Center City Healthcare's Chapter 11 Liquidation Plan and the Hahnemann Wind-Down

A Delaware bankruptcy judge confirmed the chapter 11 liquidation plan for Center City Healthcare, LLC and 13 jointly administered debtors on February 25, 2026, closing the contested phase of a case that began with the petition filed June 30, 2019 in the U.S. Bankruptcy Court for the District of Delaware under lead case number 19-11466. The Hon. Mary F. Walrath presided throughout the nearly seven-year case, which entered chapter 11 with a bifurcated strategy — orderly closure of Hahnemann University Hospital and a section 363 sale of St. Christopher's Hospital for Children — rather than a traditional reorganization.

Class 2 general unsecured creditors voted in favor of the joint plan filed by the debtors and the Official Committee of Unsecured Creditors, with 87.85% in number and 84.23% in amount accepting. The plan projects general unsecured recoveries of 2.7% to 5.8% on $191 million to $199 million in claims, funded by remaining real estate proceeds, residual sale consideration, and recoveries on retained causes of action. Allen Wilen of Eisner Advisory Group, who has served as chief restructuring officer since 2019, will continue as the post-effective Debtors' Representative under the oversight of a three-member Plan Implementation Committee.

Debtor(s)	Center City Healthcare, LLC (14 jointly administered entities)
Court	U.S. Bankruptcy Court, District of Delaware
Case Number	19-11466
Petition Date	June 30, 2019
Confirmation Date	February 25, 2026
Plan Type	Chapter 11 Plan of Liquidation
Judge	Hon. Mary F. Walrath
Claims Agent	Omni Management Group
CRO	Allen Wilen, Eisner Advisory Group
DIP Facility	$50M revolver + $15M term loan from MidCap Financial Trust (final order August 23, 2019)

Tenet Acquisition and Pre-Filing Operating Losses

Center City Healthcare and its affiliates operated under the Philadelphia Academic Health System ("PAHS") parent and ran two acute-care academic medical centers in Philadelphia: Hahnemann University Hospital, a 496-bed tertiary care facility in Center City that served as the primary teaching hospital for Drexel University College of Medicine, and St. Christopher's Hospital for Children, a 188-bed free-standing pediatric hospital in North Philadelphia. As of the petition date, the First Day Declaration of CRO Allen Wilen reported approximately 65 physicians and 2,375 non-physician employees at HUH, with another 237 physicians and 1,272 non-physician employees at STC.

Joel Freedman's PAHS purchased the hospital businesses from Tenet Business Services Corporation on January 11, 2018, financed through approximately $49 million from a MidCap credit facility, $51 million from a Harrison Street Real Estate ("HSRE") affiliate loan, $101 million from Capital One, N.A., and a $17.5 million Tenet seller loan to the Front Street Entities. The debtors later alleged they had been misled in due diligence about the platform's profitability — that what was represented as breakeven on an EBITDA basis lost more than $6 million in its first month under PAHS ownership.

Aggregate pre-tax losses at the operating level exceeded $85 million in 2018 and topped $9 million in March 2019 alone, according to the First Day Declaration. HUH's revenue, surgical volume, and average daily census declined materially over 2018, and the physical plant required capital improvements the debtors could not fund. A $17 million annual reduction in supplemental payments from the Commonwealth of Pennsylvania, with payment delays on top, compounded the operating shortfall. Disputes with Tenet over a working capital adjustment involving roughly $21 million in overstated accounts receivable and $5 million in unpaid accounts payable, and disputes with affiliate Conifer over revenue cycle services under the Master Services Agreement, generated more than $41 million in asserted prepetition claims and a threat by Tenet and Conifer to terminate transition services. Tensions with Drexel University College of Medicine — which claimed in excess of $13 million owed and resisted clinical and financial performance initiatives — added a fourth front. SSG Advisors, LLC subsequently marketed HUH to 33 parties on a going-concern basis and received no interest.

Capital Structure and the MidCap Default

At the petition date the debtors carried two principal secured credit facilities, both with MidCap Financial Trust as agent, as detailed in the First Day Declaration. The revolving credit facility had a $100 million commitment with approximately $38.6 million outstanding, secured by a first-priority interest in substantially all debtor assets including accounts receivable. The MidCap term loan, $20 million in face amount, was fully drawn and secured pari passu with the revolver. The Harrison Street acquisition loan added approximately $51 million of mortgage-secured debt at the property level, while Tenet's $17.5 million seller loan sat at the Front Street Entity tier of the structure.

