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As legal fees mount, no agreement on Crozer Health sale

There was no update on negotiations, but the foundation provided an additional $6 million. Lawyer’s bills mounted.

A lawyer for Crozer Health’s bankrupt owner, Prospect Medical Holdings, offered no update Tuesday on negotiations over the potential sale of the Delaware County health system during a five-minute court hearing.
A lawyer for Crozer Health’s bankrupt owner, Prospect Medical Holdings, offered no update Tuesday on negotiations over the potential sale of the Delaware County health system during a five-minute court hearing. Read moreElizabeth Robertson / Staff Photographer

A lawyer for Crozer Health’s bankrupt owner, Prospect Medical Holdings, offered no update during a five-minute hearing Tuesday on negotiations over the potential sale of the Delaware County health system.

Meanwhile, the nonprofit Foundation for Delaware County provided millions more to keep the for-profit health system running, and court records revealed the scope of the legal fees in the weeks following the January bankruptcy.

Bill Curtin, Prospect’s lawyer, told the judge last week that the California-based company was hoping that Tuesday’s hearing would be used to approve the sale of Crozer-Chester Medical Center in Upland and Taylor Hospital in Ridley Park to a new nonprofit.

There’s still no agreement, and no information about the potential buyer or buyers. “There are some sensitivities regarding public disclosure of anything further regarding the current process,” Curtin said.

Another court update on the future of Delaware County’s largest health system was scheduled for Thursday afternoon.

Foundation funding

The nonprofit Foundation for Delaware County put an additional $6 million into the effort to keep the for-profit hospitals open while state and county officials try to bring a group of local nonprofits together to acquire the facilities.

The payment Tuesday brought the foundation’s support to $20 million under a March 12 agreement between the foundation and the Pennsylvania Attorney General’s Office. The Inquirer obtained a copy of the settlement agreement through a public records request.

That agreement, signed by First Deputy Attorney General James A. Donahue III, called for the immediate payment of $7 million and gave the foundation the “option to provide additional funding to the new Crozer Health System.”

The state faced a March 21 deadline to request an additional $13 million from the foundation. The written request was supposed to “identify the hospital or group of hospitals” that would acquire the Crozer hospitals. The foundation also was allowed to request a meeting with the potential acquirers.

It’s not clear if that list was ever provided, or if the meeting happened.

That catch for the foundation was that if it didn’t agree to pay the $13 million, the attorney general reserved the right to sue it for up to that much money. The grounds for such a suit were not specified.

Mounting legal and professional fees

The lawyers and other professionals who are getting paid first in Prospect’s bankruptcy have billed the company a total of $16.8 million for work through Feb. 28. Prospect filed for bankruptcy on Jan. 11.

Prospect’s law firm Sidley Austin LP topped the list with $6.8 million. That’s after a 20% discount on the firm’s usual rates. In February, Sidley Austin had 46 lawyers working on the case, with hourly rates ranging from $2,120 for Thomas R. Califano to $835 for a first-year associate.

Alvarez & Marsal, Prospect’s restructuring firm, billed $5.1 million. Prospect’s investment bank, Houlihan Lokey Capital, billed $2.3 million. The law firm for the committee of unsecured creditors, Paul Hastings, listed $2.5 million in fees and expenses. That firm’s top-paid attorney, Erez Gilad, charges $2,300 an hour.