Emergency court hearing held on struggles to keep Crozer’s Delaware County hospitals open

Mounting financial pressure and legal obstacles in the effort to keep Crozer Health’s hospitals in Delaware County open prompted an emergency court hearing Thursday.

The judge overseeing the bankruptcy of Crozer owner Prospect Medical Holdings called the meeting to address a local court ruling late Wednesday that blocked the Foundation for Delaware County from providing more money to support Prospect or any related entity.

The judge pressured the foundation’s general counsel to commit to turning over $13 million to keep Crozer-Keystone Medical Center and Taylor Hospital open.

When the foundation’s attorney, Rocco P. Imperatrice III, said only the foundation’s board could do that, the bankruptcy judge ordered its representatives to a meeting in Harrisburg with the Pennsylvania Attorney General’s Office, Prospect, and others to hammer out a deal. The meeting is supposed to happen before noon Monday.

This is the second such meeting ordered by U.S. Bankruptcy Judge Stacey Jernigan. The first one occurred March 9 and resulted in a $7 million contribution from the independent foundation to meet a payroll that the for-profit Prospect no longer wanted to fund.

A follow-up hearing is scheduled for Monday afternoon.

The foundation, an independent nonprofit designed to support local community health needs, has a target on its back because it received $55 million from the 2016 sale of the nonprofit Crozer-Keystone Health System to California-based Prospect. It’s rare for such a foundation to be tapped for funds in a situation like this, according to experts.

Crozer is Delaware County’s largest health system and one of its largest employers, with 3,200 workers. Prospect has already closed two of Crozer’s hospitals, but the remaining facilities, Crozer-Chester Medical Center in Upland and Taylor Hospital in Ridley Park, serve a low-income population with few other easily accessible options for health-care services.

For the first time in weeks of court hearings about the fate of Crozer’s hospitals, the University of Pennsylvania Health System was mentioned as being in talks with the attorney general and Prospect about finding a way to preserve health-care services in this area of Delaware County.

However, Penn has no plans to act solo at Crozer, according to a statement Thursday:

“For more than a year as Prospect Medical’s financial situation has deteriorated, Penn Medicine has advocated to form a consortium of nonprofit hospitals, foundations, and county and state officials to ensure continued health care for patients in southern Delaware County.”

“This is crucial work which can only be accomplished through a collective plan with financial and operational support from numerous partners. We remain committed to working toward potential solutions in partnership with others,” Penn’s statement said.

Prospect had announced in late January that it was selling Crozer to a “not-for-profit consortium,” but no such arrangement has materialized. The consortium turned out not to exist, according to multiple sources in Delaware County, and it is unclear how close a deal is seven weeks later.

Main Line Health, which owns nearby Riddle Hospital in Media, could be hard hit by the closure of Crozer.

“We have navigated other hospital closures in the region, but the additional patient volume from Crozer will present a major challenge for Riddle Hospital, our closest campus, and our other hospitals, all of which consistently have been at or above capacity, especially over the past several months,” Main Line CEO Jack Lynch said in a LinkedIn post a week ago.

The nonprofit said in January that it “is not participating in a nonprofit health-care consortium to acquire Crozer Health at this time,” responding at the time to Prospect’s deal announcement.

The system had nothing new to share Thursday, a spokesperson said.

A Delaware County judge issued an injunction Wednesday blocking the foundation from providing any more money to Prospect or any related entity for the “operation of any hospital or hospital services.”

That ruling came in response to a lawsuit filed Wednesday in Delaware County Court of Common Pleas by Swarthmore resident Donald Delson seeking to block further transfers from the foundation. Delson is a retired investment banker, an outgoing foundation board member, and donor to the foundation, according to his complaint.

Jernigan called Thursday’s emergency hearing because she suspected that the Common Pleas Court activities “likely violate the automatic stay” that blocks action against Prospect and its bankrupt entities, according to an email posted on the bankruptcy court docket.

Typically in bankruptcy proceedings, the automatic stay blocks legal action against the bankrupt entity. The foundation is not part of the bankruptcy, other than being a creditor.

The judge was not satisfied when foundation attorney Imperatrice said the foundation had agreed to ask Judge George Pagano in Delaware County to dissolve the injunction blocking it from providing more money to Crozer, especially after she heard from Prospect’s lawyer and from the Attorney General’s Office that the injunction had caused a potential long-term solution to fall apart.

“We had spent weeks — our office, the debtors, FTI, the receiver, the governor’s office, and various other parties — to find a long-term plan,” Melissa Van Eck, Pennsylvania’s chief deputy attorney general, told the judge. “And it was this Foundation’s actions yesterday that terminated that plan, the partner that we had and the plan that we had, they’ve walked away. It no longer exists.”

A challenge for the AG and Prospect is a Friday deadline for coming up with a long-term solution for the Crozer hospitals, which Prospect has been on the verge of closing since the bankruptcy started Jan. 11. That deadline was built into the foundation’s agreement to provide $7 million.

The agreement included a provision that the foundation would consider providing an additional $13 million to subsidize a new nonprofit operator, according to statements in court. However, no sale agreement exists.