Crozer Health put up for sale by Prospect Medical

Prospect Medical Holdings Inc., the for-profit owner of Crozer Health’s four hospitals in Delaware County since 2016, has put them up for sale, according to four industry sources.

The Los Angeles company and its former controlling owner, private-equity firm Leonard Green & Partners, have come under criticism for buying struggling hospitals — usually hospitals that few others want to buy — and then extracting money from them for investors.

Officials at Prospect did not respond to a request for comment about the letters sent Wednesday to potential buyers. Peter Adamo, chief executive officer of Crozer Health, did not respond to a text seeking comment.

The for-sale signs at Crozer-Chester Medical Center in Upland, Delaware County Memorial Hospital in Drexel Hill, Springfield Hospital in Springfield, and Taylor Hospital in Ridley Park bring more turmoil to the hospital industry in Southeastern Pennsylvania.

Berks County’s Tower Health is already trying to recover from its money-losing attempt to expand by purchasing five hospitals in Philadelphia and nearby counties. Tower, a nonprofit, is selling Chestnut Hill Hospital in Philadelphia and is closing Jennersville Hospital in West Grove. The future of Brandywine is in doubt.

Prospect acquired the assets of the Crozer-Keystone Health System, a nonprofit that had been financially weak for years, in 2016 in a deal valued at $300 million, mostly for assumed liabilities. The Crozer-Keystone board tried, but was unable to find a local buyer.

The four hospitals in Delaware County had $668 million in revenue last year, and an operating profit of $16 million, according to the Pennsylvania Health Care Cost Containment Council. The hospitals have 621 licensed beds, according to the latest Pennsylvania Department of Health data.

Prospect and Leonard Green sold the real estate occupied by the four Crozer hospitals in 2019 to Medical Properties Trust — a real estate investment firm that is now collecting steep rents — as part of a $1.55 billion sale-lease back deal involving 14 hospitals and two psychiatric facilities in California and Connecticut, in addition to those in Delaware County.

The agreement with Medical Properties Trust, which in June described itself as the second-largest non-government owner of hospitals in the world, required Prospect to put $70 million from the real estate sale into the underfunded Crozer-Keystone Health System Employees’ Retirement Plan.

Prospect owns three additional hospitals in New Jersey and Rhode Island that were not part of the sale to the real estate firm.

Leonard Green has since sold its interest in Prospect, which had $3 billion in annual revenue in 2019, for a reported $12 million. Still, in a decade of ownership, the firm collected $658 million in fees and dividends, according to the nonprofit Private Equity Stakeholder Project.

The Pennsylvania Association of Staff Nurses & Allied Professionals, a union that represents 1,400 registered nurses and others at Crozer-Chester, Delaware County Memorial, and Springfield, welcomed news of a potential sale.

“We are hopeful that the greater Philadelphia health-care community recognizes the great value of the facility and that the health system returns to nonprofit status and is focused on patient care, not on creating profits from sick patients,” the union said.