Prospect Medical Holdings gets grace period to sell Crozer Health

Los Angeles-based Prospect Medical Holdings has reached a deal with two Pennsylvania stakeholders to halt active litigation and activate a 270-day window to sell its struggling Springfield, Pa.-based Crozer Health. 

The Foundation for Delaware County and the Pennsylvania Attorney General's Office have now filed a written agreement with the court to halt active litigation against Prospect Medical Holdings and open a 270-day reprieve to sell Crozer to a successor, according to WHYY, Philadelphia's PBS and NPR affiliate. 

"We are pleased to reach the agreement to halt the litigation," Prospect said in a statement shared with Becker's. "We will continue to work to make sure our community receives excellent patient care. 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." 

Prospect acquired Crozer-Keystone Health System in 2016. The system, rebranded to Crozer Health in 2020, includes four hospitals. 

Crozer Health was prepared to halt all services at Delaware County Memorial Hospital by Nov. 20, 2022, and transition the hospital to an inpatient behavioral health center by spring 2023. A Pennsylvania judge halted that transition plan last October after the Foundation for Delaware County, which represents the legal interests of the nonprofit that sold Crozer to Prospect in 2016, filed a petition to block the closure. 

The foundation argued that Prospect's asset purchase agreement requires it to obtain the foundation's consent before closing any hospitals and is in effect until July 1, 2026. The attorney general then joined in, siding with the foundation. 

In the last year, Crozer hospitals have continued to lose critical services, laid off workers, and struggled to pay vendors and fund basic needs like ambulance repairs. In August, Prospect Medical Holdings suffered a multistate cyberattack that took Crozer computers systems offline for nearly three weeks. 

Prospect Medical Holdings is a private equity company. Private equity owns about 400 of approximately 5,100 hospitals in the U.S. Firms often promote their ability to turn ailing hospitals around, returning them to profitability by increasing efficiencies and cutting costs.

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