Judge Approves Closure of Crozer Health, Ending 'Mismanagement' of Hospitals

An alternate resolution couldn't be reached in the back-and-forth saga of the distressed health system.

Following months of tumult, Crozer Health is ultimately set to close with no buyers found for the health system.

U.S. Bankruptcy Court Judge Stacey Jernigan approved Prospect Medical Holdings' move to shutter Crozer-Chester Medical Center and Taylor Hospital in Delaware County, resulting in another collapse of hospitals backed by private equity.

The full closures of the two facilities are expected to be completed within 30 days, leaving many patients in the area without access to necessary care.

Meanwhile, 2,651 Crozer employees will be laid off by May 2, according to the Worker Adjustment and Retraining Notification filing with the Pennsylvania Department of Labor & Industry.

"PMH recognizes the impact this action will have on patients as well as team members," Prospect said in a statement. "We’ve worked tirelessly with the Pennsylvania Attorney General and other parties to do everything possible to prevent this outcome. Unfortunately, we were unable to reach a viable alternative."

In delivering her support for the closure, Jernigan noted that there were no options left and that the parties "can't print money" to fix the problem.

“I lose sleep over this case and I’m sure other people lose sleep a whole lot more than I do," Jernigan said. "I worry about persons having a heart attack and they can’t get to a very close facility. I worry about people getting in a car wreck or getting shot, burned, a mama going into labor. I just hate the widespread consequences here."

Though Penn Medicine had made an offer of $5 million to support Crozer's operations and purchase assets at certain locations, the two sides couldn’t work out terms.

It marked the latest close call on nabbing a buyer for Crozer, which Prospect tried to sell to ChristianaCare in 2022, CHA Partners last year, and an unnamed consortium of nonprofits in February.

After Prospect filed for chapter 11 bankruptcy in January, Crozer was placed into a receivership with FTI Consulting in February, which ended April 18.

When Prospect purchased Crozer for approximately $300 million in 2016, the Los Angeles-based company was owned by private equity firm Leonard Green & Partners.

Prospect then cut services before closing two of Crozer's four hospitals, Delaware County Memorial Hospital and Springfield Hospital, in 2022.

The company made a string of financial decisions, include the sale-leaseback with landlord Medical Properties Trust, "which saddled Crozer with unmanageable lease obligations and even higher levels of debt," a recent report from the Senate Budget Committee found.

Eventually, the siphoning of millions from its hospitals led to Prospect being unable to keep the facilities open.

Lawmaker reaction

Crozer's closure has enraged state Rep. and legislators, who have pointed to the decaying nature of private equity ownership with hospitals.

"Prospect caused this crisis, and they must be held accountable for their reckless actions that have led to today’s announcement," Pennsylvania Governor Josh Shapiro said in a statement. "Their conduct and mismanagement must be fully reviewed in the bankruptcy legal process to hold them to account under the law, and we must ensure this never happens again by passing legislation to get private equity out of the health care business in Pennsylvania, as I proposed in my budget address earlier this year."

The Delaware County Legislative Delegation, made up of Pennsylvania Sen. and Rep., was also critical in its reaction.

"Private equity’s decimation of Crozer is an abomination – the corporate abuse that our hospitals went through should be criminally illegal, and the investors and executives who did this to us should be held accountable," the group said in a statement. "The American healthcare system – by far the most expensive in the world – is fundamentally broken, and Crozer’s saga sadly exemplifies this.

"Our elected officials and financial and corporate regulators in Washington, D.C. and every state capitol must reign in the chaos before there is nowhere left to go for help. As Crozer demonstrates, privatization and for-profit systems are the problem, not the solution. We need bold action for the public interest."