Crozer-Keystone Community Foundation wins arbitrator decision against Prospect Medical

Sunday, 12 November 2017, 10:21:10 AM. An arbitrator ruled that Prospect Medical Holdings Inc. should have paid Crozer-Keystone Community Foundation $56.6 million when it acquired the nonprofit Crozer-Keystone Health System in July 2016, far more than the $32.9 million for-profit California company paid in two installments.

An arbitrator ruled that Prospect Medical Holdings Inc., a private-equity backed California company that acquired Crozer-Keystone Health System Inc. in a deal valued at $300 million, still owes Crozer-Keystone Community Foundation $23.7 million.

The foundation, based in Media and established to use the proceeds from the sale to improve the health and quality of life of Delaware County residents, and the for-profit Prospect were in a dispute over how much money Prospect had to pay at closing to settle working-capital accounts.

In two tranches, Prospect paid $32.9 million. The foundation said Prospect owed a total of $59 million. The arbitrator, required by the sale agreement to settle such a dispute, ruled this week that the total owed by Prospect was $56.6 million, leaving Prospect with the $23.7 million balance, including $21 million that was placed in escrow.

“With the determination now final, we look forward to collaborating with the Foundation to help meet the health care needs of Delaware County residents,” Prospect said in an emailed statement.

The foundation’s attorney, Rocco Imperatrice, warned, however that several legal skirmishes with Prospect remain.

Prospect was late with the court-ordered payment of $21 million into escrow, it has refused to remove the foundation as a guarantor on two leases, and it kept a $3.5 million dividend from an insurance company that was supposed to go to the foundation, while deducting that amount from what it paid the foundation, Imperatrice said.

“Fortunately, the foundation had won all the battles to this point,” Imperatrice said. With the arbitrator’s decision, the foundation has won the war, but “it’s still got a few more battles to go,” he said. “It’s been a year and a half to accomplish what should have been accomplished within 90 days of closing, which was on July 1, 2016.”

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