Unsecured exposures were larger than the funded debt by an order of magnitude. Tenet and Conifer asserted more than $41 million in prepetition trade and service claims; Drexel asserted over $13 million; the multi-employer Pension Plan for Hospital and Health Care Employees – Philadelphia and Vicinity, in critical status as of year-end 2018, later asserted a withdrawal liability claim of approximately $22.6 million as a general unsecured claim against each debtor and a separate priority claim of approximately $1.3 million against Center City Healthcare. Trade debt was estimated at approximately $87 million as of the petition date, exclusive of Tenet, Conifer, Drexel, MBNF non-debtor parties, and pension obligations — a number the debtors later acknowledged understated actual trade exposure.

MidCap issued a Notice of Default on May 8, 2019, citing alleged violations of the credit facility tied to the Tenet and Conifer disputes, and simultaneously imposed a default rate of interest. The default tightened the operating cash position and constrained the debtors' ability to pay vendors and procure supplies in the weeks before filing. The PAHS board voted on June 25, 2019 to close Hahnemann; WARN Act notices went to all employees that day; notices to PASNAP and 1199C followed on June 26; and the petition was filed June 30, 2019.

DIP Financing and Case Milestones

MidCap, the prepetition senior lender, also served as DIP lender. The DIP package authorized in the DIP financing motion consisted of a $50 million senior secured superpriority revolving credit facility and a $15 million term loan, both priming and superpriority under section 364(c) over administrative expense claims under sections 503(b) and 507(b) and subject to a defined carve-out. Pricing was 30-day LIBOR (with a 50 bps floor) plus 425 bps on the revolver and plus 1,000 bps on the term loan, both reset monthly, with a 0.50% unused line fee, a 1.20% collateral management fee on outstanding revolver balances, and three $500,000 origination fees — one at initial funding and two deferred to HUH and STC closings. Maturity was the earlier of 12 months from closing or a DIP termination event.

The Official Committee of Unsecured Creditors objected to the DIP, arguing the terms favored MidCap and that the milestone schedule pressured a sale path. After a hearing in mid-August 2019, Judge Walrath rejected the original term sheet and the parties added $2 million to the term piece, bringing it to $17 million. The court entered the Final DIP and Cash Collateral Order on August 23, 2019. The DIP order embedded the operating runway with milestone dates: a HUH discontinuation motion by July 11, sale procedures by August 7, HUH closure by September 6, qualifying bids sufficient to pay lenders in full by September 27, an October 2 auction, and a sale closing and DIP repayment by October 14. The MidCap obligations were ultimately repaid in full from the STC sale closing proceeds in December 2019.

The Official Committee was represented by Fox Rothschild LLP and Sills Cummis & Gross P.C., with Berkeley Research Group as financial advisor. The debtors retained Saul Ewing Arnstein & Lehr LLP as bankruptcy counsel, EisnerAmper LLP as CRO firm, and SSG Advisors as investment banker, with Klehr Harrison Harvey Branzburg LLP as special counsel. Omni Management Group served as the claims and noticing agent throughout the case.

HUH Closure, Jefferson Residency Sale Collapse, and STC Acquisition

The debtors framed Hahnemann's wind-down on a parallel track: closure of inpatient operations, a section 363 sale of HUH's graduate medical education slots, and a separate section 363 sale of the St. Christopher's pediatric hospital. The City of Philadelphia objected to the closure motion and the Pennsylvania Department of Health objected as well, citing patient-care continuity, regulatory compliance, and community impact. The City approved the closure plan on August 9, 2019, the Department of Health on August 23, 2019, and HUH's clinical operations were shut down by September 6, 2019, with about 1,500 hospital employees losing their jobs under WARN notices.

The debtors filed a separate motion on July 9, 2019 to transfer HUH's residency and fellowship slots, with Tower Health as stalking horse at $51 million. At the August 8, 2019 auction, Thomas Jefferson University Hospitals topped Tower with a $55 million joint bid. The sale order encountered immediate opposition from the Centers for Medicare & Medicaid Services over the transfer of Medicare provider agreements and successor liability concerns. The District Court stayed the order; Jefferson exercised its termination right in February 2020; and the sale order was vacated on March 17, 2020, after the appeal was dismissed as moot. The case generated rulings treating Medicare provider agreements as statutory entitlements, aligning with the Verity Health bankruptcy on whether such rights can be sold free and clear under section 363(f).

The St. Christopher's process moved on a separate track. The debtors filed the STC sale motion on July 16, 2019 and proceeded without a stalking horse and without an auction, reaching agreement with STC OpCo, LLC — a joint venture of Tower Health and Drexel University — for a $50 million gross purchase price, subject to a credit of up to $2 million for medical malpractice coverage costs. Doctors and other constituencies sought to halt the transaction, but the bankruptcy court denied the request and entered the STC Sale Order on September 27, 2019. The sale closed December 15, 2019; net proceeds, after MidCap payoff of approximately $33.2 million, a physician bonus escrow, and payroll and supply reimbursements, left approximately $9.6 million for the debtor estates.

