Chicago Hospital Closures and Shifting Hospital Margins with Alan Condon

Summary

Becker’s Healthcare Podcast: Chicago Hospital Closures and Shifting Hospital Margins with Alan Kahn

Release Date: August 12, 2025

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Introduction

In this episode of the Becker’s Healthcare Podcast, host Scott Becker engages in a comprehensive discussion with Alan Kahn, Editor in Chief at Becker's Healthcare. The conversation delves into the recent closure of Weiss Memorial Hospital in Chicago and examines broader trends affecting hospital operating margins across the United States. This detailed analysis provides valuable insights for healthcare professionals and stakeholders seeking to understand the evolving financial landscape of the industry.

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Chicago Hospital Closures

Sudden Shutdown of Weiss Memorial Hospital

Alan Kahn opens the discussion by addressing a significant development in the Chicago healthcare scene: the abrupt closure of Weiss Memorial Hospital on August 8, 2025. Kahn provides a timeline and context for the shutdown:

“We saw one hospital in Chicagoland close over the weekend pretty suddenly on August 8th. That's Weiss Memorial Hospital in Chicago. This closure came just one day before CMS terminated the hospital's Medicare program.” ([01:04])

Reasons Behind the Closure

The termination by the Centers for Medicare & Medicaid Services (CMS) was attributed to non-compliance in several critical areas:

• Emergency Services
• Nursing Care
• Physician Environment Standards

“According to CMS, non-compliance in a number of areas including emergency services, nursing care, physician environment standards was also cited as well.” ([01:04])

Impact on Sister Hospital

Weiss Memorial Hospital is part of a network managed by Resilience Healthcare, which also operates West Suburban Medical Center. The sudden closure of Weiss Memorial raises concerns about the viability of its sister hospital:

“The future of West Suburban Medical Center is also up in the air after that sudden closure. A number of financial operational concerns here for the broader organization.” ([01:04])

Financial Struggles and Ownership Changes

Kahn traces the financial difficulties back to the acquisition history:

• In 2022, Resilience Healthcare acquired Weiss Memorial and West Suburban Medical Center from Pipeline Health, a California-based nonprofit system that exited the Illinois market.

“Both of those hospitals were acquired in 2022 by Resilience Healthcare. They acquired them from Pipeline Health, the California based nonprofit system which exited the Illinois market due to those two hospital sales in late 2022.” ([01:04])

Denial of Financial Assistance

A pivotal factor in Weiss Memorial’s closure was the denial of a $10 million loan from the state of Illinois, which left the hospital unable to secure job stability for its staff:

“Weiss Memorial's owner was denied a $10 million loan from Illinois from the state and really says without this financial assistance the hospital owner couldn't guarantee job security for those hospital staff and really the long term stability of those hospitals really up in the air at the moment.” ([03:06])

Private Equity Involvement

Scott Becker raises the issue of private equity ownership and its role in the closure, noting that both hospitals were already in financial distress before being acquired by Resilience Healthcare:

“These are two hospitals that were now owned by private equity for profit ownership. But these were two hospitals that were also in tremendous financial trouble for a very long time before private equity owned them.” ([03:06])

Kahn concurs, emphasizing that under private equity ownership, there was no significant financial turnaround:

“Under that new ownership, the private equity backed ownership there has not really seen a turnaround in its finances, unfortunately leading to the closure of that one hospital.” ([03:51])

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Shifting Hospital Margins

Positive Trends in Operating Margins

Shifting focus to national trends, Alan Kahn discusses the latest report by Council and Hall, which highlights a notable increase in operating margins for nonprofit hospitals from May to June 2025:

“Operating margins rose from May at 1.6% to June at 3.7%, which is the highest nonprofit margins have been since December 2024.” ([03:51])

Regional Disparities

Despite the overall positive trend, Kahn points out significant regional variations:

• Northeast Mid-Atlantic: Approximately 38% year-over-year margin growth.
• Great Plains: Around a 27% decline.
• Western United States: About a 13% decline.

“Hospitals in the northeast Mid Atlantic region led with 38% or so year over year margin growth, while hospitals in the Great Plains area and the west of the country reported steep declines of around about 27% and 13% respectively.” ([03:51])

Impact of Hospital Size

Hospital size also plays a crucial role in margin performance:

• Small to Mid-Sized Hospitals (26-299 beds): Experienced significant margin gains.
• Large Hospitals (500+ beds): Saw a roughly 30% year-over-year drop in margins.

