Bankrupt Prospect Medical is poised to take steps to close Crozer Health’s Delaware County hospitals

Prospect Medical Holdings edged closer Thursday to closing Delaware County’s Crozer-Chester Medical Center and Taylor Hospital.

The California for-profit owner of the health system told a bankruptcy judge in Texas that it planned to file a motion to close the hospitals in the Chester area and Ridley Park because it only has money to keep them open through March 14.

Talks on a short-term solution involving funding from the Foundation for Delaware County ended minutes before the hearing started. The foundation was started with proceeds from the 2016 sale of Crozer to Prospect, and says supplying money for a limited fix could jeopardize its overall mission to serve the health and well-being of local residents.

The foundation was the last option, and Prospect won’t have money to make the next $7 million payroll for Crozer employees after March 14, Prospect’s attorney, William Curtin, told U.S. Bankruptcy Judge Stacey Jernigan, who is overseeing the case in Dallas. Crozer has 3,200 employees.

The latest crisis arose after Pennsylvania and Delaware County came up with $20 million last month to keep Crozer open for 30 days. Crozer had a cash loss of $100 million in the last six months, according to Curtin, whose law firm, Sidley Austin LLP, recently billed Prospect $3 million for its work so far.

Jernigan wasn’t ready to give up on a solution that would keep open Delaware County’s largest health-care system. Crozer operates a trauma center, as well as a burn unit, and provides maternity services and behavioral health care. The next 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.

“We’re going to hope for a miracle,” Jernigan said, before she ordered a face-to-face meeting involving Prospect, the state attorney general, the foundation, and the receiver who has been scrutinizing Crozer’s finances. “I want client decision-makers as well as lawyers,” she said.

That meeting is scheduled for Sunday in Harrisburg, with the next hearing in the bankruptcy case scheduled for Tuesday at 9:30 a.m. in Dallas. It will either be a status update on negotiations, or a hearing on the closure.

Curtin said Prospect expected to file its closure motion Thursday.

The Pennsylvania attorney general and the administration of Gov. Josh Shapiro had hoped to transfer Crozer to a new independent nonprofit, backed by local nonprofit health systems, after eight years of ownership by Prospect, which was controlled by private equity firm Leonard Green & Partners when it acquired Crozer. Local systems were reluctant to get involved because Crozer has had heavy losses and is saddled with significant liabilities.

“The closing of Crozer Health System is an avoidable travesty,” Attorney General Dave Sunday said in a statement, encouraging all involved to keep working toward a solution that preserves local health-care access.

The officials from FTI Consulting Inc. who were sorting through Crozer’s financial condition communicated very little with medical staff at Crozer. State officials have said their goal was to preserve health-care services and jobs in an area of Southeastern Pennsylvania without easy access to other health-care options.

The closure discussion comes more than seven weeks after Prospect’s Jan. 11 bankruptcy filing.

Delaware County administrators have been working on a contingency plan for months. The county had little notice when Crozer closed another hospital, Delaware County Memorial Hospital, in 2022, and has made efforts to be more prepared for a potential full Crozer shutdown by coordinating with nearby hospitals, EMS, and county stakeholders.

“It is infuriating to hear that Prospect has failed to keep their promises yet again to the residents of Delaware County, now that they’re done lining their own pockets at the expense of our communities,” said Delaware County Council Chair Monica Taylor in a news release.

“We remain committed to an orderly, calm, and comprehensive process to helping ensure patients are transferred to other facilities that can provide the care they need,” Taylor said.

A closure date has not been set. Prospect said in bankruptcy court that the state Department of Health had reviewed its closure plan and provided comments. But the department told The Inquirer it “has not received official notice of closure or a formal closure plan for Crozer Chester Medical Center or its Taylor Hospital campus.”

Jernigan, who said repeatedly that she was looking for a hero to rescue Crozer, spent a large part of Thursday’s hearing questioning the foundation’s attorney about why it wouldn’t be in the foundation’s interest to keep Crozer open, at least in the short term.

“The judge is scratching her head,” Jernigan said.

“I’m not sure a short-term solution makes a lot of sense without a long-term solution,” said the foundation’s attorney, Scott Cousins, of Lewis Brisbois Bisgaard & Smith LLP.

As the legal successor to Crozer’s former nonprofit owner, the foundation has already spent significant resources fighting Prospect’s closure of Delaware County Memorial. The 2016 sale agreement required Prospect to keep the Crozer hospitals open for 10 years, unless it got approval from a community advisory committee to close them.

The foundation is liable if Prospect doesn’t pay rent and taxes on two Springfield Township medical office buildings that are leased through September 2029. That liability could be as much as $30 million, the foundation said.

At the end of June, the foundation had $64 million in unrestricted investments. At the current rate of losses, that money could keep Crozer open for a few months at the most.

“We fully understand the urgency of saving the health system — that has been our goal from the beginning. However, the liability limits our ability to provide direct financial assistance without jeopardizing our mission,” foundation president Frances Sheehan said in a statement.

Gov. Josh Shapiro accused the foundation of not doing enough in response to a question on Crozer at an unrelated news conference in Philadelphia. “I’m sick and tired of how they keep hiding the ball and not stepping up,” he said. He also said he wanted the University of Pennsylvania Health System and Main Line Health to do more.

Residents of Delaware County should stay focused on Prospect as the “bad guys,” said local State Sen. Tim Kearney during a news conference at Crozer organized by the Pennsylvania Association of Staff Nurses and Allied Professionals, which represents Crozer employees.

“We can’t turn on ourselves. We can’t turn on the other health systems. We can’t turn on the foundation. We need to make sure we focus our anger where it needs to be,” he said.

Editor’s note: This story has been updated with additional detail and comment.