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Joel Freedman, owner of empty Philadelphia hospital, wants millions to reopen for COVID-19

Coronavirus takes deadly toll in the U.S.
Coronavirus takes deadly toll in the U.S. 04:33

As cities around the U.S. brace for an onslaught of novel coronavirus patients, an empty hospital with room for 500 beds remains closed in the center of the City of Brotherly Love.

That hasn't gone over well with people in Philadelphia. Just this week someone spray-painted "Joel kills" on the house of the hospital's owner, according to CBS Philly. That would be Joel Freedman, who bought the city's Hahnemann University Hospital in 2018 only to shutter it last year. 

Many have said Freedman's end game is to turn the building in a prime location into luxury condos. In the meantime, he recently proposed that Philadelphia pay nearly $1 million a month for at least six months to reopen the hospital during the coronavirus pandemic. 

Philadelphia Mayor Jim Kenney has balked at the price. Philadelphia City council member Helen Gym said Freedman's actions were "absolutely appalling" and that the private investor is putting "unconscionable greed" above saving lives.

Now tensions are rising in a second U.S. city over another empty hospital that was purchased and closed last year by an investment group with ties to Freedman. In Illinois, local officials want shuttered Westlake Hospital, in the Chicago suburb of Melrose Park, to be reopened to help treat the growing number of coronavirus cases in Cook County. The state has said it may need to call in the National Guard to reopen the facility.

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Illinois Governor J.B. Pritzker on Monday announced that two other closed hospitals were being reopened and that Chicago's enormous McCormick Place convention center will hold as many as 3,000 patients by the end of April. On Tuesday, the governor's office reported that the number of confirmed coronavirus cases in Illinois had jumped nearly 20% in 24 hours to almost 6,000.

"The numbers of coronavirus cases here are about to explode," said Illinois State Representative Chris Welch, who represents Melrose Park and the surrounding areas. 

Negotiations to reopen Westlake Hospital, which closed last August, have hit a stumbling block in federal bankruptcy court. That frustrates Welch, who said Westlake used to serve a low-income and working-class community with a high percentage of undocumented immigrants. The community has minimal public transportation, with the next closest hospital miles away and essentially out of reach for many residents in light of social-distancing mandates.

"We are pushing so hard to get the hospital back open," Welch said. "The people in my community have nowhere to go."

The fights in Philadelphia and outside Chicago highlight the challenges communities face as they prepare for the expected spike in coronavirus cases that health experts predict could soon overwhelm hospital capacity across America. 

On Tuesday, a foundation funded by the billionaire owner of the Los Angeles Times said it was willing to pay up to $135 million to buy and reopen L..A.'s bankrupt St. Vincent Medical Center. 

The Philadelphia and Chicago controversies also shine a light on how the rush of private equity firms into the hospital industry in the past few years may have left some communities, particularly lower income ones, more vulnerable in the current outbreak. 

Private equity targets hospitals 01:18

Freedman, head of investment firm Paladin Healthcare Capital, was a target for criticism even before the recent failed negotiations with Philadelphia. 

Last July, shortly before Hahnemann University Hospital closed, presidential candidate Bernie Sanders held a rally at the site in the gentrifying neighborhood near the University of Pennsylvania. "As all of you know, the possible closing of Hahnemann has nothing to do with health care, it has everything to do with greed," Sanders said at the event.

Sue Bowes, a former Hahnemann nurse, told CBS MoneyWatch in July that Freedman "came in, and he said, 'We're going to make it work, we'll make these changes,' and then, nothing." Instead, layoffs and other cost-cutting measures at the hospital lowered the quality of care, critics say. The hospital closed in early September and has been vacant ever since. 

Philadelphia Mayor Kenney said last week that the hospital — empty just six months — had fallen into disrepair. "It has no beds and would require extensive work to make it usable again," he said in explaining why Freedman's $1 million a month rent proposal was unacceptable. "I'll let others decide whether that's reasonable or not."

Freedman has said he approached the city about reopening Hahnemann and offered a price well below market value. 

The website for the Freedman company American Academic Health System says it "owns or manages both academic and community-based acute care hospitals." A spokesperson for Freedman told CBS MoneyWatch that, other than the shuttered Hahnemann, Freedman and his various companies do not own any other hospitals. 

The spokesperson said Freedman has owned or run five other hospitals in the past, none of which have been shut. The spokesperson said Freedman has not announced his plans for the shuttered Hahnemann.

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Freedman, though, has ties to Pipeline Health, which bought Chicago's Westlake Hospital in early 2019. 

Jim Edwards, the CEO of Pipeline Health, was hired by Freedman to run one of his companies' hospitals in 2014. And up until early last year, Freedman was business partners with three Pipeline executives in a venture called Avanti Hospitals, which manages four facilities in Los Angeles. One of the Pipeline executives used to work for Freedman at Paladin. Both Pipeline Health and Paladin have headquarters addresses on the same road about a mile apart in El Segundo, California.

A spokesperson for Pipeline said the company has no current ties to Freedman. Pipeline's website says it owns and runs Avanti Hospitals. The spokesperson for Pipeline said Freedman exited the Avanti partnership and sold his ownership stake in January 2019, the same month that Pipeline closed its acquisition of Westlake and two other Chicago-area hospitals. 

The Pipeline spokesperson said Westlake's closure was a result of years of underinvestment by the state of Illinois before the company bought the hospital, as well as broader "shifts underway in the health care system" toward preventative and outpatient care. 

The Pipeline spokesperson said Westlake was placed in bankruptcy and that the investors are no longer involved in any discussions or decisions over what happens to the empty hospital. Pipeline has retained its ownership in the two other Chicago-area hospitals it got as part of the Westlake deal. Those two hospitals, unlike Westlake, are profitable. 

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But a lawsuit filed in early 2019 by the city of Melrose Park accused Pipeline and its owners of fraud in their purchase of Westlake. The lawsuit alleges that Pipeline promised in applying to the state's health care transaction review board that it would keep Westlake open for at least two years. 

Instead, according to the suit, two weeks after the acquisition Pipeline announced the hospital's closure, citing growing losses and a drop in demand for Westlake's services. The complaint, which is ongoing, also claims that Pipeline planned all along to close the hospital and sell off its assets at a profit.

"The private equity investors went around and said there were too many hospitals in the area, and that this hospital had to be closed," said Welch, the state representative who has been leading the fight to reopen it as a coronavirus treatment center. "Now every state is saying we don't have enough beds." 

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