Crozer-Keystone foundation, Prospect agree to arbitrate $21.5M dispute
The disagreement arose from the terms of the January 2016 deal in which the nonprofit Crozer-Keystone Health System agreed to sell its assets, including its five Delco hospitals, to for-profit Prospect Medical Holdings.
After two days in Delaware County Orphans' Court, the buyer and seller of the five-hospital Crozer-Keystone Health System have reached an agreement to arbitration over the $21.5 million still in dispute from a $300 million asset sale last year.
The buyer, Prospect Medical Holdings Inc. and an affiliate, agreed Thursday to put $21.5 million in escrow until the matter is settled. The money includes about $20 million the Crozer-Keystone Community Foundation says it was underpaid, plus about $1.5 million in interest.
"We're hopeful to be able to move forward in partnership with Prospect as opposed to an antagonistic relationship. We feel there should be a synergy between our charitable foundation and the health-care providers to the citizens of Delaware County," Rocco P. Imperatrice III, a Newtown Square lawyer representing the foundation, said Friday.
In a statement Friday, Prospect said, "We look forward to participating in the agreed-upon accounting reconciliation process to resolve all remaining financial issues related to the asset purchase agreement. Prospect remains strongly committed to ensuring that Crozer-Keystone Health System continues to prosper and grow as the leading health system in Delaware County. We also look forward to continuing to collaborate with the foundation to help meet the health-care needs of Delaware County residents."
On Jan. 8, 2016, the nonprofit Crozer-Keystone Health System agreed to sell its assets, including its Delaware County hospitals (two in Chester and one each in Drexel Hill, Ridley Park and Springfield Township) to Prospect, backed by the private-equity firm Leonard Green & Partners LP.
Under Pennsylvania law, when a nonprofit hospital or system is sold to a for-profit company, the sale's proceeds go to a community foundation charged with some of the same charitable aims carried out by the hospitals — to uphold the health of the community.
The total price was $300 million, with most of the money covering debt and liabilities, and the balance, $52,996,000, was due the community foundation. Prospect also promised to invest an additional $200 million in Crozer facilities in the first five years after it took over.
When the sale closed last July 1, Prospect paid $32.9 million. But it still owes the balance of the almost $53 million, plus interest, to the hospital system, which would turn the money over to the foundation, Imperatrice said.