Huge hospital network files for bankruptcy with 166 clinics in jeopardy and medical centers already up for sale
A private healthcare organization with almost 200 facilities nationwide has declared bankruptcy after former executives amassed millions of dollars while leaving the organization deeply indebted and patients facing an uncertain future.
Based in Los Angeles, Prospect Medical Holdings, Inc. runs 166 clinics and 16 hospitals throughout California and the Northeast, some of which are now being negotiated for sale.
Prospect owes more than $400 million, according to bankruptcy documents in the North District of Texas Bankruptcy Court.
According to its court documents, Prospect has been plagued by growing interest expenses and debt, and its assets and liabilities range from $1 billion to $10 billion.
Additionally, the business listed over 100,000 debtors.
According to the company’s bankruptcy court filings, hospital care would continue unhindered and its hospitals will stay operational.
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The private equity firm Leonard Green & Partners, which ran Prospect from 2010 to 2021, has been charged with carelessness and taking advantage of Prospect’s healthcare system.
Leonard Green was charged in a January 7 joint Senate Budget Committee report with stealing from Prospect’s health system to enrich its executives and investors.
The investigation claims that Prospect repurchased preferred shares from its investors and distributed $645 million in dividends to its financiers.
Additionally, the Senate committee discovered that Sam Lee, the CEO of Prospect, kept $90 million of that sum for himself, while Leonard Green shareholders received $424 million.
According to the research, Prospect depleted the health system and made huge profits for the private equity business by taking out hundreds of millions of loans before defaulting on them.
PATTERN OF ALLEGED MISMANAGEMENT
Yale New Haven Health (YNHH) filed a lawsuit against Prospect in May 2024 in an attempt to withdraw from an acquisition agreement that would have granted them ownership of Prospect’s three hospitals in Connecticut.
According to the Connecticut Mirror, YNHH accused Prospect of financial mismanagement in the complaint, including allegedly switching vendors to avoid payments, frequently bouncing checks, and other violations of the contract.
Prospect was also charged by YNHH with failing to maintain proper cybersecurity and neglecting its infrastructure.
Under Prospect’s ownership, Crozer Health, a four-hospital healthcare system in Pennsylvania, saw facility closures and service reductions.
The Pennsylvania Attorney General sued Prospect in October 2024 for allegedly ignoring and mismanaging Crozer Health.
Prospect Medical Holdings’ Full Statement
The CEO of Prospect Medical Holdings, von Crockett, made the following remarks regarding the bankruptcy filing on Saturday:
Our long-standing dedication to acting in the best interests of our patients, doctors, staff, and communities has advanced significantly with today’s measures.
By selling our businesses outside of California, we can make sure those institutions get the funding they need to continue providing vital, carefully coordinated, and individualized healthcare services to the communities who depend on them for years to come.
Prospect Holdings will reestablish its financial stability through this process as we return to our initial goal of helping the community.
We are sure that Prospect Holdings will be in a better position to prioritize and execute its core capabilities as a result of these strategic transactions, and we look forward to collaborating with our stakeholders to put them into effect.
The company cited inflation, increased health plan denial rates, and the COVID-19 epidemic in their bankruptcy proceedings.
About 85,000 people in suburban Philadelphia were left without emergency treatment when Prospect started to reduce services at Delaware County Memorial Hospital last year and finally closed the emergency department completely in November, according to CBS News.
Prospect plans to sell its properties outside of California as quickly as possible by using its bankruptcy position, including the sale of two hospitals in Rhode Island and Crozer Health.
Nevertheless, Prospect’s hospitals face an unclear future, which local officials quickly brought to the public’s attention while assuring them that no closures are in the works.
This is a public health emergency in addition to a financial one.
At a rally in front of Prospect Medical Holdings’ Crozer-Chester Medical Center in Pennsylvania, Pennsylvania State Representative Leanne Krueger declared, “A bankruptcy filing does not mean this hospital is closing today and we will fight like hell to keep it open.”
This is a public health emergency in addition to a financial one. According to Pennsylvania State Senator Tim Kearney, Prospect Medical Holdings has methodically depleted its facilities of resources, put financial gain before of patient care, and left our communities to bear the consequences.
Prospect responded to claims that care and services might change in a statement.
The communities that depend on those facilities will continue to have access to highly coordinated, individualized, and vital healthcare services for a long time to come thanks to the financial support that will be provided by the sale of our operations outside of California, said Von Crockett, co-CEO of Prospect.
Prospect Holdings will reestablish its financial stability through this process as we return to our initial goal of helping the community.
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Current president David Topper and co-CEO Sam Lee bought the majority of Prospect from Leonard Green in 2021.
According to the Senate Budget Committee study, Topper received roughly $83.2 million while Lee siphoned off an estimated $112 million from the business.