“Small mid sized hospitals dozen around about the 26 bed to 299 bed range saw significant margin gains in that month. While the largest hospitals in the country, those with 500 or more beds saw a pretty significant drop around about a 30% year over year drop in their margins.” ([03:51])

Factors Influencing Margin Changes

Kahn attributes the divergence in margin performance to several factors:

• Regional Economic Conditions
• Scale and Strategic Agility of Hospital Leadership
• Payer Mix and Regulatory Environment

“Performance really varied significantly in terms of those regions, in terms of those hospital sizes and obviously multiple factors playing into that divergence of results as well.” ([03:51])

Future Outlook

Both Becker and Kahn express cautious optimism, noting that while the recent increase in margins is encouraging, ongoing regulatory changes and legislative developments could impact future performance:

Scott Becker: “I found that quite surprising to see that. But hopefully that's a good sign and not just a blip in a longer term struggle for health systems...” ([06:50])

Alan Kahn: “...no doubt whatever we saw in July in terms of the regulatory environment, incoming legislation, so no doubt surprising but maybe a nice surprise.” ([07:24])

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Conclusion

The episode concludes with a reflection on the precarious nature of hospital finances in the current healthcare landscape. The sudden closure of Weiss Memorial Hospital underscores the fragility of healthcare institutions facing financial and regulatory challenges. Simultaneously, the rise in operating margins for nonprofit hospitals presents a complex picture marked by regional and size-specific variations.

Alan Kahn and Scott Becker emphasize the importance of monitoring these trends closely, as they hold significant implications for the future stability and operational strategies of hospitals across the nation. The discussion serves as a critical reminder of the multifaceted factors influencing healthcare finance, from ownership structures and regional economies to legislative changes and strategic leadership.

Listeners are encouraged to stay informed and engaged with upcoming reports and industry analyses to navigate the evolving challenges and opportunities within the U.S. healthcare system.

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Notable Quotes:

• Alan Kahn on Weiss Memorial Closure:

  “Without this financial assistance the hospital owner couldn't guarantee job security for those hospital staff and really the long term stability of those hospitals really up in the air at the moment.” ([03:06])

• Scott Becker on Operating Margins:

  “I found that quite surprising to see that. But hopefully that's a good sign and not just a blip in a longer term struggle for health systems...” ([06:50])

• Alan Kahn on Future Trends:

  “...no doubt whatever we saw in July in terms of the regulatory environment, incoming legislation, so no doubt surprising but maybe a nice surprise.” ([07:24])

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This comprehensive summary encapsulates the key discussions and insights from the podcast, providing a clear and detailed overview for those who have not listened to the episode.

Transcript

[Beckers Healthcare]

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[Scott Becker]

This is Scott Becker with the Beckers Healthcare Podcast. I'm thrilled today to be joined by Alan Kahn. Alan helps to head up the editorial team at Becker's Healthcare. He's the Editor in Chief and just a magnificent leader. Alan talks to us regularly about some of the issues he's watching in health care. Some of the big issues facing healthcare a lot on the financial side. Yeah. One I'm gonna, I'm gonna let you take it away. What are you watching currently? What's top of mind?

[Alan Kahn]

Yeah, absolutely. I think I'd love to touch on wider trends in terms of what we're seeing in terms of hospital margin in terms of the latest Kaufman HA report. But I think firstly just a quick update on some some breaking news over the weekend that we've been covering here in Chicago. So unfortunately we saw one hospital in Chicagoland close over the weekend pretty suddenly on August 8th. That's Weiss Memorial Hospital in Chicago. This closure came just one day before CMS terminated the hospital's Medicare program. That was due to according to cms, non compliance in a number of areas including emergency services, nursing care, physician environment standards was also cited as well. But I think that the concern here is that Weiss Memorial sister hospital, that's West Suburban Medical center, also in Chicagoland area, also operated by the same owner and operator by the name of Resilience Healthcare. The future of this hospital is also up in the air after that sudden closure. A number of financial operational concerns here for the broader organization. So both of those hospitals were acquired in 2022 by Resilient Healthcare. They acquired them from Pipeline Health, the California based nonprofit system which exited the Illinois market due to those two hospital sales in late 2022. I think that really spells disaster for these two hospitals in the Chicagoland area. The only thing I will add here before we wrap up is Weiss Memorial's owner was denied a $10 million loan from Illinois from the state and really says without this financial assistance the hospital owner couldn't guarantee job security for those hospital staff and really the long term stability of those hospitals really up in the air at the moment. So one hospital unfortunately closed over the weekend and a little a lot of them certainly surrounding its sister hospital also in the Chicagoland area.

