Delaware County’s Crozer Health is for sale. It’s not clear if anyone is interested in buying it.
Crozer's owner is facing a new challenge in the sale of its Connecticut hospitals.
![There's no word on whether any potential buyers have surfaced for Crozer-Chester Medical Center and other Crozer properties.](https://www.inquirer.com/resizer/zE4a2zsb1x2JC7Kf4LujFAVdVFA=/760x507/smart/filters:format(webp)/cloudfront-us-east-1.images.arcpublishing.com/pmn/HEIGNJEGEZC2FNOYOS3TRPFEGM.jpg)
The future of two operating and two shuttered hospitals in the Philadelphia region owned by Prospect Medical Holdings has been uncertain for months.
Here’s an update on where things stand:
More than three months after Prospect Medical Holdings started trying to sell Crozer Health under a timeline set by the Pennsylvania Attorney General, neither Crozer nor state officials will say whether any prospective buyers have emerged.
“The confidential sale process is progressing and our office remains actively engaged,” Attorney General spokesperson Brett Hambright said in an email. Crozer declined to comment.
Los Angeles-based Prospect entered the Philadelphia market in 2016 when it acquired the financially struggling Crozer-Keystone Health System in a deal valued at $300 million. Three years later, Prospect’s former private-equity owner sold the Crozer real estate for $420 million in an agreement that saddled Crozer with steep annual rent of nearly $35 million on the properties.
Crozer has since closed Delaware County Memorial Hospital in Drexel Hill and Springfield Hospital, leaving it with Crozer-Chester Medical Center in Upland, Taylor Hospital in Ridley Park, and several outpatient facilities.
Prospect’s troubles in Connecticut
Meanwhile in Connecticut, the proposed sale of three Prospect hospitals to Yale New Haven Health for $435 million is on the rocks.
Yale New Haven filed a lawsuit last week in Connecticut Superior Court to try to get out of the deal it agreed to in 2022. Yale’s complaint says Prospect failed to hold up its end of the purchase agreement by not maintaining the hospitals as viable businesses.
The “lack of financial support has run the Prospect hospitals into the ground,” the complaint says.
Yale New Haven asked the court to rule that it is no longer obligated to complete the purchase. Another option is that Yale New Haven and Prospect could negotiate a lower price.
It’s not clear what the hiccup in Connecticut means for Crozer.
Both Crozer and the Connecticut hospitals have significant financial ties to Medical Properties Trust (MPT), a large real estate investment firm that acquired most of Prospect’s hospital real estate in 2019 and leased it back to the hospitals.
MPT executives told analysts on an earnings conference call Thursday that Prospect has “significant cash pressures” caused in part by “delays in disposing” of Prospect’s hospitals in Connecticut and Pennsylvania.
Under the Yale New Haven agreement, $355 million of the $435 million was supposed to go to MPT, according to the Yale New Haven lawsuit. The remainder may have helped relieve financial pressure at Prospect’s hospitals in California and Delaware County.
The Foundation for Delaware County has sued Prospect over the closure of Delaware County Memorial, alleging that it violated the 2016 purchase agreement. The Foundation is the legal successor to the nonprofit that sold the hospitals.
“The Yale/Prospect situation is of concern to the foundation, the Delaware County government, and the tens of thousands of Delaware County residents affected by Prospect’s actions,” Rocco P. Imperatrice III, a lawyer for the foundation, said Friday.
Pa. Attorney General agreement
The AG’s January timeline called for Prospect to reach a deal to sell Crozer to a nonprofit before the end of June and then to complete the sale by the end October.
However, neither the AG nor Prospect can force anyone to buy Crozer. Officials from Gov. Josh Shapiro’s office have been in regular contact with local health system leaders about possible plans to stabilize Crozer-Chester, which serves a vulnerable population in Chester.
Local health-care experts say any buyer of Crozer would have to dig the system out of a massive financial hole caused by a large pension liability, years of deferred maintenance, and a $150 million mortgage owed to MPT.
MPT has bigger problems than Crozer and Prospect. Its largest tenant, Steward Health Care System, filed for bankruptcy protection last week. MPT intends to find new operators for more than 30 Steward hospitals. Steward has one Pennsylvania hospital, in Sharon, near the Ohio border.