The Crozer Health lawsuit is a civil action filed on October 28, 2024, by Pennsylvania Attorney General Michelle Henry against Prospect Medical Holdings and the private equity firm Leonard Green & Partners, accusing them of looting the four-hospital Crozer-Keystone system, breaching a 2016 promise to keep its acute care hospitals open for ten years, and driving the system toward collapse. The case was automatically paused when Prospect filed for Chapter 11 bankruptcy in January 2025, and the hospitals closed anyway that spring. A separate November 2024 suit by the Attorney General seeks to claw back roughly $650 million from Prospect’s founders and Leonard Green.
What the Attorney General Alleged
The complaint, filed in the Delaware County Court of Common Pleas, accused Prospect of “neglectful, self-serving practices” that led to the closure of Delaware County Memorial Hospital, the suspension of services at Springfield Hospital, the loss of accreditation for a surgical residency program, and widespread failures to pay vendors and maintain staffing.1Healthcare Dive. Pennsylvania Attorney General Sues Prospect Medical, Leonard Green The central breach was of the 2016 purchase agreement, under which Prospect committed to keep acute care services open at all four hospitals in the Crozer system for at least ten years.2WHYY. PA Attorney General Sues Prospect Medical Over Crozer Health
The suit also targeted Prospect’s 2019 sale-leaseback deal with Medical Properties Trust, alleging that the transaction diverted more than $450 million to enrich private investors while the hospital system struggled. The Attorney General asked the court for a preliminary injunction blocking further closures and for the appointment of FTI Consulting as an official receiver to run Crozer until a new owner could be found.1Healthcare Dive. Pennsylvania Attorney General Sues Prospect Medical, Leonard Green
Prospect called the lawsuit “hasty,” saying it had been trying to transfer Crozer to a nonprofit and was seeking additional state stabilization funding.1Healthcare Dive. Pennsylvania Attorney General Sues Prospect Medical, Leonard Green
The Financial Extraction at the Heart of the Case
Leonard Green held a 66% majority stake in Prospect from 2010 until June 2021. Between 2010 and 2021, Leonard Green and minority owners collected roughly $658 million in fees and dividends from Prospect, including a $188 million dividend in 2012 and a $457 million dividend in 2018. Rhode Island Attorney General Peter Neronha noted that when the 2018 dividend was paid, Prospect had only one day’s worth of cash on hand, and the payment came four years after Prospect had assured Rhode Island regulators it would not issue further dividends.3Private Equity Stakeholder Project. Prospect Medical Holdings Primer
The 2019 sale-leaseback with Medical Properties Trust was worth approximately $1.5 billion. Prospect got a short-term cash infusion but was left paying rent on buildings it had once owned outright, and it stopped paying rent entirely in June 2024.4Healthcare Dive. MPT Installs New Leadership at Prospect Hospitals5BusinessWire. Medical Properties Trust Comments on Prospect Restructuring
While money flowed out, Prospect’s finances cratered. Between fiscal years 2015 and 2020, the system suffered a cumulative comprehensive loss of $603 million, and by September 2020 total liabilities exceeded assets by more than $1 billion.3Private Equity Stakeholder Project. Prospect Medical Holdings Primer A January 2025 U.S. Senate Budget Committee report found that by 2020, all but one of Prospect’s hospitals ranked in the bottom 17% of federal quality-of-care rankings.6Healthcare Dive. Private Equity Healthcare Senate Report
Leonard Green exited in June 2021, selling its majority stake to minority shareholders for just $12 million and contributing $80 million to escrow to keep Rhode Island hospitals open.3Private Equity Stakeholder Project. Prospect Medical Holdings Primer A Leonard Green spokesperson said that when the firm exited, “Prospect was in strong financial condition with access to over $500 million to support its operations.”6Healthcare Dive. Private Equity Healthcare Senate Report
The November 2024 clawback suit names Prospect co-founders Sam Lee and David Topper alongside Leonard Green. The Senate Budget Committee estimated that Lee personally extracted at least $112 million from Prospect and Topper approximately $83.2 million. The Senate report noted that while Prospect emergency departments were shutting down, Lee was upgrading a personal property in Aspen, Colorado, valued at $16.5 million.7The American Prospect. Private Equity Hospital Bankruptcy True Crime Twist8CT Mirror. US Senate Investigation of Prospect Medical
What Bankruptcy Did to the Case
On January 11, 2025, Prospect Medical Holdings filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Northern District of Texas, listing between $1 billion and $10 billion in both assets and liabilities and more than 100,000 creditors. The company reported an “unsustainable liquidity crisis.”9Healthcare Dive. Prospect Medical Holdings Files Bankruptcy The bankruptcy filing automatically stayed the Attorney General’s Delaware County lawsuit.10PA House of Representatives. Rep. Krueger Crozer Update
