Hahnemann building’s owner stymies city’s bid to lease it for COVID-19 cases

Updated 11:50 a.m. Saturday

As hospital systems across the region brace themselves for what is predicted to be a surge in patients with severe COVID-19 symptoms, the City of Philadelphia has been looking for sites where it could house overflow patients.

Perhaps the most obvious choice is the shuttered Hahnemann University Hospital, whose 496-bed capacity would make an enormous difference in the city’s ability to absorb patients in need. The safety-net hospital shut its doors last summer when its owner, Philadelphia Academic Health System, declared bankruptcy.

But at the city’s daily COVID-19 press briefing Tuesday, Managing Director Brian Abernathy said negotiations with the building’s owner, investment banker Joel Freedman, are not going well.

“Mr. Freedman was difficult to work with at times when he was the owner of the hospital, and he is still difficult to work with as the owner of the shuttered hospital,” Abernathy said.

At first, Abernathy said, Freedman tried to get the city to buy the property, which it could not afford. Then the offer was scaled to a year’s lease, and finally a six-month lease. Still, Abernathy called the price point “unreasonable.”

“I think he is looking at how to turn an asset that is earning no revenue into an asset that earns some revenue, and isn’t actually particularly thinking through what the impacts are on public health,” Abernathy said of Freedman. “I think he’s looking at this as a business transaction rather than providing an imminent and important aid to the city and our residents.”

Notably, Hahnemann’s real estate was parsed out into a separate company, Broad Street Healthcare Properties, also owned by Freedman, and not included in Philadelphia Academic Health System’s Chapter 11 bankruptcy petition. That move caused widespread speculation that Freedman was planning to sell the building, located at the desirable corner of Broad and Vine streets, to developers.

A representative for Freedman confirmed that the building does have an interested buyer, and said that was one of the reasons why Broad Street Healthcare couldn’t just give the city the building to use.

“We’re offering this facility because of the public benefit in a health crisis, but it comes at the cost to the property owner,” said representative Sam Singer.

He did not say how much it would take to simply offer the hospital at cost.

Freedman offered the building to the city for $60 per bed per night — that’s just about $900,000 per month. (The lease cost is triple net, which means the city would pay the property insurance, taxes and maintenance costs directly. Singer estimated those costs would amount to $33 per bed per night. The remaining rent, to be paid to the owner, would be $27 per bed per night.)  

Singer said that was well below market value, and drew the comparison to St. Vincent Hospital in Los Angeles, which that city is using in a similar fashion. There, the city is paying $236 per night per bed, for a total of $2.6 million each month, he said.

“What we want is the city to step up to the plate and take a look at how thoughtful and reasonable the offer we’re making to them is ,” said Singer, who added he wished the city would take some initiative and give the company real feedback on the proposals it had put forward.

Hahnemann’s main building was valued at $32,480,000 in 2018 by the city.

Mayor Jim Kenney accused Freedman of “jacking up monthly prices.”

“People will take advantage of this, trying to make a buck out of this, and I think again it’s sad,” Kenney said. “This is probably the biggest health crisis in our generation, and they should act accordingly.”

Hahnemann no longer has the beds or medical equipment it did when it was a functioning hospital —  all that was auctioned off as a part of the hospital’s bankruptcy. But Thomas Farley, Philadelphia’s health commissioner, said the space could prove useful, if not for treatment of severe cases, then for the potential isolation of those people who may have mild symptoms or have been exposed to the coronavirus.

In response to the revelations that negotiations were going poorly, City Councilmember Helen Gym called for the city to seize the property.

“Eminent Domain was created for situations like #Hahnemann,” Gym wrote on Twitter. “This is a  public health emergency and Philly is the largest city in the nation WITHOUT a public hospital. We cannot allow unconscionable greed to get in the way of saving lives. Eminent domain this property.”

Eminent domain allows public agencies to seize privately held property when it is in the interest of the public good. The public entity appraises the value of the property, which the private owner can contest. That typically results in a lengthy and cumbersome legal process that, in light of the closed courts and emergency nature of the demand for space, might not be a realistic option in this instance.

Under the current statewide emergency declaration, Gov Tom Wolf does have the authority to seize property. According to the statute, subject to requirements and just compensation, the governor may, “commandeer or utilize any private, public or quasi-public property if necessary to cope with the disaster emergency.”

When asked whether Wolf has considered the option, a spokesperson for the state Department of Health, Nate Wardle, said the agency  is concerned that a worst-case scenario could strain the health care system to a point where hospitals cannot keep up with patient demands. 

“These include the need for a significant increase in beds, and we are looking at all options in regard to that,” he wrote in an email. 

Such a seizure also would likely be subject to legal battles surrounding compensation.

Abernathy confirmed that the city is looking at other options, including former dormitory spaces, to attempt to meet the demand for hospital beds expected in the coming days or weeks. Until such a space is found, leaders of health systems have said they are exploring the possibility of converting non-medical spaces such as cafeterias or lobbies into treatment areas.

This article was updated to add details about Gov. Tom Wolf’s powers under Pennsylvania’s emergency declaration. It also reflects an updated lease cost provided by Broad Street Healthcare Properties.
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Editor’s note: On Thursday, city officials announced they were giving up on the negotiations for use of Hahnemann. On Friday, they announced a deal with Temple University to use its Liacouras Center at no cost.