Philadelphia-based Thomas Jefferson University is set to acquire Pottstown (Pa.) Medical Specialists, a 48-year-old physician-owned group, after the group canceled its bankruptcy auction and named Jefferson the successful bidder.
Pottstown Medical Specialists filed for Chapter 11 on Aug. 30 in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania. It signed an asset purchase agreement with Jefferson the same day. The agreement covers Jefferson and its controlled affiliates, including Lehigh Valley Physician Group. Jefferson also served as the group’s lender during the bankruptcy. Under the agreement, Jefferson can count the money owed on that loan toward the purchase price, known as a credit bid.
The group canceled the auction on Oct. 22, according to a court notice. Several groups signed nondisclosure agreements and reviewed the group’s financials but chose not to bid, said Tim Rimmer, CEO of Pottstown Medical Specialists. On Oct. 27, the group filed a proposed order asking the court to approve the sale free and clear of liens and claims. A final hearing is set for Oct. 30, Mr. Rimmer said.
The agreement does not set a single dollar price. Jefferson would instead:
- Pay off the group’s loans from Fulton Bank and Meridian Bank
- Credit the balance of its own bankruptcy loan
- Fund $200,000 for unsecured creditors
- Cover up to $150,000 in costs to take over leases and contracts and up to $100,000 in bills owed to suppliers since the filing
- Provide up to $1.9 million, minus the group’s cash on hand, to wind down the bankruptcy case
The sale must close by Jan. 1, 2027.
Fifteen physicians and 12 advanced practice providers are listed as clinicians whose employment agreements are part of the deal. Jefferson will consider certain nonclinical employees for jobs. The group’s six physician owners would have to repay part of the purchase price if they leave Jefferson within two years, unless they retire, become disabled, die or are let go without cause.
Mr. Rimmer, who joined the group in May, said infusion drugs in its rheumatology practice drove the losses. Independent practices are reimbursed at about the average sales price plus 4% for those drugs, while health systems can buy them at 340B pricing, he said.
“It’s really hard as an independent practice to do well on infusion-type drugs,” Mr. Rimmer said. “You can get pretty deep on a patient and be upside down quickly, and then you’re perpetually upside down.”
The group had already lost two specialties. Its gastroenterology physicians left for a private equity-backed group, and its cardiology physicians sold to Tower Health, leaving primary care, pulmonary and critical care, pain medicine and rheumatology. After a turnaround proved unworkable, the group talked to area health systems. Physician credentialing timelines meant a standard deal could not close before year-end, so the group pursued a Section 363 sale in bankruptcy to speed up the process, Mr. Rimmer said.
“Our goal in the long run was, first and foremost, patients,” he said. “Then after that, you want to make sure you protect your vendors, you want to protect your staff, you want to protect the physicians.”
Pottstown Medical Specialists runs primary care and specialty offices in Collegeville, Stowe, Royersford, Boyertown and Pottstown, serving Berks and Montgomery counties. It listed estimated assets and liabilities of $1 million to $10 million each when it filed. It recorded more than $6 million in operating losses from 2023 to 2025, the Philadelphia Business Journal reported, citing court filings.
Becker’s has reached out to Thomas Jefferson for comment.
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