The future of Crozer Chester and Taylor hospitals is uncertain after the debtors accused the Foundation of Delaware County (Delco Foundation) of reneging on $13 million in funding.
A hearing is scheduled for Monday in the Texas-based courtroom of federal bankruptcy Chief Judge Stacey Jernigan.
Earlier this month, Delco Foundation gave Crozer Chester and Taylor hospitals $7 million to stay open. It was shortly after they received a $20-million taxpayer-funded bailout from Pennsylvania.
But, on Thursday, attorneys representing Prospect Medical Holdings and its debtors accused the foundation of willfully violating a court order giving the bankruptcy court exclusive jurisdiction.
“The Foundation has now publicly revealed what the Debtors and other parties have long feared privately… [it] has no desire to allow the Pennsylvania Hospitals to remain open and is instead plotting to force closure by any means necessary,” Prospect’s attorneys wrote.
They were referring to a lawsuit filed this week in Delaware County by Delco Foundation trustee Donald Delson. It sought to keep the foundation from transferring any funds “for the operation of any hospital or hospitals services.” Judge George Pagano ruled in favor of Delson late Wednesday.
The lawsuit sparked outrage from critics of the foundation, who point out it was created using $55 million from Prospect’s acquisition of Crozer-Keystone in 2016. According to records, it had more than $74 million in assets in 2023.
Gov. Josh Shapiro (D) griped the foundation was ‘sitting on a whole lot of money” and not doing anything with it. “They’ve got to step up,” he implored.
Delco Foundation attorney Rocco Imperatrice, who had been active in negotiations over the long-term future of the hospitals, supported the suit.
The foundation had agreed to the additional $13 million payment once a long-term resolution was reached. That donation appears to now be in doubt.
Calling the Pennsylvania court hearing a sham, the debtors’ attorneys suggested Delco Foundation performed “egregious and deceptive actions” meant to disrupt the search for a new buyer for the hospitals. “To pull the rug out from the Debtors mere days before a decision must be made on the future of the Pennsylvania Hospitals is unconscionable,” the attorneys wrote.
Jernigan agreed.
In an email sent before Thursday’s emergency hearing, a courtroom deputy said Jernigan was “extremely concerned” about the Pennsylvania court case. The deputy noted the foundation’s actions likely violated the stay in the Prospect bankruptcy case. More importantly, according to Jernigan’s deputy, the Pennsylvania court case happened at the same time when Jernigan held a hearing “where [Imperatrice] was questioned and said nothing about the action.”
Jernigan ordered all parties back to the bargaining table.
Delson’s attorney confirmed to DVJournal that he and Delco Foundation requested the injunction be dissolved. That request was made after Jernigan’s emergency hearing.
The conflict has strained relations between the foundation and Prospect. The foundation claimed Prospect underpaid it by $20 million, plus interest, during the sale. That case was eventually settled.
Foundation President Frances Sheehan told DVJournal the nonprofit was also left with a $30 million liability over hospital buildings in Springfield. “We would have much preferred [the funds be] invested directly into our community,” she said.
Some of those investments involve donations to the Media Arts Council ($16,000), an Upper Darby market for “ethnically and culturally diverse food” ($8300), and more than $68,000 for economic development in multiple areas.
Thousands of dollars were also donated for school supplies, an arboretum, and to the Chester Community Foundation “to build peace for those impacted by violence.”
Sheehan described the grants as following the will of donors and the expanding definition of healthcare. “There is a much broader understanding of what impacts health today than whether you see a physician on an annual basis,” she said.
As for the current negotiations over Crozer Chester and Taylor hospitals, a Delco Foundation spokesperson denied any funding was being withheld. “It’s a moving target right now,” the spokesperson told DVJournal.
Despite the ongoing negotiations, state officials remain irritated.
Attorney General Dave Sunday (R) accused the Delco Foundation of a “senseless act of gamesmanship” that added another obstacle in the push to keep the Crozer system open.
“However, we remain committed to helping the people and families who depend on the system and the hard-working professionals who serve the community,” he said.
