The Crozer-Chester Medical Center in Upland. 

Moody's Investors Services moved to downgrade Prospect Medical Holdings - the parent of the Crozer-Keystone Health System - late last month, attributing it to a number of factors from a failure to meet projections to a significant reliance on Medicaid programs.

In late March, Moody's downgraded the ratings of Prospect Medical Holding Inc.'s Corporate Family Rating to B3 from B 2 RUR-Down and its Probability of Default rating to B3-PD from B2 RUR-Down. Prospect Medical is the parent company of the Crozer-Keystone Health System that operates four hospitals in Delaware County — Crozer-Chester Medical Center in Upland; Delaware County Memorial Hospital in Upper Darby; Taylor Hospital in Ridley Park and Springfield Hospital in Springfield.

Moody's also downgraded Prospect's senior secured first lien term loan rating to B3 from B1 RUR-Down.

Crozer-Keystone Health System officials issued a statement regarding the downgrading.

"Prospect has taken significant steps to improve the company’s financial liquidity," it read. "These actions include the recently completed financing that provides the company with more than $100 million of available funding as well as a $41 million cash infusion made by certain funds of Leonard Green & Partners and members of management."

It noted the quality of its employees here in Delaware County and elsewhere.

"Prospect is proud of the hard work and professionalism that the physicians, nurses and other staff demonstrate every day at its hospitals across the country, as well as their dedication to providing outstanding patient care," it said.

"Crozer-Keystone Health System’s main focus is delivering quality, compassionate clinical care," it continued. "Like other healthcare networks nationwide, we strive to provide our patients with the highest quality care while operating as efficiently as possible. We routinely evaluate our management and staffing models to make the best use of our available resources while maintaining our high standards of clinical care."

In January 2016, Crozer-Keystone Health System and Prospect Medical Holdings Inc. announced they had entered into an agreement for the system to be acquired by Prospect. At the time, Prospect said they would make $200 million in investments in the system over five years , keep the five Crozer-Keystone hospitals open and that it would assume Crozer-Keystone's outstanding pension liability. 

The agreement also allowed Crozer-Keystone facilities and its physician network to retain the Crozer-Keystone name.

It did change the tax status of Crozer-Keystone from not-for-profit to for-profit and the deal closed on July 1, 2016.

Two years later, in 2018, the National Labor Relations Board ordered Prospect Medical Holdings Inc. to provide the Pennsylvania Association of Staff Nurses and Allied Professionals with a full copy of the asset purchase agreement. In 2017, Philadelphia Administrative Law Judge Benjamin Green found Prospect unreasonably withheld the entire APA during contract negotiations.

PASNAP represents about 525 nurses and 100 paramedics at Crozer-Chester Medical Center and 300 registered nurses and about 100 technical employees at Delaware County Memorial Hospital.

In March 2018, state and local officials and union representatives hosted a community hearing to air concerns that Prospect wasn't paying required pensions to employees and taxes to local school districts, including $3 million in tax payments to the Ridley, Upper Darby and Springfield school districts. Prospect strongly denied those claims.

In a statement released at the time, Prospect officials stated, "Prospect Medical Holdings has delivered all appropriate payments to its employee pensions and retirement plans. Prospect has contributed in excess of $130 million to continue to turn around Crozer-Keystone Health System's at-risk defined benefit pension plan, which covers many thousands of current and former employees and Delaware County residents."

In addition, Prospect and Crozer-Keystone, as well as the Crozer-Keystone Community Foundation, were involved in a dispute regarding the acquisition of the Delaware County health system. When they first agreed to acquire the system in January 2016, Prospect agreed to a $300 million asset acquisition that included a cash payment of $52.9 million due at the July closing. 

Prospect paid $20 million at closing and another $12.9 million was made within 130 days after the closing but another $21 million was to go into an escrow account, which Crozer representatives said wasn't open. In November 2017, a arbitrator put the final purchase price of the system at $56.6 million.

In its March 28 announcement, Moody's said the downgrade "reflects the recent spike in Prospect's financial leverage and the company's adequate liquidity profile. The negative outlook reflects uncertainty relating to both the timing and magnitude of improved operating performance that Prospect will achieve."

Moody's also stated that Prospect's Corporate Family rating downgrade was due to "very high financial leverage, shareholder-friendly financial policies and a history of failing to meet projections."

It also said it was impacted by Prospect's high concentration of revenue and earnings in only a few markets and a significant reliance on Medicaid programs, especially in Pennsylvania and California. Moody's noted that such a reliance could have longer-term risk because of federal and state budget constraints.

"Prospect's credit rating was cut because its hedge fund parent, Leonard Green & Partners, ordered Prospect to issue a $600 million dividend to themselves - a dividend that Prospect could not afford. The result is that the dedicated healthcare workers at Crozer-Keystone Health Systems have continued to face difficult working conditions and cuts at the hands of Prospect," said Angela Neopolitano, RN, a PASNAP Board member and president of the DCMH nurses local. 
 "In the last two years Prospect has disrespected the contracts of PASNAP members, lost arbitrations and court battles over paying their taxes, and failed to pay providers and local contractors.  Nurses and techs do not have the basic supplies they need to provide patient care.   
"Neither our communities nor the employees of Crozer Keystone Health System caused Prospect's debt problems, but they are feeling the effects of their misguided management.   As we are about to negotiate a first contract for the nurses at Springfield Hospital, we call on Prospect to make a real investment in our community."
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