Jenna Mechalas noticed the number of patients on her floor was dwindling. Then, last week, her unit at Hahnemann University Hospital in Philadelphia—which deals with opioid overdose patients and people going through cardiac arrest—stopped admitting patients altogether. On Friday, the hospital where the 30-year-old works as a nurse stopped accepting OBGYN patients as well, which left about 800 mothers scheduled to give birth scrambling to find another place to deliver. People with low-level trauma or who are suffering from strokes were sent to one of two nearby facilities, both of which were already dealing with long wait times, she said.

"Our mission is to stabilize and ship out, but that could be the difference between life and death," Mechalas explained in an interview.

The trouble didn't come out of nowhere. By the time Joel Freedman and his private equity firm Paladin Healthcare officially acquired the hospital by way of an affiliate in 2018, it had been losing money for the past 14 years. But Freedman, as people in his strange corner of the economy often do, told a good story, touting plans to reduce wait times and the duration of patient stays. His wasn't an effective strategy: The almost 200-year-old urban Philadelphia healthcare center is expected to close in August or September after failing to turn a profit and descending into bankruptcy proceedings.

Meanwhile, Freedman, 54, appeared to be gearing up to sell the land the hospital sits on, right at the gentrifying city's center, as the American Prospect reported.

Aside from the harm that may be done to patients, hundreds of union workers were expected to lose their jobs as a result of any impending real estate deal. Experts and activists up to and including people running for president—Bernie Sanders visited the hospital Monday—are worried the fiasco might signal a disturbing new trend for private equity firms, as the Prospect noted. In this plausible near-future, groups of wealthy investors buy up imperiled but essential services, load them up with debt, and feast on their carcasses. Without regulation, skeptics say, nothing will stop people from buying up hospitals—or, say, newspapers—on valuable land, and flipping them to build luxury hotels and condos.

"Private equity has been active in the hospital space, but buying a hospital as a pure real-estate play is very rare," said Eileen Appelbaum, co-director of the left-leaning Center for Economic and Policy Research. "If PE is successful with this move on Hahnemann Hospital real estate, expect to see a lot more."

The way private equity works is simple. Managers pool money from wealthy investors that they use to buy businesses that are often on the brink of bankruptcy. They then try to make things more efficient and profitable—at least that's the idea. The catch is that these firms use very little of their own money to make these purchases; mostly it comes from loans. The purchased company is then responsible for management fees paid to the private equity firm, as well as the principal and interest on their new owners' debts.

It’s no wonder that this often fails—private equity has so far been credited with the death or near-death of innumerable retail chains, such as Toys 'R' Us and Sears. Those cases are not exactly tragedies, sure, but the impending closure of a hospital that serves a marginalized population in a relatively high-poverty city suggests that there may need to be some basic limits on what these firms can buy. Left unregulated, private equity could snatch up struggling hospitals across the country and then sell off their assets, leaving vulnerable people without health care options.

Private equity has been encroaching aggressively into the healthcare space since at least 2015. That's when Apollo Global Management, one of the biggest in the game, purchased eight rural hospitals. (Apollo actually owns MidCap Financial, which put up money for Freedman's acquisition of Hahnemann in the first place, as the Philly Inquirer reported.) Interest among executives has accelerated since, and with researchers at Morgan Stanley finding last year that nearly 20 percent of hospitals were at risk of closing or otherwise in trouble, some healthcare companies are clearly looking for an infusion of cash. That may sound dire, but regulation of private equity is unlikely to be on the horizon anytime soon—there's a very well-known revolving door between Washington and some of the bigger firms.

On Monday, Sanders led a rally outside of Hahnemann, asking that Freedman work with the unions and local policymakers—who have dangled tax-dollars—to keep the doors open. “It’s insane,” he said in an interview with a local CBS station before the demonstration. “If you look at this thing objectively and you say that in the midst of a health care crisis, a hospital is being converted into a real-estate opportunity in order to make some wealthy guy even more money, ignoring the healthcare needs of thousands of people, that is pretty crazy."

Freedman and his ilk also risked running afoul of a cease-and-desist order the Pennsylvania Department of Health put out in June. Although the agency said the hospital couldn't begin closing until there was at least a plan in place for the patients there, that doesn't appear to have actually happened. (For his part, Freedman said in a statement this week, "I have…. always been open to any scenario which might have saved Hahnemann, including conveying the Hahnemann real estate to a not-for-profit entity that would have committed to continuing the Hahnemann operations. We made such an offer a not-for-profit entity three months ago…. Unfortunately, the discussions with the not-for-profit entity were unsuccessful.")

Mechalas, the nurse, said she was not surprised someone like Freedman might ignore the public-health implications of a sale. He can afford any fees and fines. And who cares about looking like a cartoon villain if the hospital you own sits on land worth millions?

"When they bought Hahnemann, they said they were gonna be our savior," she said. "We thought they were gonna come in and turn us around, but it seems like corporate greed got the best of them."

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