Wilkes-Barre General Hospital purchase plans detailed for Luzerne County Council

Due to a complicated process involving tax-exempt bond status, the nonprofit Tenor Health Foundation Inc. needs Luzerne County Council approval to borrow funds to purchase Wilkes-Barre General Hospital from Community Health Systems Inc.

Council must approve Tenor Health’s borrowing of approximately $72 million because the package through lender and bond holder Rosemawr Asset Management includes tax-exempt bonds, said Attorney Peter Moses.

Moses represents the Northeastern Pennsylvania Hospital and Higher Education Authority, an entity created by the county to provide tax-exempt bond status for nonprofit health care providers and educational institutions to help them attract investors.

During a lengthy discussion at Monday’s council work session, Moses repeatedly emphasized the county and authority are not pledging or obligating any funds for the borrowing and won’t be liable for any payments.

Council is expected to vote on the request at its next meeting on Nov. 25.

Tenor Health’s proposal met all state law requirements for tax-exempt borrowing, Moses said.

Moses also stressed that the package before council focuses solely on the 369-bed Wilkes-Barre General Hospital and associated real estate in this county.

Bart Plank, head of healthcare public finance at Cain Brothers, a division of Key Bank, told council Tenor Health won’t be required to pay — and thus borrow funds — for the purchase of two other hospitals in Lackawanna County because those two facilities have been losing money.

Like Wilkes-Barre General, the two Lackawanna County hospitals — the 186-bed Regional Hospital of Scranton and 122-bed Moses Taylor Hospital — are part of Commonwealth Health, a subsidiary of Community Health Systems.

While Tenor would own and manage all three hospitals, Plank said all revenue generated from Wilkes-Barre General Hospital must “stay in Wilkes-Barre” to keep the facility profitable and repay the debt. These conditions were required by Rosemawr Asset Management, he said.

Tenor Chief Executive Officer and founder Radha Savitala told council her nonprofit was established to own and operate hospitals that are financially struggling to ensure access to health care in communities where there is a risk of either competition or hospitals shutting down.

In addition to the three hospitals, the acquisition will include all physician practices and clinics, ambulatory surgery centers, and real estate, Savitala said. Tenor is working to close on the transaction next month.

Nonprofit ownership will ensure profits are reinvested locally, not for the “benefit of equity shareholders in a public company,” she said.

Tenor would establish a community board to provide input and transparency regarding hospital operations and finances, she said.

Based on local feedback, Savitala said needs that must be addressed include staff recruitment and capital improvements.

“If we’re going to have members of the community come to the hospital, we really have to show that we have the ability to invest and improve the equipment and the physical plant, but also improve the inequities of our employees,” Savitala said. “Every aspect of the hospital operations is being looked at and reviewed, and we will do what is right for this hospital and this community.”

While acknowledging Wilkes-Barre General Hospital’s importance providing health care, several council members expressed concerns about the loss of tax revenue.

County taxing bodies are projected to collectively lose more than $1.9 million in real estate tax revenue annually with the purchase, including approximately $328,000 currently received by the county, records show.

Savitala said she welcomes discussions about services that can be provided to “ensure stability and to replace some of the lost revenue from the property taxes.” For example, Tenor may assist with medical screenings and vaccines for Wilkes-Barre’s mobile health unit, she said.

Wilkes-Barre General Hospital CEO Michael Clark told council he is “very confident” Tenor will address recruitment and capital needs and “make the right choices” so the hospital “can continue to flourish.”

Clark also bluntly pointed out this is the first time a buyer has come forward with the “wherewithal to make this sale go through.”

Last year’s proposed purchase by WoodBridge Healthcare Inc. failed to materialize largely due to challenges securing financing, officials said.

”Some people mistakenly think that there are people on the sideline waiting for this to fall through, and then they’ll come in, swoop in, and buy the hospitals,” Clark said. “There’s been at least 10 or 15 different entities that have looked at the purchases and have never gone any further.”

During public comment, Dr. Michael Tedesco urged council to approve the Tenor proposal.

Tedesco said he moved here in 1987 to work as an obstetrician and estimated he had delivered approximately 10,000 babies in the area.

He said he met with Tenor representatives last week and was “cautiously optimistic” because it has a “vision to bring back services to support this hospital and help it grow.” Like Clark, he said he is unaware of any other entities willing to take on the project.

“The community needs Wilkes-Barre General Hospital,” Tedesco said. “We can’t let this hospital go down.”

Dr. Patrick Conaboy, a family practitioner in Northeastern Pennsylvania for more than 30 years, shared stock prices and other statistics that have convinced him Community Health Systems won’t “continue with Wilkes-Barre General Hospital beyond 2027.”

“People think if this goes away, Wilkes-Barre General will continue on and remain on the tax rolls and everything will be fine,” Conaboy said. “I’m here to tell you that’s not true.”

Conaboy said one option to offset the real estate tax loss could be free X-rays and bloodwork for emergency responders.