Prospect demands $9 million for Crozer hospitals, or says it will start closing them Thursday

Crozer’s bankrupt owner, Prospect Medical Holdings, told a bankruptcy judge it needs $9 million by 4 p.m. Wednesday to keep the Delaware County hospitals open for another two weeks while it negotiates a sale.

If it doesn’t get that money, “unfortunately, we’ll need to commence our shutdown protocol,” Bill Curtin, Prospect’s lawyer, told the judge during Tuesday’s nearly 90-minute hearing.

That means Crozer would stop accepting patients at its emergency departments Thursday morning, Curtin said.

Prospect has said multiple times since filing for bankruptcy in January that it was on the verge of closing the hospitals in a part of Delaware County with limited easily accessible alternatives, particularly in the low-income city of Chester.

Curtin said there was no chance of an agreement this week to sell Crozer-Chester Medical Center in Upland and Taylor Hospital in Ridley Park to a proposed new nonprofit backed by a consortium of local health systems. Crozer employs 3,200.

If the cash infusion comes in, talks would continue on a long-term solution that would require even more money, Curtin said, adding that Pennsylvania officials were trying to come up with the $9 million. Gov. Josh Shapiro’s office did not immediately respond to a request for comment.

The system has $25 million on hand, but needs to pay employees a little under $10 million this week, an attorney for FTI Consulting said. An FTI team, led by Bill Benton, has been overseeing management of Crozer since February.

FTI has devised a plan that would slash Crozer’s annual loss from $140 million to $10 million to $15 million, Melissa L. Van Eck, a lawyer in the state Attorney General’s Office, told U.S. Bankruptcy Judge Stacey Jernigan.

Another hearing is scheduled for Thursday at 3 p.m. in Dallas. The subject will be Prospect’s motion to close the Crozer hospitals or another update on the status of negotiations.

Unable to force unidentified members of the proposed consortium of nonprofit health systems to meet, Jernigan ordered other parties to meet online Wednesday at 9 a.m.

“Usually bankruptcy is a little more transparent than this,” Jernigan said.

Tobey Deluz, a Ballard Spahr attorney representing Delaware County, explained to the judge that the members of the potential consortium are not creditors or otherwise parties of interest in the bankruptcy.

“It’s that portion of a sale process where maybe an investment banker usually is talking to prospective bidders, and that’s not always that transparent,” Deluz said.

Deluz acknowledged the long-term funding gap. The local systems need to “feel more confident” that they aren’t going to “step into the shoes of the debtor and then have to close the hospital,” she said.

The judge grilled an attorney for a local nonprofit focused on health in the community, the Foundation for Delaware County, about why it wasn’t offering to provide more money to keep Crozer open. The foundation already provided $20 million, and is facing up to $30 million in liabilities related to leases on medical office buildings Crozer uses.

The foundation’s president, Frances Sheehan, said in a statement after the hearing that the $20 million was supposed to cover the shorter-term needs to keep the hospitals open. “While we were hopeful that our investment would have borne fruit, it is apparent that there is no long-term solution,” she said.

Finally, the judge was concerned that frustration over past profit-taking by California-based Prospect was impeding a sale.

“This is a new era. This is not old Prospect,” the judge said.

Not all is new, though.

Prospect still has Duane Morris LLP as special counsel, with a team led by Alan Kessler that represented Prospect on local issues for years. Duane Morris filed notice last week asking for $119,524 in fees for work in February.