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<\/p>\nHospitals are struggling nationwide, but the situation is especially dire in Pennsylvania, where facilities are disproportionately dependent on shrinking\u00a0federal healthcare funding.<\/p>\n
After 25 shuttered statewide over the past decade, a new Hospital and Healthsystem Association of Pennsylvania report last month found that 37% of the commonwealth\u2019s hospitals are operating at a loss. It predicted that another 12 to 14 will close in the next five years.<\/p>\n
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\n Up to 14 hospitals could close across Pennsylvania by 2031 due to federal healthcare funding cuts.\n <\/p>\n
To combat the closures, elected officials\u00a0at the state and federal level are targeting financial deals they say harm hospital systems, including private equity acquisitions and sale-leasebacks with REITs. If more\u00a0hospitals close, it will\u00a0likely have an impact on the surrounding real estate market.<\/p>\n
\u201cWe know that in order to have communities where businesses want to come to, where families can grow and live, we need to have strong hospitals,\u201d HAP Vice President of Strategic Communications Liam Migdail said.<\/p>\n
\u201cThis is not a hospital issue. This is a community issue.\u201d<\/p>\n
Rural and\u00a0urban safety-net hospitals<\/a>\u00a0\u2014 which disproportionately provide care to low-income communities and tend to be most dependent on Medicaid \u2014 are struggling the most in this climate, he said.<\/p>\n Pennsylvania hospitals only get reimbursed 71 cents for every dollar they spend on Medicaid and uninsured care, which is 11% lower than the national average, the HAP report found.<\/p>\n The One Big Beautiful Bill Act that President Donald Trump signed into law in July\u00a0cut an estimated $1.1T<\/a>\u00a0from Medicaid and Affordable Care Act subsidies. Democrats sought to reverse\u00a0the healthcare cuts,\u00a0focusing on the issue during the longest-ever\u00a0government shutdown in the\u00a0fall, but they\u00a0were ultimately unsuccessful<\/a>. \u00a0<\/p>\n The likely outcome of the federal cuts\u00a0is additional strain on Medicaid-dependent hospitals across Pennsylvania,\u00a0Transwestern Development Co.<\/a>\u00a0Managing Director of Healthcare Services Cheri Doyle said.<\/p>\n \u201cOver the course of these cuts, they\u2019ll be paid less and less, which means less reimbursement and operating revenue,\u201d she said. \u201cIf they were operating with the same volumes and the same patient pool, they\u2019re just going to see their margins erode.\u201d<\/p>\n While Migdail said rural and urban safety-net hospitals are most at risk with federal funding cuts, lower-income sections of the Philadelphia suburbs haven’t been spared.<\/p>\n Prospect Medical Holdings<\/a>\u2019 January 2025 bankruptcy led to the shutdown of its Delaware County subsidiary,\u00a0Crozer Health<\/a>, which left much of the region facing\u00a0emergency care gaps.<\/p>\n Crozer-Chester Medical Center<\/a>\u2019s operating margin fell more than 40% in fiscal year 2024 as 41% of its net patient revenue came from Medicaid,\u00a0according to data<\/a>\u00a0published by the state-affiliated Pennsylvania Health Care Cost Containment Council in July 2025.<\/p>\n That rate was far above every other hospital the council analyzed in the Philadelphia collar counties. Suburban Community Hospital in Norristown,\u00a0which closed its emergency room<\/a>\u00a0last March, had medicaid\u00a0patients making up 23% of its NPR, and\u00a0its operating margin fell by almost 36%.<\/p>\n Jefferson Lansdale Hospital, which had\u00a017.9% operating margin growth, only derived 7% of its NPR from Medicaid.<\/p>\n The Crozer situation has a silver lining: Investor KQT Aikens Partners 2 plans\u00a0to spend $1M<\/a>\u00a0each on\u00a0Springfield Hospital<\/a>\u00a0and\u00a0Taylor Hospital<\/a>\u00a0in Ridley Park through\u00a0Prospect\u2019s bankruptcy auction.\u00a0<\/p>\n The entity, led by\u00a0Todd Strine<\/a>, majority owner of ambulance company\u00a0Keystone Quality Transport<\/a>, aims to reactivate the Taylor emergency department. Strine didn\u2019t respond to\u00a0Bisnow\u2019s request for comment.<\/p>\n \u201cThe ideal thing that could happen is we reopen an emergency room, because that\u2019s what Delaware County needs,\u201d\u00a0he told The Philadelphia Inquirer<\/a>\u00a0in September after KQT\u2019s plan to buy Taylor became public.<\/p>\n \u201cThere\u2019s a ton of carrying costs and a lot of uncertainty about how long it\u2019s going to take to fill up,\u201d Strine added.<\/p>\n While reactivating a defunct hospital isn\u2019t unheard of, it also isn\u2019t particularly common.\u00a0<\/p>\n \u201cIt\u2019s extremely challenging if the asset is antiquated,\u201d said Cushman & Wakefield Managing Director Shane Funston, who focuses on healthcare real estate.<\/p>\n New construction is often a better option for operators looking to bring a hospital to a community that recently lost one, he said.<\/p>\n \n Crozer-Chester Medical Center was one of four properties the company auctioned off last year.\n <\/p>\n Some national and state\u00a0lawmakers have been eager to pass legislation designed to keep struggling hospitals afloat.<\/p>\n On the federal level, the issues of private equity involvement in healthcare and sale-leaseback agreements with REITs\u00a0were\u00a0the targets of an October 2025 U.S. Senate bill<\/a> sponsored by a group of Democrats.<\/p>\n Sale-leasebacks \u2014 in which a hospital operator sells its property to a real estate firm and then leases it back \u2014 have been\u00a0cited\u00a0as contributing to the bankruptcies<\/a>\u00a0of Prospect and Steward Health Care<\/a>, which both executed such deals with REIT Medical Properties Trust<\/a>. Prospect struck a\u00a0$1.5B sale-leaseback deal<\/a>\u00a0in 2019 that\u00a0gave MPT\u00a0ownership of four Crozer Properties.<\/p>\n But Doyle and Funston said sale-leaseback agreements aren\u2019t an inherently bad move for hospitals.<\/p>\n \u201cI\u2019ve never seen a hospital that was doing well and did sale-leasebacks and fell apart,\u201d Doyle said.<\/p>\n The problems arise when an already distressed facility or system monetizes its facilities. Rent payments added to its monthly expenses can become a problem after they burn through the newfound cash.<\/p>\n \u201cThose hospitals were in danger anyway,\u201d Doyle said. \u201cIt was more out of desperation.\u201d<\/p>\n Healthy systems will sometimes execute sale-leaseback agreements for their peripheral facilities, but Funston said it is uncommon for them to do so for their core hospitals. Those are so expensive to build that executives generally want to maintain ownership, he said.<\/p>\n Creditworthy healthcare systems can utilize another creative real estate maneuver\u00a0that brings some\u00a0benefits of monetization without requiring them to sacrifice ownership outright, he said.\u00a0<\/p>\n \u201cInstead of monetizing, you can put financing on the building,\u201d Funston said. \u201cOver a period of time, ownership will revert back to the health system.\u201d<\/p>\n Private equity acquisitions of hospital systems\u00a0and sale-leaseback agreements have also led to state legislative proposals in Pennsylvania.<\/p>\n<\/p>\n