Prospect’s struggle to find buyer in Pennsylvania offers possible preview of fate awaiting CT hospitals

Greenwich Time – Saturday, April 12, 2025
By Liese Klein

Critical care nurse Katelyn Mchugh has been experiencing an “emotional roller coaster” for months with her colleagues at Prospect Medical Holdings’ Taylor Hospital in Ridley Park, Pennsylvania.

The hospital is on the verge of shutting down as Prospect seeks a buyer as part of its unfolding bankruptcy case, which also involves three Connecticut hospitals.

“We are desperate,” Mchugh told bankruptcy court Judge Stacey Jernigan in a letter filed this week. “I know you cannot keep us open and if you could you would. But please don’t let Prospect just close our doors so easily.”

The struggle to find a buyer in Pennsylvania offers a potential preview of the fate awaiting Prospect’s Connecticut properties: Waterbury, Manchester Memorial and Rockville General hospitals. After Yale New Haven Health called its bid to buy the hospitals “impossible,” Prospect has proposed an auction to take place as soon as June 5.

But even with a motivated seller seeking to pay down at least $1 billion in debt, Prospect’s two Crozer Health System hospitals near Philadelphia have failed to attract a buyer. Repeated efforts to close a deal have failed in recent weeks.

Hospital services to be sold

With no deal amid a cash crunch, Prospect has been threatening to close Taylor and a second Crozer hospital for more than a month. The company said Tuesday it needed $9 million in emergency funding to keep the hospitals running for two more weeks.

The for-profit hospital operator was able to round up $6 million as of Thursday by selling off services, Prospect attorney Bill Curtin said at the latest hearing. But even with the new cash, the hospitals could begin shutting down in as soon as 10 days. In the interim, Prospect will begin to “transition” or sell off units at the hospitals, starting with OB-GYN services.

“Certain of the service lines that exist at Crozer are not financially viable at Crozer, but would be financially viable with other other providers,” Curtin said. “There was always the intent for those to be divested.”

FTI Consulting, the same firm allocated up to $3 million in state funds to monitor the Connecticut hospitals and facilitate potential sale, will supervise the sale of services in Pennsylvania, said Melissa Van Eck, chief deputy attorney general. FTI is managing the Crozer hospitals in its role as court-appointed receiver.

“What’s going to happen is that employees may be wearing different jerseys, but they’ll still continue doing their job,” Van Eck said.

CT hospitals report strong finances

Prospect’s Connecticut hospitals are in better financial shape but still face uncertain sale prospects in a challenging hospital market, according to health-care experts.

A new document filed with the court this week highlighted the Connecticut hospitals’ relatively solid financial standing compared with Prospect’s Pennsylvania operations. The California-based company also has hospitals in its home state and some operations in Rhode Island.

The “monthly operating report” for Jan. 12-31 of this year showed an ending cash balance for Prospect’s Connecticut entities of $20.5 million, compared to a negative $3.8 million balance for Pennsylvania’s holdings. All three Connecticut hospital entities had positive cash balances for the period.

Prospect did not respond to a request for comment on the financial report and recent hearings. The company has been sending out upbeat media releases in recent weeks on new services like a clinic for hand surgery in Waterbury and a new Level II trauma center certification for Waterbury Hospital.

“This certification reaffirms our continued commitment to delivering the highest standard of care to critically injured members of our community,” Waterbury Health President and CEO Deborah Weymouth said in a statement on the trauma designation.

Union: Buyers showing interest in CT hospitals

Prospect’s Connecticut hospitals are paradoxically doing somewhat better financially since the bankruptcy filing in January, said Dave Hannon, president of Connecticut Health Care Associates District 1199 and co-chair of the court’s unsecured creditors committee.

“It’s not surprising to me that when the local facilities don’t have to shift a whole bunch of money to California to pay off huge returns to shareholders that they are operationally more sound,” Hannon said. The creditors have been told that several potential buyers have expressed interest in the Connecticut hospitals, he added.

Prior to the planned auction, Hannon said unions and state officials are working hard to prevent a profit-driven company like Prospect from once again acquiring Connecticut hospitals.

“With federal funding cuts coming rapidly and seemingly haphazardly, it will not take 10 years for the next private-equity-backed hospital system to declare bankruptcy,” Hannon said. “We really need to find the right owner, not just any owner.”

As they await the unwinding of Prospect’s businesses in multiple states, Hannon said the company’s approximately 4,400 Connecticut employees remain committed to providing the best care possible in trying circumstances.

“I think that they are holding on because there is a light, maybe a dim light, at the end of this tunnel,” Hannon said, speaking of new ownership for the three hospitals. “I think they’re hanging on by a thread, but they are hanging on.”

All parties who spoke at Thursday’s Prospect bankruptcy court hearing ‒ viewed on a live stream by close to 600 people ‒ expressed frustration at the difficulty both in keeping Prospect’s Pennsylvania hospitals open and finding a buyer.

“I’m tired of hearing myself say that the situation needs some heroes,” Judge Jernigan said. “The doctors and nurses and hospital staff are, of course, heroes. So the heroes need some heroes, and the people of Delaware County need some heroes.”

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