The scramble to keep Crozer’s health-care services amid Prospect bankruptcy

Pennsylvania officials have been trying for at least a year to save Crozer Health, a vital provider of health-care services in a low-income area of Delaware County.

The bankruptcy filing this month by its for-profit owner follows years of turmoil, slashed programs, and multiple rounds of layoffs under Prospect Medical Holdings, based in California.

Crozer still fills an essential role: The emergency departments at its hospitals — Crozer-Chester Medical Center just outside Chester and Taylor Hospital in Ridley Park — had a combined 65,000 visits in 2023. The two units, which share a single license, were the sixth busiest ED in Southeastern Pennsylvania outside of Philadelphia, according to state health data.

Yet Crozer had one of the region’s lowest rates of people being admitted to the hospital from the ED. Typically that means people are using the ED as a primary care office because they don’t have other easily accessible choices.

The same was true at Hahnemann University Hospital in Center City, which closed in 2019 during the bankruptcy of Joel Freedman’s American Academic Health System.

A big difference between Crozer and Hahnemann, both safety-net providers, is the relative proximity of other hospitals. In Philadelphia, Hahnemann patients could use public transportation to get to Thomas Jefferson University Hospital, Penn Presbyterian Medical Center, or Temple University Hospital.

In Delaware County, the closest hospitals to Crozer are Main Line Health’s Riddle Hospital near Media and Trinity Health Fitzgerald Mercy in Darby, both nearly 10 miles away by car.

Mark Victor, a cardiologist whose Cardiology Consultants of Philadelphia has had an office at Crozer for 40 years, worries that many of the most vulnerable residents of Chester would have difficulty getting to more distant facilities. “Some patients take two buses to get to us already,” he said.

“On behalf of our patients, we’re really hoping that there is an 11th-hour solution,” he said.

The bankruptcy has not altered the Shapiro administration’s goal of preserving access to care in Chester and nearby communities by facilitating the sale of Crozer to a nonprofit.

“The Shapiro administration is actively engaged with health-care partners in the region to preserve access to vital health-care services and protect Pennsylvania health-care workers’ jobs,” Shapiro spokesperson Manuel Bonder said in a statement Jan. 12, the day after Prospect’s bankruptcy filing.

The governor’s office did not provide an update despite multiple requests by The Inquirer.

The Pennsylvania Attorney General’s office sued Prospect in October, seeking to put Crozer under state control, with a court-supervised manager running the system. If that lawsuit had succeeded, an outside manager would have served as a bridge to nonprofit ownership.

The Jan. 11 bankruptcy filing put that suit on hold.

Dave Sunday, a York County Republican who is the state’s new attorney general, supports the effort that was started under his predecessor, a spokesperson said Monday.

Multiple sources familiar with current talks over the future of Crozer say state officials hope that Crozer could be financially stabilized in six months and then transferred to a new nonprofit, possibly backed by other local health systems. That time would also be used to figure out what services are essential for Chester and other nearby communities that depend on Crozer.

What’s not clear is who would own Crozer during that interim period, or where the millions would come from to cover Crozer’s losses. Prospect’s bankruptcy attorney said in court that Crozer’s annual loss was $130 million and that talks on a “controlled transfer” of Crozer were moving quickly.

Prospect declined to comment Monday.

In the core market for Crozer-Chester and Taylor, defined as the top 10 ZIP codes for patients who had hospital stays, the system has lost market share since 2020, when the COVID-19 pandemic accelerated Crozer’s financial deterioration and resulted in multiple rounds of layoffs.

In the region from the Delaware state line to Ridley, Crozer’s market share for inpatients has fallen to 36% in 2023 from 41% in 2016, when Prospect took over, according to an Inquirer analysis of data from the Pennsylvania Health Care Cost Containment Council, which manages a database of billing information submitted by hospitals.

It’s likely that Crozer’s share fell again last year after the level of stroke services at Crozer-Chester Medical Center was downgraded due to the departure last year of a private physician group that had been there since 2018. State data for 2024 are not yet available.

The biggest gainers in Crozer’s core market were Main Line Health facilities. Riddle Hospital’s share increased to 28% from 20%. Lankenau Medical Center’s share jumped to more than 8% from about 4.6%.

The importance of Main Line was clear last month when Crozer-Chester had a fire. Main Line hospitals received 17 of the 33 patients who were transferred to other health systems, Main Line said.

But Crozer’s market share for childbirth services was 60% in its core market in 2023, and the system still had a 50% market share for certain emergency heart procedures, such as the insertion of stents to open a blockage in the heart.

On the other hand, Crozer’s burn center, often cited as a vital service at risk if the hospital closes, draws patients from far and wide, as is typical of such specialized facilities. Only 12% of the burn patients at Crozer in 2023 were from the hospital’s core market.

The idea of turning Crozer back into a nonprofit is not new. Prospect contemplated doing that in 2022, Crozer CEO Tony Esposito said at the time. Prospect subsequently dropped the idea in favor of selling Crozer to a nonprofit.

To give Prospect time to do so, the attorney general then agreed to pause litigation in another case for nine months starting last February. But a preliminary deal announced in August collapsed over a failure to agree on how a new entity created to run Crozer would be paid for.

» READ MORE: Crozer Health since Prospect acquired it in 2016: A timeline

Converting Crozer to a nonprofit wouldn’t automatically solve its financial problems. Most nonprofit health systems in the Philadelphia region have been losing money since COVID-19, due to increases in labor and other costs.

Even if all of Crozer’s liabilities, including $167 million in mortgage debt and a pension deficit of roughly $100 million, went away, Crozer is still not financially attractive to local nonprofit health systems.

The mortgage debt is due to Prospect’s decision to sell most of Crozer’s properties to Medical Properties Trust (MPT), a publicly traded real estate investment trust. The 2019 deal required Crozer to rent them back from MPT.

When Crozer fell behind on its $35 million annual rent payments, MPT wrote down the value of the Crozer properties by two thirds and gave them back to Crozer in exchange for a $155 million mortgage. MPT didn’t require mortgage payments for two years, but the unpaid money was tacked onto the debt. MPT declined to comment.

The aged Crozer facilities need millions in investment. That makes the operating losses worse.

“You lose your money the day you walk in the door,” Jack Lynch, CEO of Main Line Health, said last week, referring to Crozer’s financial condition.

Whatever happens in the Crozer bankruptcy, the market is changing.

ChristianaCare already plans to compete with Crozer with a 10-bed micro-hospital in Aston expected to open next year. In 2022, ChristianaCare abandoned a preliminary deal to acquire Crozer after its due diligence found that it wouldn’t work financially. ChristianaCare has plans for a second micro-hospital in Delaware County, but hasn’t said where it will be.