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As an asset purchase agreement is being negotiated with Penn Medicine and Delaware County and other entities, Prospect Medical Holdings Inc. told a Texas bankruptcy court that it will not be seeking a closure motion Wednesday for Crozer Health.
In addition, The Foundation for Delaware County has directed additional funds to FTI Consulting, the appointed receiver overseeing operations for Crozer Health to keep it going until April 1, the date parties expressed hope that an asset purchase agreement will be completed.
Through a spokesperson Monday, Penn Medicine said they’re not looking to acquire the Delaware County health system but are involved in the process to find a solution.
“Reports suggesting that Penn Medicine is in negotiations to acquire Crozer Health are inaccurate,” the Penn Medicine spokesperson said. “We are actively working with a range of partners to explore potential solutions to ensure care continuity for patients in southern Delaware County. A successful plan will require funding commitments and assistance from multiple stakeholders, including health systems, the state, county, and foundations.”
U.S. Bankruptcy Court Chief Justice Stacey G.C. Jernigan of the Northern District of Texas ordered Monday’s status hearing after a board member of Foundation for Delaware County asked — and received — from Delaware County Court an injunction for any further foundation funds to be directed to Prospect, any Prospect-related entity or hospital operations.
Jernigan then admonished the foundation, ordered all the parties to meet in Harrisburg again, which they did on Friday, and ordered them back to court Monday. Since then, the foundation sought, and obtained, a dissolution in court for the injunction that had been filed.
As a result of Friday’s meeting, the foundation has also agreed to pay additional sums to help sustain Crozer Health operations a while longer. In addition to the $7 million it has already paid, the foundation paid another $7 million this week to FTI and an additional $6 million will be given to FTI for hospital operations by April 1.
April 1 is when the parties are hopeful that an asset purchase agreement will be completed.
“It certainly is a very good thing to hear that we have this lifeline,” Jernigan said. “It sounds like we’re on a roll here.”
Prospect filed for Chapter 11 bankruptcy for most of its properties outside of California, including Crozer Health. As a result, FTI Consulting was appointed receiver to oversee Crozer Health operations.
However, at a March 6 hearing, Propsect Medical told the bankruptcy court that they only had enough funding to continue operations at Crozer Health through March 14. Three days later, the Foundation for Delaware County entered into an agreement with state Attorney General Dave Sunday to pay $7 million to keep Crozer Health afloat for two weeks.
There was also an understanding that the foundation may pay another $13 million after that to continue operations. Then, the injunction was filed last week, then dissolved and Monday’s hearing proceeded and with it, notice that an asset purchase agreement is being worked out.
Crozer Health includes the Crozer-Chester Medical Center and Taylor Hospital, as well the outpatient centers of Crozer Brinton Lake, Crozer Health at Broomall and Media Medical Plaza; as well as the Surgery Centers at Haverford and at Brinton Lake and the Crozer Health Medical Group. The system employs approximately 3,200 people.
‘Good progress’
It’s not clear whether the shuttered hospitals — Springfield and Delaware County Memorial — are involved in a potential purchase. It’s also unclear what a multi-party solution to the current crisis would look like.
On Monday, Prospect attorney William E. Curtin spoke of what the foundation’s most recent $20 million commitment means.
“This allows all of the parties to focus on the actual important issue here, which is keeping these hospitals open and moving towards our long-term solution,” he said. “With regard to the big picture and the long-term solution, we’ve also made good progress over the last few days on that.”
Curtin said first of all, it got back on track.
There had been some ambiguity whether the injunction impacting the foundation funding would derail the potential deal being worked out. Curtin said Monday that it was back in motion.
“We think it is back on track at this point,” he said. “We are progressing towards a transaction, an APA and this is going to be a transaction that is essentially a partnership between Delaware County and Penn with support from the Commonwealth and from other parties. The APA is being negotiated. It’s in front of the potential purchasers now.”
Curtin said there may be more that he can disclose at Wednesday’s hearing.
“We’re not moving forward with closure on Wednesday,” Curtin said, adding that they wouldn’t be ready to move forward on the APA by Wednesday either.
