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A PRIVATE healthcare company with nearly 200 locations across the country has filed for bankruptcy after previous executives made millions while leaving the company in severe debt and patients with an uncertain future.
The company, Prospect Medical Holdings, Inc., is based in Los Angeles and operates 16 hospitals and 166 clinics across California and the Northeast, some of which are already in negotiations for sale.
Crozer-Chester Medical Center in Pennsylvania, which is owned by Prospect Medical Holdings[/caption]
Prospect Medical Holdings owns and operates nearly 200 hospitals and clinics across the US, including Manchester Memorial Hospital in Connecticut[/caption]
Prospect Medical Holdings has filed for bankruptcy shortly after a Senate report found the company had enriched shareholders at the expense of patient care[/caption]
According to bankruptcy filings in the North District of Texas Bankruptcy Court, Prospect has debts of more than $400 million.
Prospect has been afflicted by rising interest costs and debt, according to its legal filings, and listed $1 billion to $10 billion in assets and liabilities.
The company also declared more than 100,000 creditors.
In bankruptcy court documents, the company has stated that its hospitals will remain open and that hospital care will continue uninterrupted.
From 2010 to 2021, Prospect was operated by the private equity firm Leonard Green and Partners, which has been accused of negligence and exploitation of Prospect’s health system.
On January 7, a bipartisan Senate Budget Committee report accused Leonard Green of plundering Prospect’s health system for the financial gain of its investors and executives.
According to the report, Prospect paid $645 million in dividends to its financiers and by buying back preferred stock from its investors.
The Senate committee also found that $424 million of that amount went to Leonard Green shareholders alone, while Prospect CEO Sam Lee pocketed $90 million himself.
Prospect also took out hundreds of millions in loans before defaulting on them, delivering enormous profits to the private equity firm while draining the health system, per the report.
PATTERN OF ALLEGED MISMANAGEMENT
In May 2024, Yale New Haven Health (YNHH) sued Prospect to get out of an acquisition deal that would have given them ownership of Prospect’s three Connecticut hospitals.
In the lawsuit, YNHH accused Prospect of financial mismanagement, including allegations of changing vendors to skirt payments, regularly bouncing checks, and other breaches of the agreement, the Connecticut Mirror reported.
YNHH also accused Prospect of neglecting its facilities and failing to maintain adequate cybersecurity.
Crozer Health, a Pennsylvania health system with four hospitals, suffered service cuts and facility closures under Prospect’s ownership.
In October 2024, the Pennsylvania Attorney General filed a lawsuit against Prospect for allegedly mismanaging and neglecting Crozer Health.
Prospect Medical Holdings' Full Statement
Von Crockett, Prospect Medical Holdings’ chief executive officer, gave the following statement on the bankruptcy filing on Saturday:
Today’s actions represent an important step forward in our longstanding commitment to best serve the interests of our patients, physicians, employees, and communities.
Divesting our operations outside of California will ensure that they receive necessary financial support so that the communities that rely on those facilities will maintain continued access to highly coordinated, personalized, and critical healthcare services long into the future.
Through this process, Prospect Holdings will regain its financial footing as we rededicate ourselves to our original mission of serving the community.
We look forward to working alongside our stakeholders to implement these strategic transactions, and are confident that through these actions, Prospect Holdings will be better positioned to prioritize and execute its core strengths.
In its bankruptcy filings, the company blamed the Covid-19 pandemic, inflation, and higher health plan denial rates.
In one instance last year, Prospect began cutting services at Delaware County Memorial Hospital before eventually closing its emergency department entirely in November, leaving some 85,000 people in suburban Philadelphia without emergency care, CBS News reported.
Prospect intends to use its bankrupt status to expedite the sales of its properties outside of California, including its divestment from Crozer Health and two hospitals in Rhode Island.
Even so, an uncertain future faces the hospitals operated by Prospect, one that local officials were quick to spotlight, reassuring residents that no closures are imminent.
This is not just a financial matter – it’s also a public health crisis.
Tim Kearney
“A bankruptcy filing does not mean this hospital is closing today and we will fight like hell to keep it open,” Pennsylvania State Representative Leanne Krueger said at a rally in front of Crozer-Chester Medical Center in Pennsylvania, which is owned by Prospect Medical Holdings.
“This is not just a financial matter – it’s also a public health crisis. Prospect Medical Holdings has systematically stripped resources from its facilities, prioritized profits over patient care, and left our communities to shoulder the fallout,” Pennsylvania State Senator Tim Kearney said.
In a statement, Prospect hit back against allegations that care and service will change.
“Divesting our operations outside of California will ensure that they receive the necessary financial support so that the communities that rely on those facilities will maintain continued access to highly coordinated personalized and critical healthcare services long into the future,” Prospect co-CEO Von Crockett said.
“Through this process, Prospect Holdings will regain its financial footing as we rededicate ourselves to our original mission of serving the community.”
In 2021 majority stake in Prospect was purchased from Leonard Green by current president David Topper and co-CEO Sam Lee.
The Senate Budget Committee report estimated that Lee funneled $112 million out of the company, with Topper receiving about $83.2 million.