[Scott Becker]

Thank you. And I think one of the things that's fascinating about this is I think at this point these are two hospitals that were now owned by private equity for profit ownership. But I think it's also worth noting these are two hospitals that were also in tremendous financial trouble for a very long time before private equity owned them. So there will be a natural rush in private equity. Are no angels at all, but there will be a natural rush somehow. Another blame this on private equity. But these were hospitals that were broke when private equity bought them. So I think it's it becomes a more complicated discussion as to whether this is a private equity issue or not.

[Alan Kahn]

Absolutely. I think a really important note to add there. I think to your point, pipeline healthier. The previous owners tried and tried to turn those hospitals around from a financial standpoint, struggled really. No doubt financial challenges really hit them harder during that period, during the pandemic as well. But even in the last couple years under that new ownership, the private equity backed ownership there has not really seen a turnaround in its finances, unfortunately leading to the closure of that one hospital there. And lots around a lot of questions remain the other hospital, unfortunately. But we'll pay close attention over the coming days and weeks and see what happens there. Jumping to the other story just on a more wider big picture standpoint, just kind of breaking down what we're seeing from nonprofit hospital margins really across the country. Council and Hall's latest report show pretty significant rise in operating margins from May to June 2025. So May 1.6% operating margins, the national average big jump up to 3.7% in June, which is the highest nonprofit margins have been since December 2024. So obviously big movement in the right direction there no doubt comes with some caveats in terms of what we've seen in terms of the legislation signed in July in terms of one big beautiful bill and some impending cuts coming down the line there. But I think there's a couple of key takeaways from here is that while operating margins were up on average, I think big caveat here is that performance varied widely by region and also by hospital size. So hospitals in the northeast Mid Atlantic region led with 38% or so year over year margin growth, while hospitals in the Great Plains area and the west of the country reported steep declines of around about 27% and 13% respectively. And then just a quick note on hospital size also playing a big role here. So small mid sized hospitals dozen around about the 26 bed to 299 bed range saw significant margin gains in that month. While the largest hospitals in the country, those with 500 or more beds saw a pretty significant drop around about a 30% year over year drop in their margins. So yes average operating margins up in June significantly compared to May. But again performance really varied significantly in terms of those regions, in terms of those hospital hospital sizes and obviously multiple factors playing into that divergence of results as well. When we think about scale payer makes the regulatory environment and some of the strategic agility by some of these leadership at hospital. So interesting take away from Councilman hall but I guess all eyes on July and the next month that follows whether we see a continuation of that trend or maybe a little drop in the margins as well.

[Scott Becker]

Thank you very very much. I mean that is was surprising to me to see the margins go in the right direction after so much concern out of everything in every place about reimbursement and rates and also about expenses. So we'll see how long that lasts. But that was literally I found that quite surprising to see that. But hopefully that's a, that's a good sign and not just a blip in a longer term struggle for health systems as we lose more Medicaid and more money and so forth. So, so we'll see. That's fascinating to watch though.

[Alan Kahn]

Absolutely. I think the same for myself. Surprising but it may be a nice surprise. A lot of hubs leaders out there I think to your point, allies on the upcoming report as to what we see in July, no doubt whatever we saw in July in terms of the regulatory environment, incoming legislation, so no doubt surprising but maybe a nice surprise. And we'll certainly keep our eyes on those upcoming operating results over the coming months.

[Scott Becker]

Fantastic. Alan, thank you for joining us. A lot going on in the world of health care. This thing about these hospitals closing is fascinating and, and so interesting to watch that. Thank you so much for joining us. Can't tell you how much I appreciate again Alan Content. He'll be moderating a bunch of panels at the CEO CFO Roundtable this fall. He's literally fantastic. Thank you for joining us today. If you want to join us at the CEO CFO Roundtable, let us know. Thank you so much for joining us.

[Alan Kahn]

Thank you so much Scott.