Prospect Medical Holdings has reached a definitive agreement to acquire five Pennsylvania hospitals that are part of the Crozer-Keystone Health System. Also part of the deal announced Friday are Crozer-Keystone's physician network and other facilities.
Prospect, based in Los Angeles, will now expand into Pennsylvania. Prospect owns 13 hospitals in California, Texas and Rhode Island.
The deal will convert not-for-profit Crozer-Keystone, which has operated with a razor-thin margin in recent years, to a for-profit hospital system. Pennsylvania's attorney general must approve the deal. Crozer-Keystone first announced plans to seek a buyer in 2014. The system ended last fiscal year on June 30 with an operating margin of 1%, or an operating surplus of $7.5 million on revenue of $777 million.
The deal will create a new charitable foundation and Prospect pledged $200 million in capital. It also committed $100 million toward the system's underfunded pension. Prospect has vowed to operate all five hospitals and services such as emergency care, behavioral health and maternity. Prospect also agreed to honor labor agreements and offer jobs to all Crozer-Keystone workers.
The deal is not Prospect's first push to expand its geographic reach. The company bid on a New Jersey hospital in bankruptcy but lost out in November to a rival bidder.