He did say that consideration of an approval of an APA could be done on April 1.
“We do need to keep this on a short timeframe,” Curtin said.
“It sounds like you are very optimistic that with these extra funds and extra time, you will put together an asset purchase agreement,” Jernigan recapped. “In fact, it’s being negotiated right now as we speak for a permanent solution, shall we say, to transition the hospitals, keep them open through a new partnership with a nonprofit entity so we can, hopefully, breathe a sigh of relief, not to get ahead of myself, but it sounds like we’re on the verge of breathing a sigh of relief that there’s a long-term solution here.”
Foundation leader speaks
Frances Sheehan, president of The Foundation for Delaware County, also testified at the Monday hearing.
“Under the agreement we reached on Friday with the Commonwealth, the Prospect debtors and FTI as a receiver and the Patient Care Ombudsman, I will reaffirm that the foundation has agreed to make a second payment of $7 million to the receiver this week, that is already in process, and an additional $6 million on April 1,” she said.
Sheehan noted that in addition to the $7 million the foundation provided almost three weeks ago, these payments “total a $20 million lifeline for our local hospitals.”
She also said she was very pleased that state Attorney General Dave Sunday himself was at the meeting Friday.
“It’s clear from our discussions with him that he cares deeply about the future of the Pennsylvania hospitals and really wants to find a long-term solution, as do we all,” Sheehan said.
Regarding the ongoing discussions, she added, “We’re hopeful the foundation’s investment will bear fruit.”
Sheehan said, however, that the foundation faces some new challenges.
“While the foundation did receive $50 million in proceeds from the sale of the health system to Prospect back in 2016, we also inherited an approximately $30 million in lease obligations owed … for the office buildings on the Springfield Hospital campus,” she said. “The foundation needs to address these long-term obligations so that as a community foundation, we can continue to address the many challenges our community faces as well as emergencies and challenges we may not anticipate in the future.”
The foundation president said thought was given into this most recent funding agreement.
“While this was a difficult decision for us at the foundation because we know how our community needs our maternal health and housing services and how much our nonprofit community needs support, we also know we need our hospitals,” Sheehan said. “We recognize our responsibility to provide this lifeline to assist in the process and we look forward to seeing a successful long-term resolution.”
Optimistic comments
Melissa Van Eck from Sunday’s office, confirmed that an asset purchase agreement was being drafted.
“The Commonwealth and Delaware County have now been working round the clock to try to find a resolution to this matter,” she said. “We appreciate Delaware County’s involvement in trying to make this a go … Hopefully, we’ll have a good report for you that we’re near a finalized APA on Wednesday.”
Erin Williamson, the attorney representing Delaware County, emphasized the critical nature Crozer Health has.
“We’re all working towards the best and possible resolution for these hospitals,” she said. “It’s important they stay open to us and available to the citizens of the county.”
State Sen. Tim Kearney, D-26, of Swarthmore, responded to the Texas court hearing after the proceeding.
“Today’s status hearing in the U.S. Bankruptcy Court brought a much-needed sign of hope for the future of Crozer Health,” the senator said in a press released. “I’m encouraged by the progress made and relieved that, as of today, the health system will not be closing its doors. This outcome would not have been possible without the dedication and cooperation of all parties involved.
“I would like to thank the Office of the Attorney General, The Governor’s Office, the Foundation for Delaware County, the Crozer Receiver FTI Consulting, the Patient Care Ombudsman, Prospect Medical and Delaware County for coming together in good faith this past Friday to prioritize the health and well-being of our community,” he said.
Kearney expressed optimism for the situation.
“The additional $13 million pledged by the Foundation is a critical step that buys us valuable time to secure a long-term solution — something we all know is essential to preserving local healthcare access in Delaware County,” he said. “While challenges remain, today’s development makes me hopeful about the future of Crozer Health.
“I look forward to continued updates at the next hearing and remain focused on supporting pathways that ensure Crozer Health’s long-term stability and service to our communities,” Kearney concluded.
