2 Philly-Area Health Facilities Remain Up For Grabs As Clock Ticks Down On Sale Deadline
The real estate owner of two shuttered Delaware County hospitals was supposed to have reached a deal to sell them within the next few weeks. But as the deadline draws near, no transaction has emerged, and new financial and legal troubles have cropped up.
Prospect Medical Holdings was ordered to sell off Crozer Health hospitals by June and complete the sale by the end of October, according to an agreement with the Pennsylvania Attorney General to avert litigation.
But the Los Angeles-based ownership group has not disclosed any interested buyers for Delaware County's Memorial and Springfield hospitals, which have now closed, according to The Philadelphia Inquirer.
“The confidential sale process is progressing and our office remains actively engaged,” AG spokesperson Brett Hambright told the Inquirer in an email.
Neither the AG's office nor Gov. Josh Shapiro’s administration can actually enforce the timeline, according to the Inquirer. Meanwhile, Prospect is facing a large hospital sale falling through in Connecticut and legal troubles elsewhere.
Pennsylvania Attorney General Michelle Henry first agreed last October to suspend litigation against Prospect Medical Holdings to allow the company to begin pursuing the sale of Crozer Health in Delaware County.
Prospect Medical first purchased the then-named Crozer-Keystone Health System for $300M in 2016. By 2019, though, Medical Properties Trust, a real estate investment trust, had acquired most of Prospect's hospital real estate, leasing the properties back to hospitals in a deal that left Crozer with monthly rent exceeding $35M annually, the Inquirer reported
Two years later and two years into the pandemic, Crozer closed Delaware County Memorial Hospital in Upper Darby, sparking litigation. The emergency services department at Springfield Hospital was also closed, with staffing shortages at both locations named as the reason for the closures.
In the Philadelphia area, only Crozer’s Chester Medical Center in Upland and Taylor Hospital in Ridley Park remain open, along with some outpatient facilities, and the hospital system's future appears uncertain.
Any buyer of the Crozer hospitals would have a mess to handle, according to the Inquirer’s analysis. The buyer must dig the hospital system out of a $150M mortgage still owed to MPT, along with pension liability and property maintenance.
In addition, the $435M sale of three Prospect hospitals in Connecticut to Yale New Haven Health has fallen through, with Yale New Haven filing suit against Prospect, claiming breach of contract for defaulting on rent and tax liabilities and allowing facilities to deteriorate.
Yale New Haven accused Prospect of “driving away” doctors and vendors and engaging in “a pattern of irresponsible financial practices,” according to a suit filed last week.
About $355M of the proposed $435M sale was supposed to go back to MPT, according to the lawsuit. The remainder of that sale may have helped relieve financial pressure at Prospect’s other hospitals, including those in Delaware County, the Inquirer reported.
A nonprofit foundation that is the legal successor to one of the shuttered hospitals has a bone to pick with Prospect, too.
The Foundation for Delaware County sued Prospect in 2022 over the closure of Delaware County Memorial, alleging that its owner group violated a 2016 purchase agreement. The agreement mandated Prospect keep the Crozer hospitals open for acute care until 2026 or receive approval from the foundation for any closures.
The foundation’s attorney is closely watching the deals up north in Connecticut, he said.
“The Yale/Prospect situation is of concern to the foundation, the Delaware County government, and the tens of thousands of Delaware County residents affected by Prospect’s actions,” Rocco P. Imperatrice III, a lawyer for the foundation, told the Inquirer last week.
MPT is also juggling its own financial pressures. The REIT's largest tenant, Steward Health Care System, filed for bankruptcy a week ago. Steward has one Pennsylvania hospital located in Sharon, near the Ohio border.
MPT executives blamed Prospect for some of its issues on an earnings call held last week.
Prospect has “significant cash pressures,” linked in part to “delays in disposing” of hospitals in Pennsylvania as well as Connecticut, MPT executives told analysts on the call.
