Prospect Medical Holdings has agreed to sell Crozer Health to a nonprofit organization as part of a court-approved deal.
The private equity company announced its plans to offload Crozer in October 2023. On Thursday, Delaware County Court of Common Pleas Judge Cheryl L. Austin ordered a 270-day pause in ongoing litigation against Prospect Medical Holdings while it finds a buyer. The court order also approves the terms set out in a letter of agreement signed by representatives from Prospect and the Pennsylvania Attorney General's Office limiting purchasers to nonprofit corporations.
Related article: Prospect Medical Holdings looks to sell Crozer Health within a year
By Feb. 21, the private equity company will need to create and issue a request for proposals from potential buyers, according to the deadlines listed in the agreement. Starting Thursday, Prospect will have 50 days to submit to the state a list of interested parties that signed a letter of intent to purchase some or all of Crozer, and the potential buyer will have 140 days to complete a due diligence process and enter an asset purchase agreement with Prospect.
The court order directed the attorney general to report any failure to adhere to the deadlines or other violations of the terms in the agreement.
"We are pleased the court has issued the order and we look forward to continuing to serve the community as this process moves forward," a spokesperson for Crozer Health said in a statement.
The order is the latest development in a years-long saga surrounding Prospect and Upland, Pennsylvania-headquartered Crozer Health.
Prospect purchased Crozer in 2016 and converted it to a for-profit organization. In September 2022, the private equity company announced it planned to close Crozer's Delaware County Memorial Hospital in Drexel Hill, Pennslyvania, and convert it into a behavioral health site. The nonprofit Foundation for Delaware County and others filed a complaint soon after, alleging Prospect's plans violated an asset purchase agreement that the hospital would stay open until 2026. The Pennsylvania Attorney General's Office intervened in the lawsuit later that year.
The Attorney General's Office and the Foundation for Delaware County did not respond to a request for comment.
The closure and conversion plans were temporarily blocked by a Pennsylvania judge in October 2022. A month later, the state Department of Health closed the hospital due to inadequate staffing. It remains temporarily closed.
Last March, Crozer Health laid off 215 employees--4% of its staff--due to financial struggles from high staffing and supply costs.
Prospect said in October 2023 it would sell Crozer's four hospitals—Delaware County Memorial Hospital, Springfield Hospital, Taylor Hospital in Ridley Park and Crozer-Chester Medical Center in Upland, all in Pennsylvania—along with their assets. That month, the Attorney General's Office, the Foundation for Delaware County and Prospect filed a motion to pause the ongoing litigation.
