LA-based hospital operator finalizes deal for Crozer-Keystone

Prospect Medical Holdings Inc., a for-profit hospital management company based in Los Angeles, has entered into agreement to buy Crozer-Keystone Health System — Delaware County’s largest health care provider.

The proposal deal, for which a tentative agreement was signed in October, still requires regulatory approval.

It was among a half dozen mergers and acquisitions involving local health systems that were either proposed or completed last year, as providers continue to take a “big is better” approach to changes in medical delivery and reimbursement under Obamacare.

Under the terms of the agreement, Prospect is pledging to keep all five Crozer-Keystone hospitals open and invest $200 million in the medical centers over the next five years to modernize the facilities and expand services. In addition, Prospect will assume Crozer-Keystone's outstanding pension liability — funding $100 million of the obligation at closing, and providing distributions to pay all benefits owed to pension participants and beneficiaries within five years of the closing date.

Prospect will also offer employment to all Crozer-Keystone employees and management in good standing. The health system has a staff of about 6,000 people. In addition, the company honors seniority levels and enter into recognition agreements with the various labor organizations that represent Crozer-Keystone workers.

Other financial aspects of the deal were not disclosed.

The agreement also calls for Crozer-Keystone’s hospitals, its physician network, and its other facilities to continue to operate under their existing names —and become part of the Prospect network. The agreement specifies that key service lines such as emergency department, trauma, behavioral health, maternity and pediatrics will remain in place or expand. Prospect will also adopt Crozer-Keystone’s charity care policies for at least five years, and fund wellness, health education and other community programs consistent with Crozer-Keystone’s past practices.

“We are very pleased to have a partner that shares so many of our priorities,” said Joan K. Richards, Crozer-Keystone’s president and CEO, in a prepared statement. “We recognize and appreciate the level of commitment and the willingness to take on challenges that Prospect has demonstrated throughout the process of negotiating this agreement.”

Based in Springfield, Pa. Crozer-Keystone is the parent company for Crozer-Keystone Medical Center in Upland, Delaware County Memorial Hospital in Media, Taylor Hospital in Ridley Park, Community Hospital in Chester, and Springfield Hospital. The health system also operates several outpatient centers, the Healthplex Sports Club, and a comprehensive physician network of primary-care and specialty practices.

Thomas Reardon, president of Prospect East Holdings Inc., said his company “is committed to building upon Crozer-Keystone's long and distinguished history of delivering quality, compassionate care and to helping ensure the future of this vital community health care provider.”

Prospect, which calls itself “a provider of coordinated regional health care services,” owns and operates 13 hospitals in three states (California, Texas and Rhode Island), with a total of 2,258 licensed beds along with 40 clinics and outpatient centers.

The acquisition by Prospect — should it receive regulatory approval — will change the tax status of Crozer-Keystone from nonprofit to for-profit, meaning its revenues will be taxed.

The region already has eight for-profit community hospitals operated by Community Health Systems (NYSE: CYH), Tenet Healthcare Corp. (NYSE: THC) and Prime Healthcare Services, and about a dozen other for-profit behavioral health and specialty hospitals.

Source: Philadelphia Business Journal