Prospect Medical Holdings agrees to sell Crozer Health in 9 months

Prospect Medical Holdings has approximately nine months to sell off its struggling four-hospital system Crozer Health under a newly struck agreement between the private equity firm and the Pennsylvania Attorney General’s Office and a local nonprofit.

Prospect, which had acquired Crozer in 2016, had sought to close the system’s Delaware County (Pa.) Memorial Hospital and convert it into a behavioral health facility after a planned sale of the entire system to ChristianaCare Health System fell through in Aug. 2022.

The closure proved controversial and drew litigation from the Foundation for Delaware County and Attorney General Michelle Henry, who argued that Prospect was required to keep the hospital open until at least 2026 under its original asset purchase agreement.

Still, the hospital was closed by the Pennsylvania Department of Health in November 2022 due to insufficient staffing. Another of Crozer’s facilities, Springfield Hospital, had its inpatient and emergency services suspended in 2021 and later announced to be shifting to an outpatient facility.

Under the new agreement, which is subject to court approval, the attorney general and the foundation will suspend their litigation for 270 days from the day the order is signed, though that can be extended if needed. Prospect will use that time to “explore possible avenues of a sale” of Crozer, per the agreement.

“Every Pennsylvanian deserves access to affordable and accessible healthcare, and our focus is on maintaining the entire Crozer system as a hub of care in its community, as the sales agreement assured,” Henry said in a statement.

Prospect continues to deny the allegations that it violated the purchase agreement or engaged in unlawful conduct, per the agreement.

The private equity firm had laid off over 200 Crozer employees in a restructuring announced earlier this year. At the time, the organization said Crozer was losing about $12 million per month before deciding to close Delaware County Memorial Hospital, and about $7 million per month as of March.

In a statement, the firm said it was “pleased” with the agreement and halted litigation.

“We will continue to work to make sure our community receives excellent patient care,” it said in an email statement. “Prospect has engaged the services of the Morgan Stanley group to advise on the sale of the Crozer Health System and we expect this process to proceed in 60 days.”

Los Angeles-based Prospect Medical Holdings runs 16 hospitals and more than 165 other clinical locations across Connecticut, Pennsylvania, Rhode Island and Southern California. In August it disclosed a cyberattack that brought computer systems across several of its owned systems, including Crozer, down temporarily and had lingering disruptions during the following weeks. A class action suit was filed against Prospect earlier this week over the breach.