Crozer Health issue moves to federal court;

Crozer Health parent company Prospect Medical Holdings has announced that it is filing for Chapter 11 bankruptcy, and the reaction Sunday within Delaware County has been swift.

In a statement on Sunday morning to employees obtained by the Daily Times, Von Crockett, the co-chief executive officer for California-based Prospect Medical Holdings said this:

“Prospect Holdings is taking steps to realign its organizational focus outside of California, including pursuing an agreement to sell the Roger Williams Medical Center and Our Lady of Fatima Medical Center in Rhode Island, continuing to engage with key stakeholders outside of Rhode Island, and working with the Commonwealth of Pennsylvania to agree on terms for the divestiture of the Crozer-Chester Medical Center.”

Von Crockett went on to explain that “It does not mean that Prospect Holdings is going out of business. Rather, Prospect Holdings is utilizing the chapter 11 process to facilitate its organizational realignment as expeditiously as possible.”

Patient care is expected to continue normally through the process. Employees were told to report to work as scheduled and they will continue to be paid.

The reason behind the filing, according to the statement, is “Prospect Holdings has faced a number of recent challenges, due in large part to the lingering impacts of the COVID-19 pandemic, inflation, and shifting patient demographics.”

Frances M. Sheehan, president of The Foundation for Delaware County, issued this response Sunday to the Prospect bankruptcy filing, saying the legal battle with the health care provider will continue:

“We are deeply concerned about the potential impact of Prospect Medical Holdings’ bankruptcy filing on the health care services our community relies on. Crozer Health is not just a hospital, it is home to a trauma center, burn unit, and stroke center, and serves as Delaware County’s largest EMS provider. The foundation will continue to advocate tirelessly for the residents of Delaware County, as our work to protect access to quality health care is far from over.”

There was no immediate reaction from the state attorney general’s office, which has been deeply involved in the legal battle with Prospect.

Delaware County plans a press conference at noon Monday that will include elected state officials.

Later Sunday, the entire Delaware County delegation of state lawmakers and county council issued a statement that reads as follows, continuing the criticism that has previously been leveled at Prospect:

“We are fiercely disappointed but not surprised by Prospect Medical Holdings’ declaration of bankruptcy across the country yesterday. This bankruptcy leaves our community’s most vulnerable — patients, families, and frontline health care workers — in a precarious position, a consequence of years of mismanagement and disregard for public health.

“This crisis has been building since Prospect acquired the Crozer system and it used leverage to extract value from the system for the benefit of its investors at the expense of the system’s patients and staff.

“Delaware County has fought the closure of facilities and programs through legislative action and in court and has financially supported the Foundation of Delaware County in its efforts to hold Prospect to the agreements it made at the time of the acquisition.

“During the same time period, the county’s state delegation has rung the alarm on Prospect’s disastrous management of the Crozer Health system. This bankruptcy is the direct result of Prospect’s financial decisions and the private equity playbook.

“This crisis adds to the glaring list of examples that Prospect alone has shown us of why state and federal oversight and reform of private equity involvement in health care are urgently needed to prevent corporations from exploiting essential services for profit at the expense of communities.

“Delaware County’s state legislators and elected county officials call on Prospect and its creditors to make all possible efforts to maintain services and operations at Crozer and Taylor hospitals while restructuring in bankruptcy.

“We stand with Crozer’s dedicated staff who have heroically served Delaware County patients and families while Prospect let conditions and resources deteriorate to this point. We urge Prospect and its creditors to prioritize the needs of these workers, whose dedication has sustained Crozer through years of underfunding and mismanagement.

“While working to hold Prospect and its former owners accountable for their financial looting of Crozer, the delegation and county leaders have worked to secure state and federal funding to support health services in Delaware County, including at Crozer, the new county Department of Health, and other health providers serving the county.”

The statement went on the mention a planning group that is led by the county that aims to make sure the quality of care provided to Crozer Health patients continues to be high, and what might be ahead for Crozer Health in bankruptcy court, a proceeding that might run for months or years.

Prospect has yet to respond to the responses about its Chapter 11 filing.

Word of the potential bankruptcy filing was first broken by Rhode Island Attorney General Peter F. Neronha late last week after The Wall Street Journal reported that the company was working with restructuring advisers to address its financial challenges.

Rhode Island and other states are fighting the same battles with Prospect that are going on in Delaware County as they try to rid themselves of Prospect.

‘Corporate looting’

On a different legal front, earlier last week, Brett Hambright, spokesman for the Pennsylvania Attorney General’s Office, said the attorney general’s recent legal challenge had been moved to federal court and that no trial date had been set.

“We do not have much as far as public comment at this stage, beyond the matter continues to be litigated, including venue,” he said. “Our action has been moved to federal court — we are challenging that as proper venue — and that has delayed a decision on a receiver.”

He wasn’t clear about which federal court.

In October, state Attorney General Michelle Henry filed suit in Delaware County Court of Common Pleas against Prospect Medical Holdings Inc., Prospect Crozer LLC, the private equity firm Leonard Green and Partners, and Prospect co-Chief Executive Officers Samuel Lee and David Topper or “years of mismanagement, corporate looting, and the neglect of the hospital system, it’s patients and its staff.”

