When Prospect Medical Holdings, a for-profit Los Angeles-based hospital operator, purchased the Crozer-Keystone Health System in 2016, federal law required the nonprofit assets of the original entity be set aside to create a separate charity.
Those assets, $55 million, were used to create the Foundation of Delaware County (Delco Foundation), a community nonprofit with a mission to “improve the well-being of the county’s diverse residents.”
Instead of an amicable separation, the result has been closer to an ugly divorce. And now, with Prospect in Chapter 11 bankruptcy and the Crozer-Chester Medical Center and Taylor Hospital in Delaware County in danger of closing down, some are asking why the Delco Foundation — created with cash from the hospital sale — isn’t doing more to help.
Meanwhile, the charitable foundation has been donating to unrelated causes like arts and theater, as well as efforts to increase “ethnically and culturally diverse foods.”
From the beginning of the breakup, the relationship between Prospect and the Foundation has been rocky.
The Delco Foundation went to court in 2017, claiming Prospect underpaid it by $20 million, plus $1.5 million in interest. It was eventually settled in arbitration. Two years ago, the foundation went to court to prevent Prospect from closing Delaware County Memorial Hospital.
A separate issue involved the ownership of hospital buildings in Springfield. When the initial sale went through, the landlord of those buildings refused to transfer the leases. Instead, Prospect subleased the facilities from the Delco Foundation, promising to take financial responsibility—a promise that was never fulfilled, leaving the foundation with a $30 million liability.
That’s left Delco Foundation officials fuming.
“Prospect has left the Foundation with a $30 million lease liability in Springfield, funds we would have much preferred were invested directly in our community,” Frances M. Sheehan, Delco Foundation president, told DVJournal.
Now, Prospect is in bankruptcy court and threatening to close to Delaware County hospitals. On March 9, Pennsylvania Attorney General Dave Sunday announced an “11th hour” agreement to keep them open.
”The future of Crozer Health has dominated my first month in office,” Sunday said. “And it deserves that full attention, as this system is an asset to the communities it serves and an economic driver for Delaware County.”
They may be assets, but they are also fiscal liabilities to taxpayers. Crozer received a $20-million taxpayer-funded bailout from the state. And that wasn’t enough without the additional funding announced by Sunday.
Delco Foundation kicked in $7 million to keep Crozer-Chester Medical and Taylor Hospital for two weeks. The funding was part of a multi-party agreement involving officials with Prospect, Delco Foundation, a court-appointed receiver, Delaware County and the attorney general.
But critics, like Gov. Josh Shapiro, are raising the issue of state taxpayers subsidizing local hospitals when a foundation with millions of dollars from the original sale of those hospitals is right here in the community.
“This Foundation is sitting on a whole lot of money that could help provide healthcare in Delaware County, and they’re not doing anything with that money,” Shapiro griped earlier this month. “They’ve got to step up and actually do something.”
In fiscal year 2023, the Delco Foundation fund had more than $74 million.
They are doing something with their funds at the Delco Foundation. However, not all of it involves local healthcare.
Documents show the nonprofit has thousands of dollars funding causes like art and music programs, including the Media Arts Council, which received $16,000 last year. Another $8,300 was spent on Murphy’s Giving Market in Upper Darby for “ethnically and culturally diverse” food. And more than $68,000 went to economic development along the Chester Pike, the Chester Waterfront Development, and in Lansdowne.
Thousands of dollars went to an arboretum, to fund school supplies, and to the Chester Community Coalition “to build peace for those impacted by violence.”
Asked about using money from a hospital sale on causes so far afield from healthcare, Shaheen defended the Delco Foundation by saying it is expanding the definition of the word “healthcare.”
“There is a much broader understand of what impacts health today than whether you see a physician on an annual basis,” Sheehan said.
Healthcare means looking at “broader social determinant issues” to give people access to green spaces for exercise, out of lead-free homes, and away from gun violence.
She also argued that, because Prospect is a for-profit company, the ability of the nonprofit to help is limited.
“Our role has been to hold Prospect accountable while continuing to invest in vital programs such as maternal health services, housing support, and nonprofit funding,” claimed Sheehan.
“(Prospect is) a for-profit company. They can’t receive,” she said.
The will of the donors is also important when it comes to providing grant money.
“Those individuals (and businesses) have a broad range of interests,” Shaheen said.
As for Shapiro’s complaints, former Delaware County Council chair Wally Nunn suggested he is trying to redirect the conversation.
Nunn argued it makes no sense to force the foundation to pony up more cash. “Bankrupting the foundation does nothing but bankrupting the foundation,” Nunn told DVJournal.
