Judge approves plan to close hospital system in Delaware County

Questions swirled in a Texas courtroom Tuesday about the ongoing treatment of patients in a pair of suburban Philadelphia hospitals that are slated to close after their bankrupt owner abandoned plans to transfer them to another hospital system.

U.S. Bankruptcy Judge Stacey Jernigan approved Prospect Medical Holdings’ plan to begin turning new patients away in Delaware County on Wednesday and to stop providing most services by Friday. 

The emergency departments at Crozer Chester Medical Center in Upland and Taylor Hospital in Ridley Park will stop receiving patients by ambulance but walk-in patients will be accepted for up to a week.

In a hearing on the request, lawyers for a nurses union asked for assurance that the company would pay wages and pension contributions owed since Prospect filed for Chapter 11 bankruptcy protection in January.

Another lawyer representing several Delaware County municipalities and the school district where one of the hospitals is located argued that the company had not given the required notice that it would stop providing emergency medical and ambulance services. 

“Closing a hospital system of this size is an absolute massive undertaking, and as you would expect, there is chaos, especially given that staff and patients in the community really believed that there would be a hero … stepping up,” Patient Safety Ombudsman Suzanne Koenig testified, adding that the staff remain dedicated to ensuring an orderly transfer of longer-term patients to other facilities.

Prospect has owned Crozer Health System since 2016 and closed two of its four hospitals in recent years as the California-based parent company faced financial peril. On Monday, it notified more than 2,600 employees that it would close its remaining two hospitals. It is one of the largest employers in the county. 

Attorney William Curtin, who represents Prospect in the bankruptcy case, said company officials worked tirelessly with the assistance of the Pennsylvania attorney general’s office to work out a deal to give the hospitals to a new owner in exchange for assuming their liabilities. 

“At the end of the day, your honor, it came down to funding, and there just wasn’t funding there to support a transition or to support a long term future for these hospitals,” Curtin said.

Pennsylvania and the philanthropic organization The Foundation for Delaware County provided more than $40 million in funding to allow the hospitals to continue operations as Prospect negotiated with the University of Pennsylvania to acquire the hospitals.

While Penn offered to inject an additional $5 million for the purchase of certain assets and assumption of leases, it would have also added to Prospect’s debt and the money would not be available until the deal was closed, Curtin said.

“So essentially, the $5 million was going to be too late, and it was unfortunately going to be a bridge to nowhere, because there was … nowhere to go,” he said.

In response to Prospect’s announcement Monday, Delaware County issued an emergency declaration that provides greater flexibility in hiring, procurement, emergency medical services dispatch, and in tracking and potentially recouping expenses related to the ongoing hospital closures. The county filed a motion opposing approval of the closure plan.

“To be clear, Delaware County is extremely disappointed in this outcome, and in the actions of Prospect in every step of this process,” county officials said in a statement.

Previously owned by Los Angeles-based private equity firm Leonard Green & Partners, Prospect was saddled with $1.3 billion debt as its owners took more than $645 million in dividends and fees, according to ProPublica.

Nicole Stallings, president and CEO of the Hospital + Health System Association of Pennsylvania, said that while it is unfortunate that no agreement was reached to allow Crozer to continue operating, hospitals are “consistently called upon to help when access to care is in crisis” and “will undoubtedly step up and take care of those in need regardless of ability to pay.”

She noted that half of the commonwealth’s acute care hospitals operate at a loss, according to the Pennsylvania Health Care Cost Cost Containment Council. Crozer Health System was losing $12 million a month, according to Prospect.

Stallings said the association is ready to work with policymakers and payors to address the underlying challenges pressuring hospitals and protect Pennsylvanians’ access to care.

The closures will leave Delaware County, with 576,000 people, only two hospitals. It is the fifth most populous county in the commonwealth.

Andrew Costa Kelser, who represents the Philadelphia area health care pension fund and the local affiliate of the National Union of Hospital and Health Care Employees, questioned Chief Restructuring Officer Paul Rundell about wages and pension payments.

“I think our first priority right now is patient safety, and we’re focusing on that. And so as I sit here today, I can’t answer anything other than focusing on patient safety issues,” Rundell said.

While Judge Jernigan denied the union’s motion for additional language in the closure plan to assure the payments, she said the question remains a “giant issue” in the resolution of the bankruptcy.

“There’s going to be hell to pay if people don’t get paid their post-petition wages and pension obligations,” Jernigan said. “I’ve gotten assurances from the debtor that these employees will get paid their wages or their salaries as long as they continue to work.”