In February 2025, the bankruptcy court approved a 30-day receivership under which FTI Consulting served as an independent monitor and manager of Crozer, funded with $20 million from Pennsylvania regulators. Judge Stacey Jernigan acknowledged the arrangement was “unorthodox” but necessary to “avoid immediate and irreparable harm.”11Healthcare Dive. Crozer Health Prospect Medical Receivership FTI Consulting In total, the Commonwealth, Delaware County, and the Foundation for Delaware County invested $40 million during the crisis to prevent an immediate total shutdown.12PA House of Representatives. Rep. Krueger Crozer Update
A tentative deal to sell Crozer to a consortium of nonprofit operators fell through. The confirmed bankruptcy plan, approved by Judge Jernigan on December 15, 2025, mandated an orderly wind-down and addressed approximately $2.3 billion in funded debt. The plan’s effective date was March 6, 2026.13Sidley Austin. Sidley Secures Plan Confirmation in Prospect Medical Holdings Chapter 11 Case14Omni Agent Solutions. Prospect Medical Holdings Bankruptcy Information
The Hospitals Closed Anyway
Delaware County Memorial Hospital in Drexel Hill and Springfield Hospital had already closed in 2022, before the Attorney General filed suit.15WHYY. Delaware County Crozer Health Closure Longer Ambulance Rides A judge approved an expedited closure plan for the remaining two facilities on April 22, 2025. Taylor Hospital closed on April 28, 2025, and Crozer-Chester Medical Center followed on May 2. Dr. Monica Taylor, chair of the Delaware County Council, noted that the system was closing in two weeks when a typical hospital closure would take months.166ABC. Crozer Health Hospital Emergency Rooms Stop Accepting Patients
The closures wiped out Delaware County’s only high-level trauma center and only burn unit. A county of 576,000 people went from six hospitals to two.17Pennsylvania Governor’s Office. Gov. Shapiro Plan to Protect PA Health Care From Private Equity Ambulance transport times rose from an average of nine minutes in 2018 to 40 minutes in May 2025, and emergency departments at the remaining hospitals saw a 50% surge in volume.15WHYY. Delaware County Crozer Health Closure Longer Ambulance Rides Dr. Max Cooper recounted that a gunshot victim near the closed Crozer-Chester facility died during a 30-minute transport to a more distant hospital and said the patient could have been saved if Crozer had been open.
The Workers’ WARN Act Class Action
Prospect notified 2,651 employees of layoffs on April 21, 2025, with job eliminations occurring between April 25 and May 2. Workers filed a class action seeking more than $21 million in damages, alleging Prospect violated the federal Worker Adjustment and Retraining Notification Act by failing to provide the required 60 days’ notice.18Delaware County Times. Judge Estimates $1.5 Million to Settle Crozer Health WARN Act Violations
Judge Jernigan ruled in Prospect’s favor for bankruptcy plan purposes, estimating the claims at just $1.5 million and reducing the reserve fund by 75%. The judge said she was sympathetic to the workers but found the company had “very strong defenses” based on its efforts to keep hospitals operating as long as possible.18Delaware County Times. Judge Estimates $1.5 Million to Settle Crozer Health WARN Act Violations
Fraud Allegations and Federal Interest
Prospect faced three separate lawsuits alleging fraudulent Medicare billing, and a 2016 audit found that Prospect had submitted thousands of claims dating to 2013 that were “not supported by audited medical charts,” including “upcoding” where patients were billed for two visits on the same day. Prospect characterized the billing issues as “inadvertent and isolated.”19ProPublica. Investors Extracted $400 Million From a Hospital Chain
The U.S. Department of Justice has issued a subpoena to the hospital system, though the specifics of that federal probe remain unclear. Representative Krueger and the Delaware County legislative delegation have petitioned the Attorney General to open a criminal investigation into Prospect’s owners. No criminal charges have been announced.20CT Insider. CT PA Prospect Medical Lawsuit
The Legislative Response
The Crozer collapse became a catalyst for state-level reform. In May 2025, Senator Tim Kearney and Representative Lisa Borowski introduced companion bills, Senate Bill 322 and House Bill 1460. The bills would grant the Attorney General expanded authority to review hospital mergers and acquisitions, prohibit sale-leaseback agreements by private equity firms in healthcare, and require detailed financial disclosures before major transactions.21PA House of Representatives. Kearney and Borowski Healthcare Protection Legislation
The Pennsylvania House passed HB 1460 on June 10, 2025, by a vote of 121 to 82, and it moved to the Senate. A prior version of the legislation had passed the House during the 2023-24 session but was never brought to a vote in the Senate.22Senator Kearney’s Office. Senator Kearney Highlights House Passage of HB 1460 Governor Josh Shapiro endorsed the reform push, framing it as a response to private equity treating hospitals as “piggy banks.”17Pennsylvania Governor’s Office. Gov. Shapiro Plan to Protect PA Health Care From Private Equity At least 26 hospitals have closed in Pennsylvania over the past five years, with mergers, acquisitions, or ownership changes preceding more than 90% of those closures.23Spotlight PA. Pennsylvania Hospital Merger Private Equity Oversight