Local judge blocked the Foundation for Delaware County from giving more money to Crozer Health

Editor’s note: Read more about the latest developments following an emergency court hearing Thursday to address this ruling and the future Crozer Health.

A Delaware County judge issued a permanent injunction Wednesday blocking the Foundation for Delaware County from providing any more money to Crozer Health’s owner, Prospect Medical Holdings, or any related entity for the “operation of any hospital or hospital services.”

The significant ruling came in response to a lawsuit filed Wednesdayin 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.

Delson’s lawyer was another foundation board member, Robert N. Speare, of Speare & Hughey in Media. Speare’s family was a significant supporter of the nonprofit Crozer-Keystone Health System before it was sold to Prospect in 2016. Crozer’s burn center carrys the family’s name. Delson’s lawsuit was filed at 10:20 a.m. The foundation’s response admitting to everything in the lawsuit hit the docket at 10:30 a.m.

The ruling in Delaware County elicited a quick response in bankruptcy court. The court-appointed patient-care ombudsman for Prospect’s hospitals nationwide filed a motion for an emergency status conference on Crozer’s hospitals because of concern that the “hospitals are at risk of closure in the very near term.”

Prospect, the Pennsylvania attorney general’s office, and FTI Consulting joined that motion. FTI is a consulting firm working at Crozer on behalf of the attorney general. As of 9:50 a.m. Thursday, a judge’s ruling on the motion for a conference was not on the docket.

The foundation, which is an independent entity designed to support local community health needs, provided $7 million last week to cover a two-week payroll at Crozer amid Prospect’s bankruptcy. At the end of June, the foundation had $64 million in unrestricted investments.

Delson’s lawsuit argued that the foundation’s payment to keep Crozer-Chester Medical Center in Upland and Taylor Hospital in Ridley Park open violated Delson’s intent when he donated money to the foundation. It did not say how much money he donated.

The ruling could be significant. During a hearing Wednesday, U.S. Bankruptcy Judge Stacey Jernigan asked if the foundation was still involved in securing a long-term solution for Crozer.

An attorney for Prospect and a representative from the Pennsylvania Attorney General’s Office told her that the foundation was still at the table and ready to help pay for a long-term solution that could be announced as soon as next week.

“There is an agreement for additional funds once we confirm our long-term plan,” Melissa Van Eck, from the AG’s office said, referring to the foundation.

The foundation’s agreement with the attorney general to provide $7 million “made specific reference to the possibility of an additional substantial payment by the foundation after the expiration of the two-week period,” according to Delson’s complaint. That’s not the same as having an agreement to provide more money.

The AG’s office did not respond to a request for comment about the injunction issued by Judge George Pagano. Prospect also did not respond to a request for comment.

Foundation president Frances Sheehan said in a statement that the foundation’s donors and board members understand the importance of Crozer Health.

“They recognized the importance of the foundation’s assistance so that the attorney general could pursue a final search for a genuine buyer for Crozer. But they also believe deeply in the foundation’s work over the past eight years and know that the foundation cannot save the health system,” she said.

The foundation received $55 million in proceeds from of the nonprofit Crozer-Keystone Health System to Prospect, a for-profit company based in California, a model that is common when for-profit buys a nonprofit health system.

The foundation employs 80 people who provide maternal outreach services at four locations in Delaware County. It also makes grants available to nonprofits that work to improve social factors that impact health, such as jobs, food security, and housing.

The foundation has said it is facing a potential $30 million liability for leases on buildings Prospect uses in Springfield.

Crozer 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.

Prospect filed for bankruptcy protection Jan. 11, with plans to keep paying workers at Crozer only through the end of that month. Officials from Gov. Josh Shapiro’s administration, and the Pennsylvania Attorney General’s Office have worked for more than a year on a plan to get Crozer into the hands of a new nonprofit.

Those efforts have faltered because of a lack of funding to absorb Crozer’s substantial operating losses and pay for upgrades of outdated buildings and equipment.

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