Legal Battle Unfolds: Prospect Medical Sued for Alleged Mismanagement Endangering Crozer Health

AG Michelle HenryCredit: Commonwealth Media Services

MEDIA, PA — Attorney General Michelle Henry has initiated a lawsuit against Prospect Medical Holdings, Inc., citing years of purported mismanagement and neglect of the Crozer Health System based in Delaware County. This alleged neglect has led to a significant disruption of healthcare services for a large population in Pennsylvania, with facility closures and service reductions affecting hundreds of thousands of residents.

The lawsuit claims that Prospect Medical Holdings violated the Asset Purchase Agreement approved in 2016 by systematically cutting services and closing facilities within the Crozer Health network. Instead of maintaining the healthcare system, the company is accused of redirecting substantial funds to private shareholders and investors, undermining the network’s capacity to provide necessary medical services.

Filed earlier this week, the civil complaint seeks to compel Prospect Medical to uphold its financial responsibilities to sustain operations until a new owner can be secured. Furthermore, the litigation demands a preliminary injunction to maintain current service levels and the appointment of a receiver to oversee Crozer Health System’s management temporarily, preventing further service reductions or facility closures.

Attorney General Henry emphasized the gravity of the situation, stating, “We are taking legal action against a company which agreed to prioritize affordable, accessible healthcare — but instead broke their promise with years of neglectful, self-serving practices that have put lives at risk. My office is the last line of defense for Pennsylvanians who are losing quality, convenient healthcare due to corporate greed.”

The 2016 purchase agreements included a commitment to keep all acute care hospitals operational for a decade. However, the complaint details how Prospect Medical’s financial maneuvers, such as real estate sale-leaseback agreements, have drained over $450 million for private investors, imposing an additional annual lease liability of $35 million on the facilities.

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Compounding these issues, the company has allegedly neglected to adequately fund Crozer Keystone retirees’ pension accounts. This financial mismanagement has reportedly led to the closure of Delaware County Memorial Hospital and Springfield Hospital, along with the suspension of associated healthcare services. While Crozer-Chester Medical Center and Taylor Hospital remain open, there are concerns about potential suspensions of critical services, including trauma and maternal health care, at Crozer-Chester Hospital.

Senator Tim Kearney, Representative Leanne Krueger, and Delaware County Commissioner Dr. Monica Taylor have all expressed their concerns about the impact of Prospect Medical’s actions on the local healthcare landscape. The civil complaint seeks not only to hold the company accountable but also to secure immediate operational funding to ensure that remaining facilities can continue to deliver full-scale services until new management is established.

This lawsuit highlights a broader trend of detrimental outcomes following private equity acquisitions of healthcare facilities nationwide. Such transactions often prioritize profit over patient care, leading to adverse effects on healthcare accessibility and quality.

With no specified timeline, the Attorney General’s office is urging swift judicial action to appoint a receiver and issue an injunction, aiming to stabilize the healthcare services in Delaware County and protect the community from further disruptions.

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