Prospect Medical Holdings has been granted the ability to abandon two of the four hospitals it is trying to sell off as part of bankruptcy proceedings because they have no apparent value and are burdens on the estate.
Chief Bankruptcy Court Judge Stacey G. Jernigan of the Northern District of Texas granted the motion from the California-based private medical company over the objection of Beth Stern Flemming, representing Upper Darby Township.
At least one of the properties at issue Monday, Delaware County Memorial Hospital and an associated condominium, may soon be purchased for $1.2 million by the Upper Darby School District. Trey A. Monsour, representing the district, said the district plans to acquire the properties as soon as Aug. 13 and begin demolishing them.
Prospect, which acquired the Crozer Keystone Health System for $300 million in 2016 and filed for bankruptcy earlier this year before shuttering the last of its four hospitals and associated medical services in May, indicated in a July 25 motion that it spent “countless hours” searching for a buyer for its Pennsylvania hospitals without success before the court granted an April 23 motion for closure.
Prospect closed Springfield Hospital in August 2021 and Delaware County Memorial Hospital in Upper Darby in November 2022.
The Pennsylvania Attorney General’s Office sued Prospect in late 2024, alleging mismanagement and breach of contract as Prospect diverted more than $457 million to private equity investors while saddling the system with untenable leaseback agreements that exposed it to financial ruin.
That ruin was made manifest in January, when Prospect declared bankruptcy and the remaining two hospitals, Taylor Hospital in Ridley Park and Crozer Chester Medical Center in Upland, ceased all operations in April and May, respectively.
In federal bankruptcy court on Monday, it was reported that a potential buyer went through Taylor Hospital that morning. (KATHLEEN E. CAREY – DAILY TIMES)
Prospect said in the July 25 filing that it remained hopeful to at least sell some assets and did hold a successful auction for ambulatory surgery center and imaging sites, with other offers coming in for real properties.
According to that initial filing, Prospect had soft offers for Taylor and DCMH that were far lower than the amount of the properties’ outstanding liabilities and did not justify the associated carrying costs.
The highest offer received for DCMH was $1.25 million, apparently from the school district, and $575,000 for Taylor from an unknown third party. There is a monthly carrying cost for DCMH of $463,053 and Taylor has a monthly carrying cost of $312,223, according to the filing.
The asserted tax obligation for DCMH, assuming a pro-ration of 2025 taxes through the estimated abandonment date of Aug. 15, is $19.74 million and the approximate estimated net value for that hospital, excluding all closing costs that could be charged in a transaction, which would further reduce potential sale proceeds, is $18.49 million.
For Taylor, the tax obligation is $7.67 million and the approximate estimated net value is $7.1 million.
“The estimated net proceeds represent approximately 6% of the outstanding asserted property tax obligations,” Prospect said in the filing. “Additionally, based on the estimated carrying costs, there will be a further 2% reduction per month prior to the close of the sale. …Taylor is similarly underwater: Over $7.6 million in tax claims as compared to a potential highest offer of $575,000.”
The Pennsylvania Attorney General’s Office, Delaware County, Upper Darby Township and Ridley Park had voiced some concerns about allowing Prospect to simply walk away from those properties, however, chiefly due to a lack of security presence, shutting off of water and associated fire suppression systems and the inability to assert claims for owed tax liabilities following abandonment.
Prospect attorney Maegan Quejada said she was able to put most of those concerns to rest Monday.
The revised proposed order Jernigan approved indicated that Prospect would have “reasonable security” on site and that fire suppression systems would remain active until any sales closed or the bankruptcy plan was completed, whichever comes first. Any taxing entity will also still be able to assert a general unsecured claim.
Quejada said that assuaged most of the objectors. The only holdout was Upper Darby Township.
Flemming said that it would require an act of the Upper Darby Township Board to approve withdrawing the objection in a public vote, which could take some weeks to arrange, so she instead moved forward in an attempt to show there was a real threat of “imminent and identifiable harm” associated with the DCMH properties.
Such a showing would negate granting the motion.
‘We would like $100 million’
Flemming questioned Paul Rundell, Prospect’s Chief Restructuring Officer, about structural issues at DCMH and the condominium, including an allegedly crumbling parking garage. Rundell said he was not aware of any structural issues.
Flemming also asked if Rundell was aware of assessments that put the hospital property valuation at more than $100 million and a medical office building at more than $17 million, far in excess of the $1.25 million being offered by the district.
Rundell noted that Prospect’s real estate broker, Keen-Summit Capital Partners LLC, has been actively marketing the properties since June 2, but of course there have been interested parties sniffing around for many more months than that.
Keen sent out more than 26,000 electronic inquiries to potentially interested parties and executed 73 non-disclosure agreements since June 2 and a website for the properties that went live that same day has received 2,000 views from 875 unique users, according to the Prospect filing.
“Despite the engagement and scope of contact, the potential offers or stated interest provide no value to the estate and simply continue the drain on estate resources,” the filing states. “The Keen marketing process has confirmed that DCMH and Taylor are not valuable estate assets.”
Rundell also underscored this Monday.
“All the time, people have appraisals much higher and — unfortunately in the world that I live in, which is fair market value — it’s what a willing buyer and seller is willing to do,” he said. “If the property was worth that much, we would have had people offering that much, but we didn’t. … I can assure you, if the hospital was worth anywhere close to that, we would sell for more money. We’re not actually trying to take less money. We would like $100 million. Nobody wants to give us that for this real estate.”
The closed emergency room at Delaware County Memorial Hospital in November 2022. Upper Darby says the building’s deteriorating condition has rendered it a threat to anyone who might enter it, including emergency responders. (PETE BANNAN-DAILY TIMES)
Flemming argued that no one had clued the township in that the school district might be finalizing this sale so quickly and that it did not get word about the July 25 motion until late on July 28, so did not have time to gather evidence in support of its objections before Monday’s hearing.
The judge was unconvinced that a delay would do any good, however, given the potential for at least one sale. Quejada indicated another third-party had also toured Taylor just Monday morning, so a deal could be in the works there as well.
Jernigan overruled the township’s objection, but indicated that any language in the updated motion that had assuaged the other objectors should be applied to Upper Darby as well.
The judge also approved $15 million in emergency funding for Prospect to continue the bankruptcy process and will reconvene court Aug. 20 to possibly approve additional monies if needed.
Originally Published: August 4, 2025 at 9:52 AM EDT