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LEGAL NEWSLINE

Tuesday, November 5, 2024

Attorney general sues Prospect Medical Holdings over health system mismanagement

State AG
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Attorney General Michelle Henry | Ballotpedia

Attorney General Michelle Henry has initiated legal proceedings against Prospect Medical Holdings, Inc., citing the company's mismanagement and neglect of Crozer Health System in Delaware County. The lawsuit claims that these actions have led to facility closures and disrupted healthcare services for numerous Pennsylvanians.

The legal action argues that Prospect Medical violated an Asset Purchase Agreement approved by a court in 2016. This agreement required the company to maintain services and facilities while supporting the healthcare network financially. Instead, funds were allegedly redirected to private shareholders and investors.

A civil complaint was filed by the Office of Attorney General, seeking redress for Prospect Medical's management decisions. The complaint requests that the company cover operating costs until a new owner takes over. Additionally, it seeks a preliminary injunction to preserve current service lines and calls for appointing a receiver to manage Crozer Health System temporarily.

Attorney General Henry expressed concerns about Prospect Medical's practices: "We are taking legal action against a company which agreed to prioritize affordable, accessible healthcare — but instead broke their promise with years of neglectful, self-serving practices that have put lives at risk."

The 2016 purchase agreements included provisions to keep all acute care hospitals operational for at least ten years. However, Prospect's financial maneuvers allegedly resulted in more than $450 million being diverted to private investors through real estate sale-lease agreements, leading to an annual lease liability of $35 million.

The complaint also states that pension accounts for Crozer Keystone retirees were not fully funded by Prospect Medical. This alleged mismanagement caused closures at Delaware County Memorial Hospital and Springfield Hospital, along with suspensions of related services. While Crozer-Chester Medical Center and Taylor Hospital remain open, further service suspensions are anticipated.

Currently serving over 500 patients daily on average, these hospitals' continued operation is crucial. The lawsuit asserts that Prospect Medical's actions violate its obligations under the 2016 agreement and seeks payment to maintain full service until an approved acquisition occurs.

This case reflects broader issues seen nationally with private equity acquisitions of hospitals leading to adverse effects on patients and staff due to profit-driven practices.

No specific timeline is provided in court documents; however, the Office of Attorney General aims for swift implementation of the injunction and appointment of a receiver.

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