Prospect Medical Holdings moves to sell Crozer Health assets amid bankruptcy proceedings

Prospect Medical Holdings, Inc. has announced plans to sell Crozer Health and its associated medical facilities to a not-for-profit consortium of healthcare operators. The proposed hospital ownership transfer, which includes hospitals, clinics, ambulatory surgery centers, and physician offices, is aimed at ensuring long-term stability and uninterrupted medical services for patients in Delaware County, Pennsylvania.

The transition is being carried out in collaboration with the Commonwealth of Pennsylvania, with Prospect Medical Holdings emphasizing that the sale will preserve access to essential healthcare services while allowing the organization to streamline its focus. The Crozer Health sale follows the company’s broader strategy of divesting assets outside of California as part of its ongoing Chapter 11 bankruptcy proceedings. The company has assured patients, employees, and healthcare providers that operations will remain unaffected during the transition.

Why Is Crozer Health Being Sold to a Not-for-Profit Consortium?

The hospital ownership transfer is expected to bring financial and operational stability to Crozer Health, ensuring it continues to meet the medical needs of local communities. The not-for-profit consortium purchasing Crozer Health has pledged to sustain high-quality healthcare services, maintain critical medical programs, and support initiatives that enhance public health.

Tony Esposito, Chief Executive Officer of Crozer Health, emphasized that the sale will allow the hospital system to continue delivering essential patient care without interruption. He acknowledged the Commonwealth of Pennsylvania’s role in facilitating a smooth transition and ensuring that local healthcare services remain intact.

Beyond maintaining hospital operations, the not-for-profit consortium has also committed to continuing physician training programs and supporting community health initiatives, reinforcing Crozer Health’s longstanding role as a pillar of medical education and public health.

How Does the Bankruptcy Court Impact the Crozer Health Sale?

While the Crozer Health sale has been agreed upon in principle, the transaction remains subject to bankruptcy court approval. Prospect Medical Holdings has filed the necessary documentation with the United States Bankruptcy Court for the Northern District of Texas, with a hearing scheduled for February 6, 2025. The approval process is critical, as it will determine whether the sale can proceed under the company’s Chapter 11 restructuring plan.

Prospect Medical Holdings has engaged top legal and financial advisors to oversee the transaction. Sidley Austin LLP and Duane Morris LLP are providing legal counsel, while Houlihan Lokey Capital Inc. is serving as the investment banker. Alvarez & Marsal North America, LLC has been brought on as the company’s financial advisor.

How Does the Crozer Health Sale Fit Into Prospect Medical Holdings’ Broader Strategy?

The Crozer Health sale is part of Prospect Medical Holdings’ restructuring plan, which involves selling hospitals outside of California to refocus on core operations in underserved communities. The company has been actively working to streamline its portfolio, prioritizing financial stability while ensuring continuity of healthcare services at the facilities being divested.

Earlier this month, Prospect Medical Holdings announced that it would be divesting its Rhode Island hospitals, Roger Williams Medical Center and Our Lady of Fatima Medical Center, to Centurion Foundation, Inc.. The move is part of a broader initiative to strengthen its financial position while ensuring continued healthcare services at facilities it no longer plans to operate. In addition to these transactions, the company is finalizing discussions with stakeholders regarding the sale of Crozer-Chester Medical Center in Pennsylvania.

Will Patients Be Affected During the Transition?

Despite the ongoing bankruptcy court approval process, Prospect Medical Holdings has reassured the public that all of its hospitals, including Crozer Health, will continue to function without disruption. Patients will have full access to medical services, and there will be no interruptions in care during the transition to new ownership.

The company has taken steps to ensure payroll continuity for employees and maintain vendor payments for post-bankruptcy services. These measures are designed to guarantee a seamless transfer of ownership without impacting healthcare delivery. Medical professionals, hospital staff, and supporting personnel will continue their roles as usual, with no immediate changes to operations or service availability.

What Comes Next for Prospect Medical Holdings?

Following bankruptcy court approval, Prospect Medical Holdings expects to finalize the sale of Crozer Health and other non-core hospital assets, allowing for a strategic realignment of its operations. Meanwhile, its California-based healthcare network, including PHP Holdings, LLC, will remain unaffected by the Chapter 11 proceedings. The company has also confirmed that its planned sale of PHP Holdings, LLC to Astrana Health, Inc. is on track to close by mid-2025.

As Prospect Medical Holdings navigates its restructuring, the company remains focused on providing uninterrupted healthcare services while ensuring a financially stable future for the hospitals being sold. The Crozer Health sale represents a critical step in this process, securing long-term stability for patients and medical professionals alike.