Judge will allow Prospect to abandon Crozer-Chester Medical Center and Springfield Hospital if a sale fails

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U.S. Bankruptcy Judge Stacey Jernigan granted a motion Friday allowing Prospect Medical Holdings to abandon Crozer-Chester Medical Center and Springfield Hospital if a sale doesn’t materialize.

Attorneys for Prospect told the judge that the company reached an agreement with taxing authorities in Delaware County to make the shuttered properties more attractive assets. An auction for the closed hospitals is set for later Friday.

“I’m really pleased to hear that things have been worked out, if you will, with the taxing authorities,” Jernigan said during the bankruptcy hearing in the Northern District of Texas.

The starting bid for Crozer-Chester Medical Center is $7 million, and the starting bid for Springfield Hospital is $3 million.

“We believe that we’ll be able to get those sales consummated because of the deal that we’ve struck for the abandonment order here with the taxing authorities,” said Maegan Quejada, an attorney representing Prospect Medical Holdings.

Prospect filed the abandonment motion Oct. 3, because bidders wouldn’t agree to a deal unless tax assessments on the properties were reduced. The deadline to submit bids for the former Crozer Health hospitals was Tuesday.

Crozer was once Delaware County’s largest health system. The four-hospital system was home to the county’s only high-level trauma center. Prospect closed Delaware County Memorial Hospital and Springfield Hospital in 2022. Prospect filed for bankruptcy in January.

Crozer-Chester Medical Center and Taylor Hospital closed a few months later, leaving Delaware County residents in an emergency health care desert.

In August, Prospect sold Delaware County Memorial Hospital for $600,000 to the Upper Darby School District. KQT Aikens purchased Taylor Hospital from Prospect in September for $1 million.

Prospect then moved to sell the Crozer-Chester Medical Center and Springfield Hospital properties.

Some of the taxing authorities present at the hearing requested minor changes to the wording of the orders. They wanted to ensure bidders would not get the benefits of the tax resolution unless they agreed to sign the stipulation.

Springfield calls abandonment a ‘total surprise’

While no party submitted an objection in writing, Springfield Township rejected nearly all of Prospect’s framing of events.

Solicitor James Byrne told Jernigan that word of a possible abandonment came as a “total surprise.” He verbally objected to reaching a deal with Prospect.

“We don’t know anything about it and in fact my hands are tied,” Byrne said. “I can’t agree to anything under this type of circumstance where I don’t have an opportunity to explain anything to my clients.”

Jernigan said the dual track of abandonment-or-sale had been the trajectory for the properties since April. Quejada also stated that Springfield was not included in discussions because Prospect was only working with authorities with whom they had outstanding tax obligations.

“We don’t have any claims filed by this entity,” Quejada said. “That’s why they weren’t the ones we were talking about.”

Byrne categorized abandonment as a legal “sledgehammer” — but Jernigan called it a “tool.” Ultimately, Jernigan found Prospect met the burden of proof to seek abandonment as an option.

“I’m still hopeful a sale’s going to come through,” Jerngian said.