Attorney General’s Lawsuit Exposes Alleged “Coporate Looting” Scandal by Hospital Owner

Pennsylvania Attorney General Michelle Henry has filed a lawsuit against Prospect Medical Holdings, the owner of Crozer Health System. The legal action, announced on Tuesday, alleges severe mismanagement, corporate looting, and neglect of the Delaware County-based healthcare provider over several years. Prospect Medical Holdings owns 12 hospitals, nationwide, including four within the Crozer Health System.

Henry emphasized the lawsuit is to defend accessible, quality healthcare for Pennsylvanians, harmed by Prospect’s focus on profit over care. 

The lawsuit claims that Prospect Medical Holdings engaged in a pattern of behavior that prioritized corporate profits over patient care and community health needs. According to the Attorney General’s office, this mismanagement led to closures and disruptions of vital healthcare services in Delaware County.

The legal complaint outlines a series of actions taken by Prospect Medical Holdings that allegedly undermined the financial stability and operational effectiveness of Crozer Health System. These actions are said to have jeopardized the quality and accessibility of healthcare services for residents in the area.

Here are the key points of the lawsuit: 

• Allegations: The lawsuit claims Prospect Medical broke a 2016 Asset Purchase Agreement by closing facilities and cutting services, while diverting funds to private shareholders.
• Financial Mismanagement: Prospect allegedly misused over $450 million for private investors and created extra lease costs by selling and leasing back hospital assets, breaking their promise to keep hospitals open for 10 years.
• Pension Fund Issue: Prospect Medical has allegedly not fully funded the pensions for Crozer Keystone retirees.

The lawsuit seeks to require Prospect Medical to cover operating costs until a new owner is found, appoint a receiver to manage Crozer Health and prevent further service cuts, and reserve current services through a preliminary injunction.

The consequences of the alleged mismanagement have been far-reaching for the local community. Crozer Health System, which operates several hospitals and healthcare facilities in Delaware County, has reportedly experienced closures of departments and reductions in services over the years. Closures include Delaware County Memorial and Springfield Hospitals, with more cuts to trauma, burn, and maternity services at Crozer-Chester Medical Center.

These disruptions have caused severe nurse and provider staffing issues and left gaps in the local healthcare infrastructure, forcing residents to seek medical care elsewhere or face delays in treatment. The lawsuit aims to address these issues and ensure that the community’s healthcare needs are met.

The lawsuit filed by the Pennsylvania Attorney General’s office represents a significant regulatory intervention in the operations of a major healthcare provider. If successful, the legal action could lead to substantial changes in the ownership and management structure of Crozer Health System. It may also set a precedent for increased scrutiny of healthcare management practices across the state and nation.