Prospect Hands Over Crozer Health to Receivership, Avoids Hospital Closures

It's the latest development in the long saga of troubled Crozer, which has yet to secure a permanent owner.

Prospect Medical Holdings' most recent attempt to divest Crozer Health wasn't completed, putting the long-term fate of the four-hospital health system up in the air.

For now, Crozer's facilities will remain open after a U.S. bankruptcy judge approved a plan to place the turbulent asset into a 30-day receivership with FTI Consulting while Prospect searches for new owners.

The deal between Prospect, which filed for chapter 11 bankruptcy in January, and the Commonwealth of Pennsylvania was signed off on by Judge Stacey Jernigan and came after a proposed sale of Crozer to a nonprofit consortium of healthcare operators was put on hold.

Under the agreement, advisory firm FTI Consulting will receive $20 million in funding from Pennsylvania to keep Crozer's operations running for one month.

Two of Crozer's hospitals remain operational and continue to provide care in Delaware County—Crozer-Chester Medical Center and Taylor Hospital. Crozer previously shut down Springfield Hospital and Delaware County Memorial Hospital.

"Crozer Health looks forward to working constructively with the Commonwealth of Pennsylvania and FTI Consulting to ensure that our communities continue to receive uninterrupted access to the critical health services they require," Crozer Health CEO Anthony Esposito said in a statement. "As always, we remain focused on providing high-quality and personalized care to our patients, and will continue to uphold that commitment throughout this process."

Pennsylvania authorities filed a lawsuit last year against Prospect and its former private equity owner, Leonard Green & Partners, alleging mismanagement that led to the closure of half of Crozer's hospitals.

A recent bipartisan report from the Senate Budget Committee found that Leonard Green collected $424 million of the $645 million in dividends and preferred stock redemption that Prospect paid out to investors. It also revealed that Prospect engaged in a $1.55 billion sale-leaseback deal with Medical Properties Trust, leaving it with crippling debt.

"Prospect has a long track record of reckless, greedy, and irresponsible management of Crozer — and they will not receive a cent of this funding," Gov. Josh Shapiro spokesperson Will Simons said in a statement.