Crozer Health litigation paused to give Prospect Medical Holdings time to sell the system

Prospect Medical Holdings Inc., which owns Crozer Health, and the Foundation for Delaware County agreed this week to a nine-month pause in their legal fights to give Prospect a chance to sell the cash-strapped health system.

The Foundation sued Prospect over the closure last year of Delaware County Memorial Hospital in Drexel Hill, alleging that the closure violated Prospect’s 2016 purchase agreement. The Foundation is the legal successor to the nonprofit that previously owned the former Crozer-Keystone Health System.

“The Foundation is hopeful that a high quality, nonprofit system or consortium of systems will come forward to acquire a health care system that so many Delaware County residents need and deserve,” the foundation’s statement said.

Crozer said in a statement that it was pleased with the agreement: “We will continue to work to make sure our community receives excellent patient care.”

The temporary legal cease-fire had the support of Gov. Josh Shapiro’s office, the Pennsylvania attorney general, and Delaware County leaders, Crozer and state officials said.

“The administration will continue operating in good faith throughout this process to achieve the best outcome that both ensures adequate health care and services remain available for Delaware County residents, while also protecting current Prospect employees,” Shapiro spokesperson Manuel Bonder said in an email.

Financial woes at Crozer — which operates Crozer-Chester Medical Center in Upland, Taylor Hospital in Ridley Park, and numerous outpatient facilities — have mounted in recent months. At least seven vendors have filed lawsuits since August over unpaid bills totaling more than $900,000.

Upper Darby Township, home to Delaware County Memorial Hospital, filed a lawsuit in August alleging that it was owed $202,552 in back taxes and interest.

Prospect, based in Los Angeles, acquired Crozer in 2016 in a deal valued at $300 million. In 2019, Prospect sold the real estate at 14 hospitals and two psychiatric facilities to Medical Properties Trust, a real estate investment firm, for $1.55 billion. MPT then leased the buildings back to Prospect.

Money from the sale was used in part to fund a $457 million dividend to a former private equity owner and current owners.

MPT valued Crozer’s properties at $420 million in that deal, but has since reduced their value to $155 million — about a third of what it paid.

In Connecticut, Prospect’s planned sale of three hospitals to Yale New Haven Health for $435 million has hit some road blocks, CT Mirror reported Monday. Yale New Haven is seeking a price cut and wants the state to kick in $16 million a year for five years to help support the three struggling hospitals.