A separate dispute over malpractice tail insurance for HUH-displaced residents drew direct attention from Judge Walrath. The court questioned officials over the absence of tail coverage and ultimately authorized the debtors to spend roughly $6.2 million on tail liability insurance over creditor objections, granting tentative approval in March 2020. The Tenet and Conifer dispute over post-petition Transition Services Agreement and Master Services Agreement administrative claims went to mediation before retired Bankruptcy Judge Judith K. Fitzgerald in October 2019; on September 19, 2019 the court had granted a Tenet/Conifer motion in part, awarding an administrative expense claim of at least $400,000 per week from the petition date through August 20, 2019, plus $1 million payable from Health Plan Partners, Inc. A Tenet/Conifer settlement was approved December 9, 2019.

MBNF Adversary, Global MOU, and Real Estate Monetization

For roughly three years, the case revolved around governance and recovery disputes among Joel Freedman's MBNF non-debtor entities, the HSRE entities, and the debtors' estate. Freedman controlled the OpCos that became debtors, the PropCos that held hospital real estate (the "Broad Street Entities"), and the parent ParentCos (PAHH and American Academic Health System). On June 29, 2021, the debtors filed adversary proceeding 21-50991-MFW against the MBNF non-debtor entities seeking recovery of transfers and damages for alleged fiduciary breaches. Governance tensions escalated when Freedman attempted to appoint new managers and remove independent managers, prompting his side to seek a chapter 11 trustee.

The Broad Street Entities and PAHH filed a Stay Relief Motion on October 29, 2021 to free hospital campus real estate from the automatic stay so they could secure a $17.5 million Gordon Brothers loan. The court denied the motion on December 1, 2021. Mediation before former Bankruptcy Judge Kevin Carey produced a global Memorandum of Understanding signed by the debtors, the Official Committee, Tenet, Conifer, the MBNF non-debtor entities including Freedman, the HSRE entities, the CONA Parties, and Travelers Casualty and Surety Company. Allen Wilen's declaration in support of the MOU walked the court through its components.

The court entered the MOU Approval Order on August 29, 2022. Under the settlement, the MBNF entities withdrew approximately $64 million in administrative and priority claims and more than $500 million in contingent and non-contingent claims, the HSRE entities withdrew approximately $433 million in claims, and Joel Freedman permanently separated from ownership and management of the debtors. John DiNome, the debtors' general counsel, replaced Freedman as manager of PAHS. Travelers contributed $2,950,000 to the estates; HSRE contributed $143,000; the bond supporting the Pension Plan released approximately $700,000 of cash collateral to the estates; projected RRG distributions exceeding $2,760,000 were directed to the estates; the debtors paid a $1,450,000 settlement payment and a $4,450,000 settlement balancing payment, with the latter to be reimbursed two-thirds from real estate proceeds attributable to Tenet and HSRE. HSRE received an allowed $30 million general unsecured claim. Tenet and Conifer received a combined $30 million general unsecured "MOU Claim," with $57.2 million of allowed prepetition claims defined as the "Tenet/Conifer Subordinated Claim." Critically, the MOU substantively consolidated the Broad Street PropCos' assets and liabilities with Center City Healthcare's estate, giving the debtors control of the Hahnemann campus real estate sale.

That control unlocked a multi-asset real estate process running into 2025. The debtors entered into stalking horse agreements with affiliates of Dwight City Group LLC — 222 North Broad LLC, 200 North Broad LLC, and 201 North 15th LLC — for the North and South Towers and the Race Street Assemblage at $11.5 million combined ($7,050,000 for the towers and $4,450,000 for the Race Street parcels). Judge Walrath entered the Real Estate Sale Order on September 22, 2025, and the towers and Race Street closing occurred on December 3, 2025. A separate stalking horse agreement with Martinelli Park LLC at $5.5 million collapsed when the purchaser exercised its termination right on August 22, 2025, leaving that parcel and the Stiles real estate parcel for continued post-effective marketing.

Confirmed Plan and Tenet/Conifer Subordination

The Joint Plan of Liquidation, filed jointly by the debtors and the Official Committee, substantively consolidates the debtor estates for plan purposes and is funded by cash on hand, ongoing real estate and asset proceeds, and recoveries on retained causes of action. Allen Wilen serves as the post-effective Debtors' Representative and sole officer and director of the post-effective debtor entities. A three-member Plan Implementation Committee — two designees from the Official Committee and one additional member — oversees plan implementation. The court approved the disclosure statement on January 8, 2026, authorizing solicitation ahead of the February 12, 2026 voting deadline; the Plan Supplement followed on the post-effective governance side.

