Tower, which had endured severe financial troubles, announced an alliance with Penn in 2021. Tower is still struggling to recover from an ill-fated expansion.
Penn Medicine and Tower Health said they have dropped plans for a strategic alliance of the two systems, according to media reports.
Penn Medicine, the Philadelphia-based system, and Tower, which is struggling to overcome its daunting financial challenges, made the announcement Friday. WFMZ-TV, a news station in eastern Pennsylvania, and Becker’s Hospital Review reported that the alliance has been abandoned.
Tower and Penn Medicine first announced plans to pursue a strategic partnership in July 2021.
In a statement, Tower Health said, "Tower Health and Penn Medicine have mutually and amicably agreed to no longer pursue a strategic alliance between our two health systems."
"The environment for the healthcare industry has changed dramatically since July 2021 when we signed our Letter of Intent. Healthcare providers regionally and nationally are working through a host of challenges, and both Tower Health and Penn Medicine agree it is most important to focus on our own organizational and local community needs at this time."
"While we will not move forward with a formal strategic alliance, Tower Health and Penn Medicine will continue to work together in areas of mutual interest and to improve patient access to high quality healthcare," Tower said.
When the partnership with Penn Medicine was first announced, Tower Health said the alliance would allow the organization to remain independent as it strives to improve its finances.
Based just outside Reading, Pa., about an hour from Philadelphia, Tower Health continues to struggle with its financial woes. Last week, Standard & Poor’s lowered Tower Health’s credit rating by two notches, to “B” from “BB-,” The Philadelphia Inquirer reported.
The ratings agency said it had made some strides, but Tower remains “highly vulnerable” due to its modest cash holdings. Tower’s unrestricted cash dropped from $684.5 million on June 30, 2019 to $307.6 million on Sept. 31, 2022, the Inquirer reported.
On Jan. 1, Tower sold Chestnut Hill Hospital to Temple University Health System.
Tower Health also shut down two hospitals, Brandywine Hospital and Jennersville Hospital, at the end of 2021. ChristianaCare, based in Delaware, bought the shuttered Jennersville Hospital last year, completing the acquisition in July.
Tower is still struggling to recover from an ill-fated expansion that proved to be disastrous to its finances.
In 2017, the Reading Health System, anchored by Reading Hospital, acquired five hospitals in the Philadelphia area and formed the new organization called Tower Health. Tower paid $423 million for the hospitals but the move did not pan out financially.
Kevin Holloran, senior director at Fitch Ratings, told Chief Healthcare Executive in a December interview that the expansion was a body blow.
“It was the expansion that didn’t work,” Holloran said, adding, “They were expanding at the exact wrong time.”
Tower Health recently announced that it has retained Houlihan Lokey, an investment bank, to help the system gain more sound financial footing. Tower Health also installed Michael Eesley as the system’s new financial officer last month.
Selling Chestnut Hill Hospital was a positive step for Tower, Holloran said in December. He said he thinks highly of Tower CEO P. Sue Perotty. “She’s a ball of energy,” he said.
In one positive, Healthgrades last month named Tower’s Reading Hospital as one of America’s Top 50 hospitals.
Still, the embattled system faces an uncertain future, Holloran said in December.
“They have a difficult road still ahead of them,” Holloran said.