Crozer Health Update: Closure Motion Hearing Scheduled for Thursday
Rep. Leanne Krueger April 8, 2025 | 6:11 PM
This afternoon, the bankruptcy judge in Texas held a status hearing on the Crozer Health System and it was full of bad news for Delaware County. Prospect Medical Holding’s lawyers opened by telling the judge that there is no Asset Purchase Agreement (sale) ready to put before the judge today and if they didn’t receive $9M by 4pm tomorrow to keep the hospital open for two more weeks, they planned to begin closure proceedings tomorrow. When the judge pressed them for more details about the closure plan, they said they would go on diversion on Thursday, start transferring patients to other hospitals, and close the hospitals within two weeks. This latest shakeup comes after the Commonwealth of Pennsylvania, Delaware County, and the Foundation for Delaware County put in a total of $40M over the last two months in an effort to avoid a closure, funding the Receiver’s account to make payroll at the request of the Attorney General’s office. Prospect told the judge they want the Commonwealth of Pennsylvania to put up the $9M, but there’s no guarantee that we won’t be right back in this same position in two weeks' time, and we’re tired of them asking for taxpayer bailouts. My sources have told me that negotiations on the Asset Purchase Agreement had been proceeding in a positive manner but Prospect threw a wrench in the negotiations over the weekend and they appear to have blown up all the progress made towards a sale with unreasonable demands yet again.
The Attorney General’s office pushed back on Prospect during the hearing and called out the mismanagement and losses by Prospect that created all of these problems in the first place. The Receiver appointed by the courts, FTI, has come up with a plan to reduce the systems current losses from $140M to $15M a year, but that plan requires funding commitments from other health systems that have not yet come through, and time to unravel the structural and liability issues caused by Prospect.
The Receiver’s attorney disputed Prospect’s claims that they are out of money by tomorrow because the operating account he manages currently holds slightly more than $25M, with $10M committed to the next payroll, and money continuing to come into the account through accounts receivable. It seems like Prospect is looking for an excuse to close our hospitals.
Both the judge and the Attorney General’s lawyer commended the staff who have continued to serve patients during very challenging circumstances, with the judge calling them “angels.”
I and so many others want Prospect and the former owners that extracted resources from our hospital system to be held accountable and I’ve asked the Attorney General’s office to press charges in many, many meetings. The judge said that the forensic phase of a bankruptcy case usually comes later in the process, when the court will ask the question, “Who may have done something bad here?” When that phase comes, she said she will look at any evidence of wrongdoing and there’s the possibility of a massive settlement agreement. Unfortunately, that will come too late to help with immediate cash flow needs for the Crozer system.
In one final effort to prevent a closure, the judge ordered a 9am ET Zoom meeting tomorrow of all the parties that have been involved in the Asset Purchase Agreement negotiations. She also scheduled a 4pm ET hearing on Thursday to hear Prospect’s motion to close the hospitals. If Prospect moves forward with their plan, they may actually start the closure process before they are back in court on Thursday.
I am heartbroken for our community and furious that a California-based hedge fund has been allowed to extract so much from us despite all of our efforts to stop them. There is a small chance that tomorrow morning’s meeting might bear fruit, but I’m not hopeful. Prospect’s greed and unreasonable demands are hurting us once again. I will continue to push for criminal charges and we plan to run legislation soon to ban private equity from owning hospitals and end the kind of lease-leaseback deals that created so much unnecessary debt for Crozer. We passed similar legislation through the House last year but it died in the Senate when Majority Chairman Brooks removed the language of private equity from the bill, making it toothless. Getting this legislation signed into law won’t save Crozer, but it would stop entities from Prospect from creating this kind of damage in other communities.