A major healthcare player, Prospect Medical Holdings, is facing turmoil. The company operates 16 hospitals and 166 clinics across California, Connecticut, Pennsylvania, and Rhode Island. On Saturday, it filed for bankruptcy under Chapter 11 protection in Texas. The move signals massive changes ahead for the organization, which employs 12,600 people.
Bankruptcy filing and plans for restructuring
Prospect has debts exceeding $400 million. Despite the financial crisis, it reassured patients that all hospitals, clinics, and medical offices would continue operating during the restructuring. The company, however, intends to shift its focus entirely to California. It currently owns seven hospitals in the state and plans to sell its operations in the other three states.
Hospital sales and job transfers
Two hospitals in Rhode Island, Roger Williams Medical Center and Our Lady of Fatima Medical Center, are set to be sold to another healthcare provider. In Pennsylvania, the company struggles to find buyers for Crozer-Chester Medical Center in Chester and Taylor Hospital in Ridley Park. Meanwhile, in Connecticut, Waterbury Hospital, Manchester Memorial, and Rockville General are also up for sale. A previous buyer backed out, alleging these facilities were in poor condition.
Von Crockett, Prospect’s CEO, expressed optimism about the move. He stated, “Divesting operations outside California ensures these facilities receive the financial support they need. Communities depending on them will retain access to critical healthcare services.”
History of financial struggles
The company’s troubles aren’t new. Prospect Medical was once an aggressive buyer of struggling hospitals but has faced mounting financial issues. Private equity firm Leonard Green & Partners held a majority stake in the company between 2010 and 2021. During this period, Prospect paid a massive $457 million dividend to its leadership in 2018. Former CEO Sam Lee reportedly received $90 million, while Leonard Green’s shareholders pocketed $257 million.
Investigations and criticism
Prospect Medical has been under scrutiny for years. CBS investigations revealed how private equity firms drained millions from community hospitals. This financial mismanagement led to severe cuts in services and, in some cases, closures. Steward Health Care, another private equity-backed system, collapsed last year after owning over 30 hospitals. The fallout raised alarms about the risks of private equity in healthcare.
Recently, a bipartisan congressional committee criticized Leonard Green and Prospect Medical. The report accused them of prioritizing profits over patient care, leaving hospitals in vulnerable communities to struggle. It concluded that private equity-backed hospitals pose a significant threat to America’s healthcare infrastructure, particularly in underserved areas.
Defense and charitable contributions
Prospect Medical defended its track record. A spokesperson highlighted that the company had spent over $750 million on its hospitals and provided $900 million in charity care. They argued that most of the hospitals they acquired were in dire conditions and on the brink of closure. “No one else wanted to acquire these facilities,” the spokesperson said. “Many were headed for shutdowns.”
Future implications
The bankruptcy and planned hospital sales mark a significant turning point for Prospect Medical Holdings. The company’s financial maneuvers and private equity ties have drawn widespread criticism. As it consolidates in California, the healthcare giant’s ability to navigate its challenges will shape the future of many communities depending on its services.
