Crozer closure: Gov. Josh Shapiro, Delaware County legislators unite behind bills to tackle private equity

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There is nothing the government can do to immediately reopen Crozer Health, Delaware County’s largest health system.

But Pennsylvania officials are rallying together to ensure that private companies like California-based parent company Prospect Medical Holdings cannot devastate another hospital or community like it did with Crozer.

Gov. Josh Shapiro demanded Thursday that a pair of bills safeguarding Pennsylvania’s hospitals against unchecked corporations make it to his desk this legislative session.

“I am done letting private equity wreak havoc on our healthcare system, wreak havoc on our communities, treating our hospitals like a piggy bank that they can drain and then smash on the floor,” Shapiro said at a presser outside of Crozer-Chester Medical Center. “Those days are over. The time for action is right now.”

In a statement to WHYY News, a spokesperson for Prospect said “contrary to the Governor’s assertions” that the company negotiated in “good faith” to keep the hospitals open.

“This included arranging for Crozer, and all of its assets, to be transferred to any party supported by the Commonwealth for no cash payment free and clear of any claims, as well as keeping Crozer open for as long as possible post-bankruptcy to allow for a local solution to be achieved at the expense of its third party creditors,” the statement reads. “The outcome is extremely unfortunate and we are continuing to work to provide support for our patients and team members.”

The yearslong death spiral of Crozer can largely be attributed to avoidable financial decisions at the behest of private equity firm Leonard Green & Partners and Prospect. Executives saddled the Prospect’s hospitals with debt, left the system handcuffed to $1.3 billion in lease obligations and profited to the tune of $457 million.

“Across Pennsylvania, especially in some of the most rural parts of our commonwealth, private equity is stripping money out of our hospitals and health care systems with total disregard for the communities who rely on them,” Shapiro said.

State Sen. Tim Kearney, D-Delaware, and state Rep. Lisa Borowski, D-Delaware, introduced companion legislation in their respective chambers that seeks to reel in for-profit health care institutions from conducting harmful acquisitions, mergers and other business transactions.

Senate Bill 322 and House Bill 1460 would grant the Pennsylvania Office of the Attorney General power to review deals involving health systems, block sale-leaseback agreements by private equity firms and mandate institutions to submit financial and operational disclosures before completing transactions.

“This is America,” Kearney said. “And most folks don’t have a problem with doing good and doing well. But profits should be earned. They should not be taken, especially when it comes to our health. This is the balance that our legislation seeks to restore in our healthcare system.”

Delaware County lawmakers have drafted similar bills before. Previous iterations of policy included more ambitious goals, such as a complete prohibition on for-profit entities operating hospitals. The restrictions within the bills extended even to nonprofit ownership.

All of it died somewhere along the way in Harrisburg. Kearney insinuated “fairly powerful interests,” including the hospital lobby, played a factor. After retreating to the drawing board, lawmakers are trying their hand with a narrower set of policies.

State Rep. Craig Williams, R-Delaware, was notably present Thursday alongside his Democratic colleagues, who were applauding in support of the bill.

“I hope lawmakers come together, Democrat and Republican, like the group we have assembled here today, and quickly pass this much needed legislation,” Shapiro said. “Put it on my desk and I will sign it into law.”

Shapiro also announced steps that the administration and county officials are taking to remedy the situation in Delaware County, including supporting emergency medical care, connecting former Crozer staff to new employers and setting up a transition center in Chester.

Shortly after the presser, attendees were reminded of the crisis currently unfolding as a result of the collapse of a four-hospital system.

A woman approached Crozer-Chester with a responsive baby in need of medical attention. First responders sprung into action to transport the child to another hospital, which would likely be 30 minutes away.

“What happens when harm is the business model of your health system?” said Peggy Malone, president of the Crozer-Chester Nurses Association. “I can tell you what happens. Shooting victims die, mothers give birth at places far outside their community limits — if they make it there, caregivers are abandoned, behavioral health patients wander the streets, communities suffer. That’s why we have to stop this before private equity ever does this to any other health system.”