Prospect gets OK to ‘abandon’ Crozer-Chester Medical Center and Springfield Hospital if sales don’t go through

Prospect Medical Holdings Inc. had a $7 million bid for Crozer-Chester Medical Center and a $3 million bid for Springfield Hospital ahead of an auction held in the afternoon, an attorney for the bankrupt company said at a hearing Friday.

Neither the winning bidders nor the top bids were identified publicly after the auction. Prospect did not respond to a request for information about the prospective buyers. Community members have been pushing for the restoration of hospital services to Crozer-Chester in particular.

At the same hearing, U.S. Bankruptcy Judge Stacey Jernigan approved Prospect’s plan to “abandon” the two shuttered Delaware County hospitals if the sales fail to close promptly because the properties have become a financial burden to the bankruptcy estate.

Prospect used a similar tactic last summer in the case of Crozer Health’s two other closed hospitals, Delaware County Memorial Hospital in Drexel Hill and Taylor Hospital in Ridley. Both of those hospitals have since been sold.

In a court filing Friday morning, Prospect said it had reached agreements with local tax authorities to set the assessments on Crozer-Chester and Springfield at the sale price for this year and next year.

The properties had elevated assessments because of Prospect’s financial maneuvers since the California for-profit acquired the county’s largest health system in 2016. The current assessment on Crozer-Chester is $114.6 million, according to public records. That figure is $10.9 million for Springfield

The filing also said school districts and others would accept general unsecured claims in the bankruptcy. Those claims are unlikely to have much value.

Much of Friday’s hearing on the abandonment motion was taken up with discussion of complications at Springfield. An attorney for Springfield Township said his client had not agreed to the tax deal outlined in the abandonment motion and was not part of the discussions.

That’s because Springfield Township has not filed a bankruptcy claim for back taxes, according to Prospect’s attorney, Maegan Quajada, of Sidley Austin. A hurdle in any sale is a deed restriction on the Springfield property that requires the operation of an emergency department that is open all the time.

However, Prospect closed the Springfield Hospital emergency department in early 2022, so it’s not clear how much weight the deed restriction has.

When Prospect announced late last month that it would hold an auction for Springfield and Crozer-Chester, it said any bids had to have no conditions on them, such as the resolution of tax matters or the Springfield deed restriction.

But then Prospect changed its mind and accepted conditional bids and rejected one that was unconditional, an attorney said in court Friday.

Quajada said the unidentified contingencies are being taken care of. “We already know we can meet them,” she said.