CHA Partners: A look at the company that wants to buy Crozer Health in Delaware County
CHA Partner owned the former Memorial Hospital of Salem County from 2019 through 2022. It didn't go well.
CHA Partners LLC, a real estate company that has a preliminary deal to acquire Crozer Health, has a track record of redeveloping closed hospitals, but hasn’t had much success running a functioning one.
The company’s only past attempt to turn around a struggling hospital, the former Memorial Hospital of Salem County in South Jersey, ended poorly, with a local foundation losing half its endowment. And a foundation leader involved at the end of CHA’s tenure there warned Thursday against counting on CHA for a turnaround at Crozer, a health system that has been losing money for years.
“I would caution our colleagues in Delaware County to avoid any kind of a business relationship with CHA,” said Paul DiLorenzo, executive director of the Salem Health & Wellness Foundation, which under his predecessor, poured $39 million into CHA’s effort in Salem.
CHA did not respond to e-mailed requests for comment.
CHA, based in Bloomfield. N.J., acquired the 126-bed hospital for $3 million in early 2019 from Community Health Systems Inc. That was less than one-tenth of the $35 million CHS paid in 2002.
The Salem Health & Wellness Foundation, founded with proceeds from the 2002 sale and meant to preserve health-care assets for the community, contributed a $14.5 million grant and a $14.5 million loan to help get the newly nonprofit and renamed Salem Medical Center off the ground, according to legal filings. CHA promised $30 million in upgrades.
But big losses, caused partially by the onset of COVID-19 a year after CHA’s purchase, continued at Salem Medical Center. Meanwhile, CHA, led by an executive named William J. Colgan, and related for-profit entities collected millions in management fees and rent.
Three years later — and after $10 million in additional loans from the Salem foundation — Salem Medical Center was once again on the verge of closing unless CHA could find a buyer. Inspira Health Network took over in late 2022 for $1.5 million, and renamed the hospital Inspira Medical Center Mannington.
The foundation forgave $20 million of its loans as part of that sale, but CHA still owes it $3 million. The foundation won a Superior Court judgment in May for the $3 million, plus interest and legal fees.
On the surface it looks like CHA lost money on the deal, but that doesn’t count the $18.4 million in management, rent, and other payments the hospital made to CHA and other related for-profit entities from 2019 through 2022, according to the tax returns for Salem County Hospital Corp., the official nonprofit owner of the hospital.
CHA collected $3.2 million in the first year of ownership for management services.
Another management entity, Salem Hospital Management LLC, was paid a total of $2.6 million during CHA’s four years of ownership.
Real estate companies collected $6.5 million in rent for the hospital property at 310 Salem-Woodstown Rd. in Mannington Township and $406,330 in rent from a medical office building at 499 Becket Rd. in Swedesboro.
Healthcare Preferred Partners LLC, owned at least in part by the hospital’s CFO Vincent Riccitelli, was paid $616,467. Crozer described the company, expected to have a role at Crozer if the sale goes through, as having a “track record of engineering successful turnarounds in underserved urban areas.”
An additional $5 million went to Metro Real Estate Development Corp. for COVID-19-related construction projects in 2020 and 2021.
Reaction to CHA Partners announcement
The Pennsylvania attorney general’s office, which has been monitoring efforts to sell Crozer, said it could not comment on Wednesday’s letter-of-intent for the sale of Crozer to CHA because it is not a public document.
“The Office of Attorney General has been involved in reviewing the operational viability of Prospect Crozer for several years, and we will continue to exercise oversight over any potential sale of the facility to ensure high-quality health care options for residents of Southeastern Pennsylvania,” spokesperson Brett Hambright said in an email.
The Foundation for Delaware County, which collected about $55 million from the 2016 sale of Crozer Keystone Health System to Prospect Medical Holdings Inc., is also closely watching Prospects efforts to sell Crozer. The Foundation is the legal successor to Crozer Keystone and sued Prospect over the closure of Delaware County Memorial Hospital in 2022.
“We’re waiting to learn and see how the process evolves, and we’ll review a final agreement of sale when it’s available, if and when it’s available,” the foundation’s president Frances Sheehan said.