Price tag for Crozer-Keystone $300M

Prospect Medical Holdings Inc.'s purchase price for Crozer-Keystone Health System is $300 million, according to a court filing obtained Monday from the Pennsylvania Office of the Attorney General.

That sounds like a large pile of money for the struggling Delaware County nonprofit system, but most - if not all - of it will be put toward Crozer's debt and other liabilities.

The petition filed Friday in Delaware County Orphans' Court did not provide a net purchase price after a long series of deductions, starting with as much as $120 million for Crozer's pension plan, which on March 31 had a $185.2 million deficit.

Orphans' Court must approve the sale of tax-exempt Crozer to the for-profit Prospect.

The deal also calls for the retirement of at least $160 million in long-term debt, according to recent notices to bondholders.

The asset-purchase agreement included the 191-page filing also said that Prospect will deduct $15 million for the cost of a general liability insurance policy to cover events that occurred before Prospect's takeover.

Any money leftover will go into the Crozer-Keystone Community Foundation, a new entity to be formed from the merger of the Crozer Chester Foundation and the Delco Memorial Foundation.

Joshua A. Nemzoff, president of Nemzoff & Co. in New Hope, a mergers and acquisitions adviser to nonprofit health-care organizations, does not expect much to remain after Crozer's bills are paid.

"It's pretty obvious that the board of trustees, the management of Crozer were very lucky to get this number, because it looks like what they did is they matched the price up to the liability," he said.

For Prospect, which already owns 14 hospitals in California, Texas, Rhode Island, and New Jersey, on the other hand, "it's a very good price if they are able to turn the place around," Nemzoff said.

Crozer, which operates hospitals in Chester, Drexel Hill, Ridley Park, and Springfield, has already shown improvement in the last three years.

In the nine months ended March 31, Crozer had $8.7 million in operating income, compared with an operating loss of $9.4 million in the same period the year before. Two years ago, in the nine months ended March 31, 2014, the operating loss was $31.6 million, filings show.

Prospect, which is headquartered in Los Angeles, reported operating income of $108 million on $1.3 billion in revenue for the year ended Sept. 30.

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