Prospect Medical promises to invest in Crozer-Keystone system
Prospect Medical Holdings Inc.'s deal to buy Crozer-Keystone Health System calls for the California company to change virtually nothing about the operations of the financially beleaguered Delaware County system for five years.
Prospect Medical Holdings Inc.'s deal to buy Crozer-Keystone Health System calls for the California company to change virtually nothing about the operations of the financially beleaguered Delaware County system for five years.
What happens after that is a big worry for nurses, community activists, and public officials who testified at a hearing Wednesday on the sale of the tax-exempt Crozer, which traces its roots to the 1893 founding of Chester Hospital, to Prospect.
Mitchell Lew, president of Prospect, which is based in Los Angeles and has 14 hospitals in California, Texas, Rhode Island, and New Jersey, offered assurance that the company would be committed to the community.
"Our roots are in local community hospitals serving underserved populations, Medicaid, primarily government paid, in East Los Angeles, in places where patients would come to us because no one else would take them. That is in our DNA," Lew said in concluding remarks at the hearing on Crozer's Upland campus.
The hearing was part of the Pennsylvania Attorney General's review of the transfer of Crozer's charitable assets to Prospect, which is majority-owned by private-equity firm Leonard Green & Partners. The next step is a filing with the Delaware County Orphans' Court. That could happen within the next 30 days.
Prospect and Crozer have not disclosed a price tag for the deal, which is Prospect's biggest so far. The agreement calls for Prospect to make a $100 million down payment at closing toward the retirement of Crozer's pension liability, which stood at $190 million on Dec. 31. Within five years, Prospect is supposed to fully fund the rest of that obligation and end the plan.
Prospect, which had $1.3 billion in revenue in the year ended Sept 30, also will pay off Crozer's bond debt at closing, Jonathan J. Spees, Prospect's senior vice president for corporate development, said Wednesday. That debt amounted to $156 million on Dec. 31. Crozer has an additional $32 million in bank debt, notes, and other financing that is likely to be paid off by Prospect.
Those commitments alone are a hefty amount to pay for a system that has struggled to make ends meet, but Spees said Prospect's model of coordinated regional care would make the difference. "We're very confident in that," Spees said.
In its first five years of ownership, Prospect has promised to spend $200 million on plant and equipment, about twice the amount cash-strapped Crozer has spent over the last five years.
That money would be very welcome to Kim Brounce, who has worked at Crozer since 1979, as long as it doesn't all go out to Crozer's suburban outposts in Haverford and Brinton Lake, she said.
"The monitors that I work with are the same monitors that were installed in the surgical-trauma in 1981. You can imagine that a lot has happened technology-wise since those monitors were attached to the walls," she said.
Crozer's chief executive said net proceeds of the sale would go toward a new Crozer-Keystone Community Foundation. Prospect officials said it was too soon to say how much money that would be. .
Two mayors - Thaddeus Kirkland of Chester and Michael Ciach of Upland - testified, both highlighting the fact that Crozer-Keystone would start paying taxes after the for-profit Prospect Medical took over. "We want to say welcome, and we look forward to your tax dollars," Kirkland said.
215-854-4651
@InqBrubaker