Prospect Medical Holdings is the for-profit owner of Crozer Health, which now has two full-service hospitals: Crozer-Chester Medical Center and Taylor Hospital. There had been two others, Springfield Hospital and Delaware County Memorial Hospital, but they are now closed.

In August, Prospect announced it had signed a letter of intent for CHA Partners LLC to acquire Crozer Health. At the time, Crozer Health CEO Anthony Esposito said the deal could potentially close by the end of the year, which hasn’t happened.

“Regarding our potential sale, it is on hold due to the AG litigation,” Lori Bookbinder, manager of communications and media relations for Crozer Health, said, directing questions to the AG’s office.

The attorney general also said it will also ask the courts to appoint a receiver to oversee Crozer Health’s finances, and to make sure the entity is sold. The term “receiver” would sound familiar in Delaware County because there are state-appointed receivers in place in Chester and the Chester Upland School District to oversee finances in those entities.

At question also is the 270-day suspension of litigation involving CKHS, Inc. (Crozer-Keystone Health System), the Foundation for Delaware County, Prospect Medical Holdings Inc. and Prospect Crozer LLC after Henry filed a stipulation in Delaware County Court of Common Pleas to suspend litigation temporarily so Crozer could pursue a sale process.

The litigation involved the late 2022 closure of Delaware County Memorial Hospital to transform it into a behavioral health hospital, which hasn’t happened.

The ‘large-scale incident’

In a separate matter, an incident at Crozer-Chester Medical Center on Dec. 26 caused the transfer of 33 patients to other locations as a ruptured pipe caused flooding in the hospital’s mechanical room located near the loading dock.

The flooding reached the transformer and power panels in the electrical room causing multiple arc shorts and terminating power in certain areas of the hospital.

Ed Beebe, acting director of Delaware County Emergency Services, shared the county’s role in responding to that emergency and said county emergency staff were on the scene within 30 minutes of it being reported.

“We knew this Crozer incident was going to be rather large,” he explained last week, adding that reports of an active fire, the hospital filling with smoke and the need to move patients caused the county to act. “That’s where as a county we moved forward and said, ‘We’re going to offer help.’ ”

The call, he said, came approximately 8:30 p.m. on Thursday, Dec. 26 and by 9 p.m., county representatives were on the scene.

“We were there until 2 o’clock in the morning,” he said. “Once they said, ‘We have this, we’re under control,’ that’s when the county backs out and says, ‘We’re here if you need us.’”

Beebe explained that the county’s role was solely support and that Upland and Chester fire personnel as well as those at Crozer Health were responsible for the fire suppression.

“Upland Borough, Chester Fire and their mutual aid fire companies did a phenomenal job responding to the fire,” Beebe said, especially with moving the patients.

He said the county is there to assist.

“We’re not there to advance fire lines or stretch fire hoses,” Beebe said. “Those agencies that went in and dealt with the generator fire. That’s a whole different group of folks. We offer logistical support.”

One of the ways they did that was by bringing the communications truck.

He explained that in the basement of commercial buildings, it can be difficult to get onto the county emergency radio system.

“We deploy that,” he said  of the communications truck, “it acts as an on-scene communications truck.”

That way, first responders can get their messages of “I need more water,” “I need another line” more quickly to the right places.

Without the communications truck there, Beebe said the message sometimes has to find a repeater 3 miles down the road before it gets transferred to the right listener.

The truck, he said, worked phenomenally, as did all at the scene, according to Beebe.

“From the DES side of things, we played a very active role working with representatives of Crozer and Upland Borough,” he said. “Between Upland Borough and their fire department and us, it was a coordinated effort … It was a large-scale incident.”

And while he said the fire was confined to the basement boiler area, it had it’s own challenges with certain chemicals needed for suppression, he explained.

“We’re there to support anybody who calls us,” Beebe said. “We don’t necessarily sit back and wait. Delaware County’s role is not to come in and take over. It was Upland’s incident — this is what we have to help you.”

‘Textbook effort’

He said the relationships among first responders and communities are something built over time, and not started at the time of an emergency.

Beebe also said the county emergency services team worked with Crozer very well.

“It was seamless,” he said. “Everything really kind of came together very well … It was a cooperated effort between Crozer and Upland officials. Frankly, I’m not sure it could’ve gone any better. It was a textbook effort to get everyone the resource they need.

“This had the potential to be a really, really severe incident,” Beebe said. “It was managed very quickly from the beginning.”

He said he was really proud of the DES team.

“Everybody has their specialty,” he said. “We’re there to help/we’re here to help all the communities. That’s our role.”

There was a second, smaller-scale incident on Dec. 30. 

Contractors were switching power to an external generator as they worked to repair the damage from the fire. There was an arc short of a transformer in the same mechanical room as the Dec. 26 emergency.

A small fire ignited, causing a smoke condition in the boiler room with minor extension of smoke and odor in the hospital. No patients needed to be moved, and the situation was under control quickly.

Bookbinder reported on Jan. 2 that the hospital was back to normal operations.

Originally Published: January 12, 2025 at 7:40 AM EST