Prospect Medical Holdings and the Foundation for Delaware County have temporarily suspended their ongoing lawsuit over the closure of Delaware County Memorial Hospital to give Prospect time to sell Crozer Health, which is currently in legal and financial trouble.

Prospect, an affiliate of hospital real estate firm Medical Properties Trust (MPT), sought to close the facility, a part of the former Crozer-Keystone Health System, in 2022 and turn it into a behavioral health site but was blocked by the Foundation, which is the legal successor to the previous owner of the health system. It said the move to close the facility without its permission violates the 2016 purchase agreement that Prospect signed, according to The Philadelphia Inquirer.

Both have now agreed to a nine-month pause that will provide Prospect with 270 days to sell Crozer, which will continue to provide care until a buyer is found.

“The Foundation is hopeful that a high-quality, nonprofit system or consortium of systems will come forward to acquire a health care system that so many Delaware County residents need and deserve,” said the Foundation in a statement.

Based in Los Angeles, Prospect paid $300 million for the Pennsylvania-based health system, which also includes Crozer-Chester Medical Center, Taylor Hospital, and several outpatient facilities. The company sold Crozer real estate, along with other properties, to MPT in 2019 for $420 million. MPT leased it back, but since then its value has declined to $155 million due to the health system’s financial troubles.

Prospect was in talks in 2022 to sell Crozer to Christiana Care Health System but no deal was formed. In recent months, Crozer has been hit with lawsuits by at least seven vendors who claim that it failed to pay over $900,000 in bills, according to The Inquirer. It also laid off 200 employees in March, reported Fox 29 News.

Prospect is also facing hurdles in ongoing negotiations with Yale New Haven Health over the sale of three Connecticut hospitals for $435 million, with Yale New Haven now seeking a price cut, plus $16 million for financial support from the state for five years in the wake of a cyberattack that led to a $1.3 million auction of over half a million individuals’ data on the dark web.

In May, MPT announced a recapitalization agreement in which Prospect would pay off its material debts and lease obligations with $375 million from third-party lenders, using the money to liquefy operations at its 17 hospitals and over 165 clinics and outpatient centers, and scale its managed care business, PHP Holdings.

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