A Los Angeles-based company that owns more than a dozen hospitals in four states filed for bankruptcy late Saturday, the second major system acquired by private equity to collapse in less than a year .
In an initial filing seeking Chapter 11 protections, Prospect Medical Holdings, which has 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 physician offices will remain open, and patient care and services will continue without interruption,” 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 previously backed by private equity. CBS News documented how Steward, along with private equity investors, extracted hundreds of millions of dollars from that company, which could lead to the shortage of medical equipment to save lives.
Along with Steward, Prospect Medical has been one of the focuses an ongoing CBS News investigation revealing how private equity investors have 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 on it a series of financial movements the company issued leadership a dividend of $457 million in 2018. Prospect Medical CEO Sam Lee took home about $90 million while Leonard Green shareholders were paid $257 million .
Among the similarities between Prospect Medical and Steward, both companies sold the land and buildings to a real estate investment firm before their executives were issued large payouts. The transactions resulted in onerous leases that diverted funds from direct patient care.
last week, found a powerful bipartisan Senate committee what he 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 that concluded the private equity financial model may pose “a threat to the nation’s health infrastructure, particularly in rural and underserved areas.”
Both Prospect Medical and Leonard Green disputed the Senate investigators’ findings.
In a statement, a spokesman for Prospect Medical said the report drew false conclusions and omitted key facts.
“The Committee made general conclusions about the quality of care at our hospitals without ever reviewing the information at those hospitals, which is where the focus of care is, rather than at the corporate level,” the spokesman wrote in a statement. , pointing to the company. has invested more than $750 million in its hospitals and provided more than $900 million in charity and uncompensated patient care.
“Nearly all of the hospitals that Prospect acquired were cash-starved, neglected, in disrepair and on the verge of closure or bankruptcy,” the spokesman wrote. “In almost every case, no one else wanted to acquire them and many headed for closure.”