Prospect Medical Holdings’ troubles endanger potential Crozer Health sale. Will Pa. step in to save health care in Delco?

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Prospect Medical Holdings is in the crosshairs of Connecticut’s largest health care system and one of New England’s biggest medical unions.

The California-based for-profit hospital network, which owns hospitals in California, Connecticut, Pennsylvania and Rhode Island, is facing scrutiny for its attempts to sell its various assets.

Prospect’s inability to get a deal across the finish line has local legislators worried that the company’s court-approved promise to sell Crozer Health to a nonprofit might be dead on arrival. Given the confidentiality around the bidding process, it’s unclear if there are interested suitors.

“The confidential sale process is progressing, and our office remains actively engaged,” said Brett Hambright, a spokesperson for the Pennsylvania Attorney General’s Office, in an emailed statement.

State Sen. Tim Keaney said he believes the issues up north will hurt Crozer’s ability to survive unscathed. Kearney’s policy director, Sam Arnold, said the delay in the other sales hurts Delco and its residents.

“The more delay there is with Prospect’s hospital sales in Connecticut and Rhode Island that puts a greater cash crunch on Prospect, which we are concerned will result in delays in payment to vendors, staff and needed maintenance in the Crozer properties here — because it’s all the same entity getting cash-squeezed,” Arnold said.

Prospect did not immediately respond to a request for comment. The situations unfolding in Connecticut and Rhode Island reveal a future wrought with hurdles, even if Prospect finds a buyer for Delaware County’s four-hospital system.

Most recently, Yale New Haven Health is pushing to exit a deal to purchase Prospect’s three Connecticut hospitals. In a legal complaint filed May 3 with the state’s Superior Court, Yale New Haven alleged Prospect is breaching its asset purchase agreement.

“The value of the assets has declined dramatically due to Prospect’s failure to pay physicians and vendors including Yale Medicine, the non-payment of state provider and municipal taxes, and the impact of a massive cybersecurity event caused in part by a lack of investment in technology which exposed patient, employee and dependent data and rendered Prospect CT unable to bill for services,” Dana Marnane, a spokesperson for Yale New Haven, told WHYY News in a statement.

In September 2023, Yale New Haven sought a price reduction to account for Prospect’s “serious mismanagement” and a $67 million tax bill. Prospect wouldn’t budge.

“Yale New Haven Health has acted in good faith throughout this process in order to find a responsible path forward that would allow us to maintain access to care and extend the benefits of non-profit, academic medicine to communities currently served by a for-profit entity,” Marnane said. “We simply cannot jeopardize the sustainability of our health system by moving forward with the acquisition as it stands.”

Prospect owns two hospitals in Rhode Island, Roger Williams Medical Center and Our Lady of Fatima Hospital, plus a home health care agency. The company is trying to sell those assets to The Centurion Foundation, a nonprofit entity based in Atlanta, Georgia.

Centurion and Prospect filed an application with the state’s Department of Health and attorney general’s office, seeking approval of the sale.

Chris Callaci, general counsel for United Nurses and Allied Professionals, said the union has a problem.

“As much as we despise Prospect — and they are about as bad if not the worst corporate citizen you will ever come across — we have very aggressively opposed this transaction.

And the reason boils down to something very simple. The Centurion Foundation is basically, if you visit their website, just a consulting outfit. They don’t own any hospitals,” Callaci said.

Callaci said Centurion doesn’t know how to operate hospitals and that they won’t invest in Rhode Island’s hospitals if they gain ownership interest in them. In effect, there would be no investments and capital expenditure.

“And their play is that if they get ownership, they want to take these local health care facilities to the bond market and make the local health care facilities borrow approximately $133 million,” Callaci said.

In this bond-funding scenario, Centurion wouldn’t take on any of the debt.

“So, it’s a no-cash deal, and when the local hospitals collapse from that debt that Centurion wants to saddle them with, then they get to take the fee money, put it in their pocket, go back to Atlanta and live happily ever after while the local facilities crash and burn,” Callaci said.

Centurion would disagree with his assertion.

Callaci said the situation in Connecticut has only reinforced what he already believed about Prospect’s ability to get a deal done: He cannot rely on them.

He has given the same advice to Rhode Island officials, from the state House to the governor’s office.

“We all have to be in a position to save these community hospitals, and that means that if for example, in Pennsylvania, the attorney general is requiring that Prospect sell to nonprofits, I have difficulty imagining that that’s going to be successful if the state and other stakeholders don’t play a role in making the financing of such transaction possible,” Callaci said.

Kearney said he is keeping a close eye on the situation in Rhode Island. Delco’s state legislators have proposed legislation in Harrisburg akin to the Ocean State to shore up hospital acquisition regulations. While the passage of those bills would prevent another Prospect situation, the legislation in limbo would not solve the problem.

However, Kearney said he doubts that a deal is on the horizon. His stance? Pennsylvania might have no other choice if it wants Delco to keep its hospitals.

“Senator Kearney is committed to ensuring access to healthcare in Delaware County, including providing reasonable state support if necessary,” a spokesperson for Kearney said in a follow-up emailed statement. “With any state support, appropriate legal guardrails must be in place to ensure taxpayer dollars only support access to healthcare and don’t wind up benefitting Prospect or covering any of their losses.”

Manuel Bonder, a spokesperson for Gov. Josh Shapiro, said in an emailed statement to WHYY News that the administration “is dedicated to maintaining that level of care in Delaware County by preserving Crozer Health and facilitating Prospect’s exit from Pennsylvania.”

“The people of Pennsylvania — including Delaware County — deserve quality health care provided by entities that are invested in the communities they serve and not just out to make a buck,” Bonder said.