over the last two fiscal years, and it wrote off $370 million in value of its hospitals in 2021.

After a $212 million drop in revenue at the onset of the COVID-19 pandemic, the health system cut 1,000 jobs across various departments in June 2020. Tower Health said the layoffs would help the company save roughly $230 million over a two-year period.

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