Class	Description	Estimated Claim Amount	Estimated Recovery	Treatment
Unclassified	Administrative	$1.4M – $2.7M	100%	Cash payment in full on/after Effective Date
Unclassified	Section 503(b)(9)	$540,000	100%	Cash payment in full on/after Effective Date
Unclassified	Professional Fee	~$2M	100%	Cash payment of unpaid portion on/after Effective Date
Unclassified	Priority Tax	$14,000 – $225,000	100%	Cash payment in full on/after Effective Date
1A	Priority Non-Tax	$1.7M – $2.2M	100%	Cash payment in full
1B	Secured	$500	100%	Cash or collateral release
2	General Unsecured	$191M – $199M	2.7% – 5.8%	Pro-rata distributions from Debtors' Distribution Account
3	Insider Claims	$0.00	0%	Disallowed per MOU; deemed to reject
4	Interests	N/A	0%	Cancelled upon dissolution; deemed to reject

The plan back-subordinates the $57.2 million Tenet/Conifer Subordinated Claim defined in the MOU. That claim is excluded from Class 2 distribution calculations until other holders of allowed general unsecured claims receive the lesser of $25 million or 50% of their allowed claims — the Tenet/Conifer Subordinated Recovery Threshold. The structural accommodation prioritizes recoveries to non-Tenet general unsecured creditors before Tenet and Conifer share in the back end of the GUC pool.

Class 2 voted in favor by 87.85% in number and 84.23% in amount, per the confirmation hearing transcript. Classes 3 and 4 were deemed to reject and received no distribution. The U.S. Trustee filed a limited objection to the plan's exculpation provisions, which was resolved by adding language in paragraph 29 of the confirmation order restricting exculpation to fiduciaries acting between the petition date and the effective date and excluding actual fraud, willful misconduct, and gross negligence. The court found the plan was proposed in good faith, satisfied section 1129(b) for rejecting classes, was feasible, and was not proposed to avoid taxes.

The estate also pursued a substantial portfolio of avoidance actions filed in late June 2021 — about 109 adversary proceedings seeking approximately $21 million across vendor counterparties. Several rulings in those proceedings became frequently cited, including a memorandum opinion in Center City v. McKesson and a Medline summary judgment decision granting partial summary judgment for the defendant on $1,297,376.50 of preferential transfers under the objective ordinary course of business defense. The general claims bar date had been set as August 5, 2020.

Key Timeline

Date	Event
January 11, 2018	PAHS acquires HUH and STC from Tenet
May 8, 2019	MidCap issues Notice of Default; default rate imposed
June 25, 2019	PAHS Board votes to close HUH; WARN notices mailed
June 30, 2019	Petition date
July 12, 2019	Interim DIP Order entered
July 16, 2019	STC sale motion filed
August 8, 2019	Jefferson tops Tower at $55M residency auction
August 23, 2019	Final DIP Order entered; PA DOH approves HUH closure
September 6, 2019	HUH closure complete
September 27, 2019	STC Sale Order entered
December 9, 2019	Tenet/Conifer Settlement approved
December 15, 2019	STC sale closes; MidCap satisfied
March 2020	Court authorizes $6.2M tail insurance; residency sale order vacated
December 30, 2020	Original Chapter 11 Plan of Liquidation filed
June 29, 2021	MBNF Adversary Proceeding filed
December 1, 2021	Broad Street Stay Relief Motion denied
August 29, 2022	Global MOU Settlement approved
September 22, 2025	Real Estate Sale Order entered
December 3, 2025	N/S Towers and Race Street Assemblage sale closes
January 8, 2026	Disclosure Statement approved
February 25, 2026	Plan confirmed

Frequently Asked Questions

Who is the claims agent for Center City Healthcare?

Omni Management Group serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

Which judge confirmed the plan?

The Hon. Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware presided over the case from filing through confirmation and entered the confirmation order on February 25, 2026.

What is the projected recovery for general unsecured creditors?

The plan estimates Class 2 general unsecured creditors will recover between 2.7% and 5.8% on $191 million to $199 million in allowed claims, with distributions sourced from cash on hand, ongoing real estate proceeds, and recoveries on retained causes of action. The $57.2 million Tenet/Conifer Subordinated Claim is excluded from those distributions until other Class 2 holders receive the lesser of $25 million or 50% of their allowed claims.

What was the August 2022 MOU?

The court-approved global Memorandum of Understanding resolved disputes among the debtors, the Official Committee, Tenet and Conifer, the MBNF non-debtor entities controlled by Joel Freedman, the HSRE entities, the CONA Parties, and Travelers. It withdrew more than $1 billion in asserted claims, removed Freedman from debtor governance, substantively consolidated the Broad Street PropCos with the debtor estate, and unlocked the Hahnemann campus real estate sale process.

What happened to Hahnemann's residency program?

Jefferson won the residency program at $55 million on August 8, 2019, but the sale collapsed after CMS opposed the transfer of Medicare provider agreements. Jefferson terminated in February 2020 and the sale order was vacated on March 17, 2020.

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