Crozer Health will receive $20M in public funding to keep its Delaware County hospitals open for at least 30 days

Crozer Health will receive $20 million in government funding to keep Crozer-Chester Medical Center and Taylor Hospital open for at least 30 days under a plan approved Thursday by a bankruptcy judge in Texas.

The agreement between the Pennsylvania attorney general and Crozer Health owner Prospect Medical Holdings will put a temporary manager in charge of Delaware County’s largest health system. The move gives Prospect and state officials more time to work on a longer-term solution, Judge Stacey Jernigan said.

The appointment of a temporary manager, known as a receiver, is “unorthodox,” she said, but “this seems to be the only alternative at the moment to both keep these very important, necessary hospitals open.”

The temporary manager from FTI Consulting Inc. is expected to assume control of the Crozer hospitals quickly. FTI is a national advisory firm with a division that provides crisis management for health-care operators.

The plan represents at least a short-term solution to keeping open Prospect’s Delaware County hospitals. The health system has been losing $12 million each month, Prospect’s attorney, Thomas R. Califano of Sidley Austin, told Jernigan during Thursday’s hourlong hearing.

Califano had warned earlier this week that the company was prepared to announce the closure of Crozer-Chester Medical Center in Upland and Taylor Hospital in Ridley Park.

State and local elected officials from Delaware County welcomed the appointment of a temporary manager.

“This extension will provide time to better understand Crozer’s financial position and work with regional health partners to keep Crozer open permanently under new ownership,” they said in a statement.

Pennsylvania officials have been working for more than a year to preserve Crozer, which serves a low-income area without easy access to other health-care options. Prospect previously closed two other Crozer hospitals in Springfield and Drexel Hill.

» READ MORE: The scramble to keep Crozer’s health-care services amid Prospect bankruptcy

One of the challenges in getting public money to support Crozer was to ensure that not even a penny was going to Prospect and that the $20 million in public funding would be used only for Crozer operations, Melissa L. Van Eck, a lawyer in the state attorney general’s office, told Jernigan, the judge.

“Prospect has a long track record of reckless, greedy, and irresponsible management of Crozer — and they will not receive a cent of this funding,” Gov. Josh Shapiro spokesperson Will Simons said in a statement, noting that the administration plans to work with regional health-care providers and local leaders on a long-term solution.

The state is providing in $10.2 million of the funding, and $9.8 million is coming from Delaware County, the government’s office said.

What happens next is uncertain. Shapiro’s administration has said it wanted to transition Crozer to a new nonprofit backed by a consortium of local nonprofit health systems, but little progress has been made in forming that group, according to sources involved in the discussions.

“Is the state going to continue to put in money to support it?” said Larry Kaiser, CEO of the College of Physicians of Philadelphia and a former CEO of Temple University Health System.

» READ MORE: The scramble to keep Crozer’s health-care services amid Prospect bankruptcy

A patient-care ombudsman, appointed by bankruptcy court to ensure that care does not deteriorate at the bankrupt hospitals, visited Crozer-Chester and Taylor this week. She “observed excellent patient care during her tours,” according to a statement filed in bankruptcy court Thursday.

The ombudsman urged Prospect and others to continue looking for ways to keep the hospitals open. “The Pennsylvania hospitals provide critical services to an older, lower-income population that may not have the resources (including transportation) to receive care elsewhere,” the statement said.

“This community needs these services,” the ombudsman, Suzanne Koenig, said during the hearing.

The emergency departments at Crozer’s two hospitals had a combined 65,000 visits in 2023. The two units, which share a single license, were the sixth-busiest ED in Southeastern Pennsylvania outside of Philadelphia, according to state health data. Many of these patients rely on Crozer’s ED for primary care, the ombudsman noted.

If Crozer were to close, the closest hospitals are Main Line Health’s Riddle Hospital near Media and Trinity Health Fitzgerald Mercy in Darby, both nearly 10 miles away by car.

Thousands of health-care professionals at Crozer have worked through years of uncertainty since Prospect acquired the then-nonprofit system in 2016. At the time, Prospect was controlled by a private equity firm.

Three years after the acquisition, Prospect sold Crozer’s real estate as part of a 14-hospital deal that raised $1.55 billion. Some of that money was used to pay off debt that funded $457 million in dividends to Prospect executives and its private equity investors. The real estate sale required Crozer and other Prospect health systems to lease back the properties they used to own.

In the fall of 2021, as the coronavirus pandemic was slamming hospitals financially, Prospect started trying to sell Crozer and other East Coast hospitals in Connecticut and Rhode Island.

A tentative deal in 2022 to sell Crozer to ChristianaCare, Delaware’s largest health system, fell apart when ChristianaCare decided the deal did not make sense financially. ChristianaCare is now setting itself up to compete with Crozer by building two micro-hospitals in Delaware County. The first is expected to open next year in Aston.

CHA Partners LLC, a New Jersey real estate company that specializes in buying hospital properties and redeveloping them into mixed-use medical facilities, in August reached a tentative deal to acquire Crozer, with the goal of eventually transferring it to a new nonprofit. That deal fizzled out when a financial agreement could not be reached.

Editor’s note: This story was updated with funding information and comment from the governor’s office, details from the court hearing and background on Crozer’s history.