WILMINGTON — ChristianaCare announced Friday morning that it has reached an agreement to acquire Crozer Health, including four hospitals, in a major deal that will dramatically expand Delaware’s largest health care provider into Pennsylvania.
ChristianaCare has signed a letter of intent with Crozer’s parent company, Prospect Medical Holdings Inc., although an acquisition price was not immediately disclosed. Following a due diligence period and negotiations, a definitive agreement could be reached as early as June 2022, according to officials.
Closing the deal could come as early as the second half of this year, but Crozer officials anticipate it being finalized in the fourth quarter of 2022.
If the deal is finalized and approved by regulators, ChristianaCare would grow its headcount by a third and acquire assets with four hospitals — including real estate, ambulatory centers, offices, clinics and outpatient services — in southeastern Pennsylvania.
“We see an opportunity here, and that’s what makes Crozer Health an attractive partner,” ChristianaCare CEO Dr. Janice Nevin told the Delaware Business Times. “Crozer’s extensive network of ambulatory assets includes a physician network, behavioral health providers, a burn center and a graduate medical education program. It’s not just about acute care hospitals, it’s really the value of community-based assets.”
Under the agreement, Prospect hospitals will specifically transfer:
- Crozer-Chester Medical Center in Upland, Pa., with 499 certified beds.
- Delaware County Memorial Hospital in Drexel Hill, Pa., with 215 certified beds.
- Springfield Hospital in Springfield, Pa.
- Taylor Hospital in Ridley Park, Pa.
The deal will also transfer Crozer Health Medical Group’s primary care and specialist practices and their associated assets.
ChristianaCare’s intent to acquire Crozer comes at a time when Delaware competitors Beebe Healthcare and Bayhealth have been racing to expand in Kent and Sussex counties. After acquiring the former Union Hospital in nearby Elkton, Md., ChristianaCare has stayed relatively quiet in terms of expanding beyond its footprint, although it has announced it would open its first primary care office in Rehoboth Beach and intends to open a spinal surgery center in Wilmington.
Nevin told DBT that ChristianaCare was in “constant growth mode,” and always considered new acquisitions, projects and initiatives as the best way to increase access to care in its service areas.
“Much of our growth has been organic, I think, but a significant part of it has been intentional with our [recent additional] primary care offices and partnering with GoHealth to increase access to urgent care,” she said.
Crozer Health, established in 1990 by the merger of Crozer-Chester Medical Center and Delaware County Memorial Hospital, was acquired by Prospect in 2016 after no local nonprofit organizations were willing to take over the beleaguered system. Prospect, a for-profit company, has laid off employees, including about 100 last week, and closed hospital units, the Philadelphia Inquirer reported.
Crozer Health CEO Kevin Spiegel noted that the COVID-19 pandemic hit the health care industry hard, and that Crozer was no exception, as its labor costs alone increased by 25% and supply costs were rising with inflation and shortages.
“We were exploring options, but when we found a partner like ChristianaCare, it became clear this is ultimately in the best interest for the community and Crozer so it can be solidified for years to come,” he told DBT. “ChristianaCare is one of the top 100 health care systems in the United States. To find a partner that even had a better reputation is incredible.”
Spiegel also noted that ChristianaCare and Crozer share a foundation as academic medical centers. Crozer has a strong trauma center, neuroscience center, an organ transplant center and among the top stroke centers in the nation.
If the deal is closed, ChristianaCare will return Crozer Health, with its approximately 4,000 employees, to nonprofit status as part of ChristianaCare. The related real estate assets of the Prospect hospitals are to be released from the existing master lease agreement between the real estate owner and Prospect.
Four months earlier, Prospect reportedly hired Morgan Stanley to search for a buyer of Crozer Health. Nevin said that ChristianaCare made a suitable match due to its proximity and faith it could continue its mission of serving neighbors.
“The people in Delaware County, Pa., are our neighbors, and we believe that people deserve equitable access to care that allows them to lead a quality of life that’s important to them and improves their health,” she said. “Through this relationship, we will be able to do that.”
It is still possible that the deal between ChristianaCare and Crozer Health would not be consummated, and the health care industry has often seen such sales derail as due diligence is undergone. The letter of intent is a non-binding agreement.
Nevin added that ChristianaCare plans to take an “extraordinarily thorough approach,” and all questions on Crozier Health’s financial situation would be answered in the months ahead.
ChristianaCare, a nonprofit that breaks its organization into several tax-exempt organizations, produced a net revenue of more than $2.5 billion in Fiscal Year 2020 and held more than $2.8 billion in net assets.
Ratings agency Moody’s noted in December 2020 that ChristianaCare had a unique position as “Delaware’s largest teaching hospital, with extensive clinical depth” that grants it a regional and statewide market capture to allow it to rebound to pre-pandemic level margins in the following fiscal years.
Moody’s also noted at the time that ChristianaCare had “very strong unrestricted cash and investments” that allowed it to recover and as such would be able to absorb its acquisition of the former Union Hospital at the time. ChristianaCare has also received millions in federal aid programs, like the CARES Act and the American Rescue Plan Act.
Editor’s note: a previous version of this article incorrectly stated that ChristianaCare reported $78 million in revenue for FY 2020. We regret the error.
