A Los Angeles-based company that owns more than a dozen hospitals in four states filed for bankruptcy late Saturday night. The second major system acquired by private equity collapsed in less than a year.
Prospect Medical Holdings, which owns facilities in California, Pennsylvania, Rhode Island and Connecticut, listed more than $400 million in debt in its initial filing seeking Chapter 11 protection. “We will continue to operate normally,” the company said in a press release announcing the restructuring.
“Throughout the Chapter 11 process, Prospect Holdings’ hospitals, medical centers and clinics will remain open and patient care and services will continue without interruption,” the company said.
Prospect Medical’s bankruptcy comes less than a year after the bankruptcy of Steward Health Care, another major hospital system once backed by private equity. CBS News documented how Steward worked with private equity investors to extract hundreds of millions of dollars from the company, potentially resulting in: There is a shortage of life-saving medical equipment.
Together with Steward, Prospect Medical Ongoing CBS News Investigation We uncover how private equity investors siphoned hundreds of millions of dollars from community hospitals, with devastating public health consequences.
From 2010 to 2021, private equity firm Leonard Green & Partners controlled a majority stake in Prospect Medical. CBS News reported. a series of financial moves The company paid out $457 million in dividends in 2018. Prospect Medical CEO Sam Lee took home about $90 million, while Leonard Green shareholders received $257 million.
Among the similarities between Prospect Medical and Steward: Both relied on hospital real estate values to help finance large payouts to their owners. The deal resulted in onerous lease agreements that diverted funds from direct patient care.
last week, A strong, bipartisan Senate committee was established. The report was “overwhelming evidence of financial mismanagement” as Leonard Green and Prospect Medical’s pursuit of profits led hospitals serving vulnerable communities to cease services or close entirely, he said. The Senate committee’s findings were part of a 162-page report that concluded private equity’s financial model could pose a “threat to the nation’s health care infrastructure, especially in underserved and rural areas.”
Prospect Medical and Leonard Green both disputed the Senate investigators’ findings.
A Prospect Medical spokesperson said in a statement that the report drew incorrect conclusions and omitted key facts.
“The committee made general conclusions about the quality of care at our hospital without reviewing information from the hospital given its focus on non-corporate care,” a spokesperson said in a statement. It has invested more than $750 million in its hospitals and provided more than $900 million for charity and uncompensated care to patients.
“Nearly all of the hospitals acquired by Prospect were cash-poor, neglected, in a state of disrepair and on the verge of closure or bankruptcy,” the spokesperson wrote. “In almost all cases, no one was willing to take them over and many were heading toward closure.”
Update: This story has been updated to clarify that the amount both Steward Health Care and Prospect Medical Holdings pay investors is dependent on the value of their hospitals’ real estate holdings.
