Two hospitals to close after Pa. officials provided $40 million to help company find a buyer

A California for-profit health care company said Monday it plans to close its remaining hospitals in Pennsylvania’s fifth most populous county and fire thousands of employees after failing to find a buyer.

Prospect Medical Holdings filed papers Monday in bankruptcy court seeking approval to close the two Crozer Health System hospitals in Delaware County before they run out of cash. The announcement was met with condemnation from state and local officials, who had provided a $40 million lifeline while the company worked to reach a solution to keep them open.

“Prospect’s decision to move forward with the closure of the Crozer Health System is a devastating and disgraceful blow to our communities, our healthcare workers, and every patient who has ever relied on our local hospital system,” state lawmakers from Delaware County said in a joint statement Monday. “Yet again, Prospect decided to put profits over patients by putting Crozer’s assets up for auction.”

The closures will affect Crozer Chester Medical Center in Upland and Taylor Hospital in Ridley Park, which remained open after Prospect closed two other Delaware County hospitals in recent years. Three ambulatory surgery and imaging centers will remain open pending a sale.

“Prospect Medical Holdings, the for-profit owner of Crozer Health, pillaged these hospitals for their own gain – and today, we see the result of their greed and mismanagement with the announced closure and loss of critical health care services for the people of Delaware County,” Gov. Josh Shapiro said in a statement.

Crozer Health System has received $5 million in annual state funding for the last decade. Shapiro said his office would continue fighting for the patients who have been harmed by the closures.

“Prospect caused this crisis, and they must be held accountable for their reckless actions that have led to today’s announcement,” Shapiro said, adding that the bankruptcy process should include a full review of the company’s conduct and mismanagement. He also called on lawmakers to pass legislation he has proposed to get private equity out of the health care business in Pennsylvania.

The closures will leave Delaware County, population 576,000, with only two hospitals, owned by Main Line Health and Trinity Health Mid-Atlantic. Prospect, with more than 2,600 employers, is one of the county’s largest employers. It owns 16 hospitals in California, Connecticut, Pennsylvania and Rhode Island.

A spokesperson for Prospect said it recognizes the impact its decision will have on patients and employees and that the company worked tirelessly with state Attorney General Dave Sunday and other officials but were unable to find a viable alternative.

“At this time, the focus at Crozer Health remains on seamlessly transitioning patients to other health facilities so that they can continue to receive the critical, uninterrupted care they require, and to support Crozer Health team members as they seek to identify other employment opportunities,” the spokesperson said.

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.

Prospect filed for Chapter 11 bankruptcy protection in January while it attempted to restructure. It sought approval to sell the hospitals to a new owner in exchange for assuming their existing liabilities. 

The following month, Prospect began working with Sunday to appoint a receiver and facilitate $20.2 million in state funding to keep the hospitals running while Prospect and the potential new owner worked to finalize the deal. The philanthropic organization Foundation for Delaware County provided another $20 million.

Sunday said in a statement that he was deeply disappointed by the closure announcement.

“Along with the Governor’s office and other state and local leaders, we worked tirelessly to avoid this outcome. Unfortunately, the damage inflicted by Leonard Green & Partners — the private equity owners of Prospect — who prioritized their own wealth over the wellbeing of a community, was too much to overcome,” Sunday said, adding that his office would continue working through the bankruptcy process to pursue the state’s financial claims and hold Prospect accountable.