ChristianaCare walks away from Crozer deal
From: Delaware Business Times WILMINGTON — ChristianaCare has ended its bid to buy Crozer Health this morning, concluding its efforts to aggressively expand in southern Pennsylvania and settling for a smaller share of the market for now.
Delaware’s largest health care system signed a letter of intent with Crozer’s parent company, Prospect Medical Holdings Inc., in February. The goal was to finalize the sale in the fourth quarter of 2022, pending a due diligence period and negotiations.
In a joint statement, both ChristianaCare and Prospect Medical Holdings said Thursday that “the economic landscape has significantly changed, impacting the ability of the sale to move forward.”
“We worked hard to reach an agreement for the purchase of Crozer Health, and we are disappointed in this outcome,” ChristianaCare Chief Strategy Officer and General Counsel Jennifer Schwartz said in a statement. “ChristianaCare very much wants to be a strong partner in Delaware County and in other communities throughout southeastern Pennsylvania. We will continue to explore opportunities to serve the needs of our neighbors.”
ChristianaCare, a not-for-profit that breaks its organization into several tax-exempt organizations, produced revenue of more than $2.5 billion in Fiscal Year 2020 and held more than $2.8 billion in net assets. The FY 2020 tax returns for the nonprofit are the last publicly available documents at this time.
Crozer Health, established in 1990 by the merger of Crozer-Chester Medical Center and Delaware County Memorial Hospital, was acquired by Prospect in 2016 after no local nonprofit organizations were willing to take over the beleaguered system. Prospect, a for-profit company, has laid off employees and closed hospital units in the past year.
The deal, if completed, would have transferred four hospitals as well as Crozer Health Medical Group’s primary care and specialist practices, as well as other assets. ChristianaCare would have also gained roughly 3,800 employees.
However, in the weeks after the prospective deal was announced, Crozer Health continued to lay off more staff. Departures eventually included Crozer CEO Kevin Spiegel, who held the job for five months. In July, he was replaced with Anthony Esposito, who served as the chief financial officer at Drexel University College of Medicine.
Crozer also weighed closing several wards and services, including substance abuse clinics and services at three hospitals and a crisis center at Crozer-Chester Medical Center, according to WHYY.
In April, Crozer was looking to quietly receive additional payment from seven Pennsylvania townships to continue offering paramedic services. Then-Crozer CEO Kevin Spiegel wrote a letter to municipal leaders that the paramedic service operated at a $336,000 annual loss, and would be ending service by the end of the month if a new funding agreement could not be reached.
Amid closing or reevaluating many of its assets, another factor complicating the deal with ChristianaCare was that Crozer no longer owns its facilities. In 2019, Prospect sold the property it owned in Pennsylvania, California and Connecticut to Medical Properties Trust for $1.55 billion, with Crozer leasing back its facilities and adding to operational costs.
Crozer pays between $30 million and $35 million in annual rent to Medical Properties Trust, according to the Philadelphia Inquirer.
Earlier this month, Prospect Medical Holdings signed its first contract with a union of more than 80 technical specialists at Delaware County Memorial Hospital (DCMH) and Taylor Hospital. The contract was signed after 14 months of negotiations.
ChristianaCare declined to comment in detail about ending the deal, citing the confidentiality of negotiations.
In the past year, ChristianaCare has proven to be an aggressive agent in health care expansion in the past year. After acquiring the former Union Hospital in nearby Elkton, Md., ChristianaCare was relatively quiet in terms of expanding beyond its footprint, until the potential deal with Crozer was announced.
Since then, ChristianaCare has moved forward with primary care offices in Rehoboth Beach and Milford, as well as a spinal surgery center in Wilmington. Around the same time talks were beginning for the Crozer deal, the health care system announced it would buy two primary care offices in Jennersville and West Grove. It also bought the Jennersville Hospital from Tower Health for $8 million this summer.