Delaware County and Penn working on a way to save bankrupt Crozer hospitals, Prospect lawyer says

Talks involving Delaware County and the University of Pennsylvania Health System have made progress toward identifying a long-term solution for Crozer Health, which is in bankruptcy along with its owner, Prospect Medical Holdings, an attorney for the California-based company said during a court hearing Monday.

“This is going to be a transaction with essentially a partnership between Delaware County and Penn, with support from the Commonwealth and from other parties,” Prospect attorney Bill Curtin said. More details might be available at a hearing scheduled for Wednesday, he said.

After the hearing, however, Penn said its involvement remains limited, calling reports that it is negotiating an acquisition of Crozer inaccurate.

Delaware County referred a request for comment and confirmation to the Pennsylvania Attorney General’s Office, which declined to comment.

In a statement, Penn said it is “working with a range of partners to explore potential solutions to ensure care continuity for patients in southern Delaware County. A successful plan will require funding commitments and assistance from multiple stakeholders, including health systems, the state, county, and foundations.”

It’s not clear if any other local health systems are part of the negotiations on the future of Crozer-Chester Medical Center in Upland and Taylor Hospital in Ridley Park. State officials have been working since at least the fall of 2023 to transfer those hospitals to a nonprofit owner, aiming to preserve jobs and health services in a low-income area of Delaware County.

One of the challenges for any new operator will be the necessary reliance on Prospect’s computer systems for medical records and billing. Installing new systems take time and would require payments to Prospect under what is known as a transition services agreement.

Prospect could bring a sale agreement to court for the bankruptcy judge’s approval as soon as April 1, Curtin said. But the company has previously said it was close to deals that did not materialize. Prospect filed a motion for the sale of Crozer in January, when a sale agreement was nowhere near being done. Prospect also sought a release from liability for Prospect executives and owners Sam Lee and David Topper in that motion.

The attorney general released Prospect’s former private equity owner Leonard Green & Partners from an October lawsuit that accused Prospect of mismanagement as part of a deal to get an outside manager from FTI Consulting in place at Crozer.

The Foundation for Delaware County came under fire last Thursday by lawyers for Prospect and the attorney general after a Delaware County judge issued an injunction preventing the foundation from providing more money to Prospect or any entity related to the for-profit company.

The nonprofit foundation then agreed Friday to provide an additional $13 million to keep the for-profit hospitals open while negotiations continue on a transition to nonprofit ownership, said Curtin, a lawyer at Sidley Austin.

The foundation had previously provided $7 million to prevent Prospect from closing the hospitals, as the company has been saying it will do since filing for bankruptcy protection in January — unless the state, Delaware County, and now the foundation agreed to provide more money.

“We’re hopeful the foundation’s investments will bear fruit,” foundation president Frances Sheehan told the bankruptcy judging during the virtual hearing.

Litigation on whether the foundation violated what is called an automatic stay protecting bankrupt companies has been paused, but not off the table, Curtin said. The original purpose of Monday’s hearing was to examine whether the “imposition of compensatory and coercive sanctions against the foundation” was in order.

The foundation, which is an independent entity designed to support the health of Delaware County residents, received $55 million from the 2016 sale of the nonprofit Crozer Keystone Health System to Prospect, though it had to go to court to get a substantial chunk of that money. The foundation is also facing a potential $30 million liability related to buildings used by Prospect at the shuttered Springfield Hospital.

Crozer, which employs 3,200, is Delaware County’s largest health-care system. It operates a trauma center, as well as a burn unit, and provides maternity services and behavioral health care. The next closest hospitals are Main Line Health’s Riddle Hospital near Media and Trinity Health Mercy Fitzgerald in Darby, both nearly 10 miles away by car.

Editor’s note: This story has been updated with additional information.