Crozer Health is getting some financial breathing room under a restructuring by its landlord
As part of a restructuring, Crozer now own the properties and has a mortgage with payments deferred for two years.
Crozer Health, the largest health system in the Delaware County, has some financial breathing room under a restructuring announced Tuesday by its landlord, Medical Properties Trust Inc.
The Alabama-based real estate investment trust is giving the properties back to the health system’s owner, Prospect Medical Holdings, in exchange for a $155 million mortgage. MPT had purchased Crozer’s real estate from Prospect in 2019 in a deal valued at $420 million.
Under the latest restructuring, MPT has agreed to defer payments on the five-year mortgage for two years, Crozer said. After that, Crozer only has to make interest payments.
“These favorable mortgage terms will be important in assisting Crozer Health to stabilize its finances,” Crozer said in an emailed statement.
Crozer has not paid rent to MPT this year because of financial struggles. Other Prospect hospitals in California, Connecticut, and Rhode Island also were not paying rent.
In February, MPT recorded a $170 million loss on its Crozer holdings. The size of the mortgage means that MPT now thinks Crozer-Keystone Medical Center and other facilities are worth just over a third of what it initially paid for the real estate as part of a $1.55 billion deal with Los Angeles-based Prospect.
Crozer’s future
When Prospect bought Crozer in 2016 for $300 million, the system had four hospitals: Crozer-Chester Medical Center, Delaware County Memorial Hospital, Springfield Hospital, and Taylor Hospital. Last year, as financial pressures from the pandemic intensified, Prospect stopped providing acute inpatient services at Delaware County and Springfield.
More changes are in the works. Crozer in January filed an application with the IRS to convert back into a not-for-profit health system. Prospect has not disclosed the financial terms of that conversion, or if it would remain involved.
Crozer’s lease with MPT called for $35 million in annual rent, widely viewed as unaffordable for the health system that serves a large population of low-income patients with Medicaid insurance. MPT did not disclose terms of the new mortgage.
Securing a future for Crozer-Chester Medical Center is increasingly a focus of political and industry leaders, according to Philadelphia-area health-care sources. The hospital is in Upland Township, right outside the city of Chester, where 28.5% of the residents live in poverty.
A Crozer spokesperson said Crozer will start adding new services, such as inpatient mental health and addiction treatment, at Delaware County Memorial Hospital in Drexel Hill late this year. The emergency department and inpatient services there closed last fall.
A panel of Commonwealth Court judges recently ruled that the Foundation for Delaware County, which is the legal successor to the former Crozer-Keystone Health System, did not prove that the closure of the Drexel Hill facility caused irreparable harm to the community.