A healthcare desert has emerged in Delaware County. There are currently only two hospitals, Riddle and Mercy Fitzgerald, operating in a county of around 576,000 — where there once had been six. The four additional hospitals of the Crozer Health System — Crozer-Chester, Taylor, Delaware County Memorial, and Springfield — began closing in 2022, just six years after Prospect Medical Holdings (PMH) acquired them.

Originally founded by a group of California physicians, Prospect Medical Holdings (PMH) became majority-owned by the private equity investment firm Leonard Green & Partners (LGP) in 2010. LGP spent $363 million for a 61.3 percent position in the healthcare company. By 2018, LGP had PMH take on debt of $1.31 billion, a cash infusion that allowed PMH to pay LGP dividends and management fees of $658.4 million.

In healthcare, large systems survive; standalone hospitals disappear. And if your payer is predominantly self-pay and Medicaid, you will also disappear.

In 2016, PMH acquired the not-for-profit Crozer Keystone Health System, when Crozer had debt on the order of $300 million, with approximately $51 million funding The Foundation for Delaware County.

Just seven years later, on January 12, 2025, PMH filed for Chapter 11 bankruptcy. On January 13, 2025, The Philadelphia Inquirer reported the state health department cited Crozer for diverting heart attack patients because of nursing staff shortages and noting reports from staff of supply shortages.

There seems to be a pattern. A private equity investment (PE) firm acquires an asset, a healthcare system, worth hundreds of millions. The PE then refinances the asset in the magnitude of billions allowing the PE to reward itself in order of hundreds of millions. The asset, the healthcare system, burdened by the debt and debt service and having burned through pension funding and other obligations such as unsecured creditors, files for bankruptcy.

Perhaps one might be skeptical of my description of events. If so, I offer the excellent Senate Budgetary Bipartisan Staff Report of January 2025, “Profits Over Patients: The Harmful Effects of Private Equity on the U.S. Health Care System”

How we got here

First, we need to understand how we got here. Private equity may be a convenient bogeyman to blame, but there is more to the story.

Compensation by Medicare and Medicaid for care provided does not cover the cost of the care provided. To remain open, hospitals must have a payer mix with enough private insurance to cover the losses generated by Medicare and Medicaid.

Frequently, private insurance payments for a service are expressed as a percent of Medicare payments such as 105 percent of Medicare or 113 percent of Medicare. A larger market presence of an institution usually results in a more favorable compensation rate by private insurance. A system with 15 hospitals can usually negotiate better compensation than a two-hospital system. In healthcare, large systems survive; standalone hospitals disappear. And if your payer is predominantly self-pay and Medicaid, you will also disappear.

Knowing Medicare and Medicaid does not cover the cost of the care provided, perhaps we must think the unthinkable. Perhaps the government must pitch in.

The Crozer-Chester Medical Center was a Level II Trauma Center, with a burn unit. Trauma and burn units consume resources and are usually money losers, requiring the support of services with positive margins such as cauterization labs and imaging services. Combined with a service area for a substantial indigent population, Crozer-Chester hemorrhaged money. To maintain such institutions required exogenous financial support.

When I came of age in medicine, there was a hospital, Philadelphia General Hospital, whose origin was to provide care for the indigent. Society had recognized a duty to provide for the indigent, including healthcare.

The Board of PGH closed the hospital in 1977. Medicaid began in 1965. The expectation was that private hospitals would provide care to the indigent now they were “insured.”

The closure and loss of Crozer-Chester, Taylor, Delaware County Memorial, and Springfield along with Brandywine in Chester County invites us to reflect on where this prediction has come true.

Predatory private equity is a symptom and scapegoat for creating a healthcare desert in Delaware County, not the cause.

Healthcare has changed. Our system must too

The cause lies with us. We have embraced magical thinking. We believe we can have ever increasing consumption of healthcare with minimally increasing expenditure.

One reason for the increasing expenditure on healthcare: The market basket of goods we call healthcare has changed.

In 1980, the care for a heart attack was oxygen, morphine and monitoring. Today, the standard of care is an interventional cardiac catheterization within 90 minutes of arrival.

Building, equipping and staffing cardiac cath labs 24/7 are orders of magnitude more expensive.

In 1980, a patient with non-Hodgkin’s lymphoma could expect a three to- ive year survival. Today, I have a friend who is 20 years post-diagnosis and staging with no active lesions found. He was treated with rituximab, a monoclonal antibody introduced in 1997. Immunotherapy has revolutionized cancer care. For every drug we find effective, many never make it past phase 3 trials. Currently we have over 400,000 trials taking place.

Knowing Medicare and Medicaid does not cover the cost of the care provided, perhaps we must think the unthinkable. Perhaps the government must pitch in.

And why do we have a Pennsylvania Lottery … to “benefit older Pennsylvanians.” If Crozer-Chester remained open would older Pennsylvanians have been helped?

Frank Speidel, MD, is a retired emergency physician, U.S. Navy Flight Surgeon and former hospital CEO. He was EMS Medical Director for the Commonwealth of Pennsylvania and Chester County. He is currently producer and host for The Doctor Is In on MLTV21.

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