The Foundation for Delaware County will not be providing any more funding to Prospect Medical Holdings, FTI Consulting or any Prospect-related entity in a move that’s unknown how it will impact any pending deals to save Crozer Health.
Delaware County Court of Common Pleas Judge George Pagano approved an injunctive order Wednesday basically freezing the foundation from transferring any funds to Prospect Medical Holdings Inc., Prospect Crozer LLC, any Prospect-related entity, FTI Consulting Inc. or to any other entity for the operation of any hospital or hospital services, or for supplies and any other related expense.
The order came out of a filed request of foundation board member Donald Delson of Swarthmore, who is also a donor to the organization.
The legal action maintained that the foundation’s purpose when it was created in 2016 as a result of the sale of the former Crozer-Keystone Health System to Prospect Medical Holdings Inc. was to build a better community, support health care education and support health care education, social services and initiatives and programs throughout all of Delaware County.
The document noted that the foundation has done that, distributing millions in grants, scholarships, and other initiatives and programs consistent with its stated charitable purpose to groups such as the YMCA of Eastern Delaware County, Philabundance, Bringing Hope Home and administering the county’s Women, Infants and Children program.
The legal action noted, Delson “donated money to the Foundation, but with the specific condition and/or expectation that such money be used solely in furtherance of the Foundation’s stated charitable purposes.”
On Jan. 11, Prospect filed for Chapter 11 bankruptcy for many of its properties outside of California, including Crozer Health. Then, FTI Consulting was appointed to serve as a receiver to oversee Crozer Health operations.
Delaware County and the state each committed about $10 million for operating costs incurred under FTI’s oversight.
Then, on March 9, the Foundation entered into an agreement with the state Attorney General’s Office to provide further funding to keep Crozer afloat, though the amount was not specified.
Court documents stated that the Foundation responded in this matter “whereby the Attorney General agreed not to bring suit or otherwise challenge the Foundation in exchange for the Foundation’s payment to Prospect of funds to support the operation of Prospect’s hospitals for a two-week period.”
The document expressed that “under the Agreement, there is the immediate possibility that more money may be requested from the foundation to be paid to Prospect,” especially as the two-week period is getting closer to ending.
Delson noted, “(d)he Foundation’s payment of additional money to Prospect, as expressly contemplated under the Agreement, or to the Receiver, to operate Prospect’s hospitals is thus contrary to Plaintiff’s conditional donation” and that’s why he was asking the court to prevent payment of any additional money to Prospect.
The foundation released a statement regarding this court action.
“Our donors and board members understand the vital role of Crozer Health. Many have supported it for years, even before the sale to Prospect Medical Holdings,” it said. “They recognized the importance of the Foundation’s assistance so that the Attorney General could pursue a final search for a genuine buyer for Crozer. But they also believe deeply in the Foundation’s work over the past eight years and know that the Foundation cannot save the health system, especially with our $30M+ liability left by Prospect. Their commitment remains focused on ensuring the Foundation’s ability to continue serving the community for decades to come.”
It is unclear how this action will impact the potential asset purchase agreement that officials mentioned Wednesday from bankruptcy court hearings in Texas.
County and state leaders noted that updates to that court revealed that a potential plan was possibly emerging that would allow a operating partner to come to Crozer Health. However, officials also continue to reiterate that whatever occurs, the Crozer Health system would look different than it does today. It’s not clear what that means.
