A Los Angeles-based company that owns more than a dozen hospitals in four states filed for bankruptcy late Saturday, the second large system acquired by private equity to collapse in less than a year.
In initial filings seeking Chapter 11 protection, Prospect Medical Holdings, which owns facilities in California, Pennsylvania, Rhode Island and Connecticut, listed debts of more than $400 million. In a press release announcing its restructuring, the company said it would continue to operate as normal.
“During the Chapter 11 process, Prospect Holdings' hospitals, medical centers and physicians' offices will remain open, and patient care and services will continue uninterrupted,” the company wrote.
Prospect Medical's bankruptcy comes less than a year after the bankruptcy of Steward Health Care, another major hospital system that was once backed by private equity. CBS News documented how Steward conspired with private equity investors to extract millions of dollars from that company, possibly resulting in Lack of life-saving medical equipment.
With Steward, Prospect Medical has been a focus Ongoing CBS News investigation Exposing how private equity investors have siphoned 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 reports a series of financial moves The company decided to issue a $457 million dividend to leadership in 2018. Prospect Medical CEO Sam Lee took home a dividend of nearly $90 million, while Leonard Green shareholders were paid $257 million.
Among the similarities between Prospect Medical and Steward, both relied on the value of their hospital real estate to help finance large payouts for their owners. The transaction resulted in onerous lease agreements that diverted funds away from direct patient care.
last week, Found a powerful, bipartisan Senate committee It found what it said was “overwhelming evidence of financial mismanagement” as Leonard Green and Prospect Medical sought to turn a profit, causing hospitals serving vulnerable communities to cut services or close entirely. The Senate committee's findings were part of a 162-page report, which concluded that private equity's financial model “could pose a threat to the country's health care infrastructure, particularly in underserved and rural areas.”
Both Prospect Medical and Leonard Green refuted the Senate investigators' findings.
In a statement, a spokesperson for Prospect Medical said the report drew incorrect conclusions and omitted important facts.
“The committee made general conclusions about the quality of care at our hospitals without reviewing information from hospitals where the focus is on care rather than at the corporate level,” the spokesperson wrote in a statement. has invested more than $750 million in its hospitals and provided more than $900 million in charitable and uncompensated care to patients.
“Almost all of the hospitals acquired by Prospect were cash-strapped, neglected, dilapidated and on the verge of closure or bankruptcy,” the spokesperson wrote. “In almost every case, no one wanted to acquire them, and many were on the verge of closing.”
UPDATE: This story has been updated to clarify that payouts to investors by both Steward Health Care and Prospect Medical Holdings depend on the value of their hospital real estate holdings.