Prospect Medical Holdings Inc. said in an emergency bankruptcy motion Friday evening that it wants to ‘abandon’ Delaware County’s Crozer-Chester Medical Center and Springfield Hospital unless local authorities agree to its property tax demands.
The California for-profit, which filed for bankruptcy in January, said it has potential buyers for the properties in Upland Borough and Springfield Township, which were once part of Crozer Health, the county’s largest health system and an important safety-net provider.
However, the bidders won’t close the deals unless tax assessments on the properties are reduced to the amount of the sale prices, Prospect said in its motion. The filing did not say what bids Prospect had received or how much Prospect owes in taxes. The assessments have been in dispute for years.
If U.S. Bankruptcy Judge Stacey Jernigan approves the motion at a hearing scheduled for Friday, Prospect would be allowed to jettison the properties from the case and stop the accumulation of property tax liabilities against the bankruptcy estate.
Then, if the tax authorities still do not agree to Prospect’s demands, the only way the municipalities and school districts could collect at least part of what they are owed would be to foreclose on the properties and put them up for a tax sale — a process that could take years.
Prospect had said previously it planned to hold an auction Oct. 10 for the Crozer-Chester and Springfield properties. It’s not clear if that plan has changed.
Prospect’s replay of earlier tactic that worked
In July, Prospect received court approval to abandon two other shuttered Crozer hospitals, Taylor Hospital in Ridley Park and Delaware County Memorial Hospital in Drexel Hill. Those two hospitals have since been sold.
Upper Darby School District acquired Delaware County Memorial for $600,000 on Aug. 14 and plans to use the property for the expansion of its neighboring high school. A group of local investors bought Taylor for $1 million Sept. 5 and hope to bring medical services back to the building.
In both of those cases, the townships and school districts accepted a general unsecured claim for past property taxes. The assessment issue was moot in Drexel Hill, but in the Taylor sale the taxing authorities agreed to a $1 million assessment for the first year or so.
Complications in Springfield
The Springfield property has a complicated ownership structure. Ventas, a large real estate investment trust, owns three of the buildings, two medical office buildings, and a sports club that is leased to the YMCA of Eastern Delaware County. The sale of those buildings happened in 2009, seven years before Prospect acquired Crozer.
The hospital and a parking garage were part of the 2019 sale of Crozer real estate to a different investment firm, Medical Properties Trust. Under that arrangement, Prospect leased Springfield and other hospitals back from Medical Properties Trust.
After Prospect’s financial condition deteriorated, MPT returned ownership of the Delaware County hospitals to Prospect in exchange for a mortgage. That happened in 2023. During the bankruptcy, MPT agreed to walk away from its interests in Crozer’s real estate.
Prospect failed for years to maintain the hospital and its parking garage, according to a lawsuit filed in mid-September by Springfield Township. The lawsuit cited the potential structural failure of stairwells in the garage and other problems and asked for an order forcing safety improvements.
Judge Jernigan blocked the township from pursuing that lawsuit last week.
Another sticking point in Springfield is a deed restriction requiring the operation of a 24/7 emergency department on the site.
Representatives for Springfield Township and Upland Borough did not respond to requests for comment Saturday.