Changing market led to deal for Bacharach Bacharach looks towards future after announcement of Select Medical acquisition

GALLOWAY TOWNSHIP - Pressures impacting small health care providers nationwide are ending an era of rehabilitative care in the area.

Bacharach Institute for Rehabilitation agreed in September to have Select Medical acquire its licensed beds, with which Select will build a new rehabilitation hospital, operating under the Bacharach name. AtlantiCare is set to acquire the Bacharach facility located adjacent to its Mainland Campus hospital as part of the deal.

The deals are pending approval from various state agencies.

The deal will create a more sustainable future for rehabilitative health care in the area, said Richard Kathrins, Bacharach's chief policy officer.

"I think the plus here is Select brings a lot to the table, they're a national provider of rehab services, they have great resources at their disposal," Kathrins said. "I think Select will be a wonderful partner to the community in the long run, and I think there's sustainability there, I think there's quality there, I think they'll do a good job for the community."

A Select spokesperson said more details about the new rehabilitation hospital were unavailable, as it was still obtaining state regulatory approval. The new facility will provide treatment for various ailments, including brain injuries, cancer, spinal-cord injuries and strokes.

"Our plans are to build a new, state-of-the-art inpatient rehabilitation hospital," Select spokesperson Shelly Eckenroth said in an email Wednesday. "As with Select Medical's other 30 inpatient rehabilitation hospitals across the country, including Kessler Institute for Rehabilitation (in Marlton), our commitment will be to help patients regain function and independence for daily living."

Kathrins said Bacharach had been experiencing financial difficulties over the past several years. The company had struggled with the rising regulatory and technological health care costs generally facing all hospitals, something that can be especially difficult for a smaller hospital, Kathrins said. There were also changes in the rate of patient referrals due to managed care plans and admissions as well as difficulties created by the COVID-19 pandemic.

"Those issues came together to create a financial picture that was difficult to overcome for us," Kathrins said.

Bacharach has a storied legacy in the region. It was founded in 1924 in Longport, operating as a facility that provided rehabilitative care to pediatric patients. It soon garnered a national reputation for specific pediatric treatments, regularly drawing children and families from Philadelphia looking for therapy and the restorative salt air of the Jersey Shore.

"It all sort of came together and it became part of the institution of Atlantic City," Kathrins said. "It became part of the environment."

Bacharach moved to its current location in Galloway in 1972, three years before the opening of what is now the Mainland Campus of AtlantiCare Regional Medical Center. The institute soon after pivoted away from pediatric care and became an adult rehabilitative hospital, ultimately receiving its designation as a specialty hospital from the state. It remains a rehabilitative hospital for adults, offering an array of inpatient programs, including those that treat brain and spinal cord injuries, strokes, and neurological and orthopedic disorders. It also continues to provide pediatric care.

One of the more critical challenges facing Bacharach has been the growth of managed health insurance plans, such as Medicare Advantage and Medicare Shared Savings programs. With stricter rules surrounding when one can be admitted into a rehabilitation hospital, many patients that would otherwise receive treatment at Bacharach are denied admission. Patients are often referred to lower levels of care instead, such as a nursing home, draining Bacharach of patients and revenue in the process, Kathrins said.

"Patients who we think are appropriate under the Medicare guidelines, somebody else at the insurance company is thinking that they're not appropriate," Kathrins said.

Kathrins said he was encouraged that government officials were beginning to take notice of the obstacles some managed care plans laid out for institutions like Bacharach.

"The goal there is to reduce costs, so they might not want to send a patient to a high-quality rehab hospital as opposed to a lesser-costs (facility)," Kathrins said. "There's a lot of research in terms of the outcome value (at rehabilitation hospitals) versus the outcomes in nursing homes and so forth."

These financial challenges have been exacerbated by the pandemic. Public-health shutdowns put in place in 2020 reduced the volume of admissions at rehabilitation facilities like Bacharach, further cutting into the facility's revenue.

Kathrins said Bacharach was vulnerable to these financial challenges due to its status as a small, non-affiliated, nonprofit hospital.

"If you were to look around in South Jersey, New Jersey, the country, you would see that the number of freestanding, small hospitals continues to dwindle," Kathrins said.

The acquisition of Bacharach's licensed beds comes as smaller hospitals in the region are being subsumed by their larger counterparts. Cape Regional Health System, which operates Cape May County's only hospital, entered into a merger agreement with Cooper University Health Care, of Camden, in December.

"I think there is a growing trend towards consolidation," Kathrins said. "It's hard to argue against it."

Kathrins said Bacharach was optimistic that the Select Medical acquisition could help improve health care outcomes in the area. He noted that Select Medical operates the Kessler Institute for Rehabilitation, which U.S. News & World Report ranked as the fourth best rehabilitation hospital in the country. Health care providers from Bacharach had previously collaborated with clinicians from Select hospitals and were impressed by the experience and dedication.

Select Medical operates 30 inpatient rehabilitation hospitals and employs more than 7,500 therapists, according to its website. It is based in Mechanicsburg, Pennsylvania, and owns NovaCare Rehabilitation.

"We've come to know their clinical acumen, their commitment to the community," Kathrins said.

Kathrins said the new Select facility will have little continuity with Bacharach and generally no Bacharach employees will be transferring over to the new Select facility. There will be a gap between when the Bacharach facility closes and the new Select rehabilitation hospital opens.

An AtlantiCare spokesperson said in an email Monday the company had not yet decided for what purpose the Bacharach facility would be used. It would not be used as an acute rehabilitation facility as such services are not provided at AtlantiCare, although referrals will be made to appropriate providers. The health care company did not have a timeline as to when it would begin using the facility given the outstanding state regulatory approvals. The Bacharach name will not be kept at the AtlantiCare-run operation.

"We are evaluating and planning expansion of our hospital to ensure our community has the most appropriate and comprehensive care it needs," AtlantiCare spokesperson Jennifer Tornetta said.

It is not the end of Bacharach as an institution in the Atlantic City area. The Bacharach Hospital Foundation will remain in operation after the Bacharach Institute for Rehabilitation closes. Kathrins said the foundation could support health care on several fronts, perhaps supporting research, creating scholarships or helping other clinical programs or partnering with local colleges. Kathrins said the foundation is still exploring its options.

Kathrins acknowledged the acquisition will be difficult for people who have grown attached to Bacharach, as well as current Bacharach employees, some of whom have worked at the hospital for decades. He nevertheless expressed optimism that the deal would ultimately benefit the residents that Bacharach had long served.

"It's a sad time, but this is I think, in the long run, a good opportunity for the community, for sustainability and growth," Kathrins said. "I think at the end, it's a win-win, even if now it feels painful, it feels sad."

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