A Los Angeles-based company that owns more than a dozen hospitals in four states filed for bankruptcy late Saturday night, the second major system acquired by private equity to collapse in less than a year. Prospect Medical Holdings, Inc., which owns hospitals in California, Pennsylvania, Delaware, and Rhode Island, says that operations will continue “as normal” during the Chapter 11 procedings, but can make no guarantees of the outcomes. Several facilities closed a couple of years ago, leaving areas without health care.
Read the CBS story:
Prospect Medical Holdings files for bankruptcy after owners took hundreds of millions in payouts
The bankruptcy is very reminicent of the collapse of Steward Health last year, another system which had been acquired by a private equity firm. Private equity firm Leonard Green & Partners controlled a majority stake in Prospect Medical. Exactly like Steward, the Prospect management sold off most of its real estate and buildings to external real estate companies, which then rented the facities back to the hospitals at crippling rates. Despite the fact that this maneuver resulted in an unsustainable situation for every one of the facilities, the management rewarded leadership a $457 million dividend in 2018; the Prospect Medical CEO, Sam Lee, took home about $90 million while Leonard Green shareholders were paid $257 million.
CBS News reported on the early impact of this maneuver, which resulted in the shutdown of several facilities: CBS Mornings: Pennsylvania hospital shutdown spurs questions about private equity in health care
Read about the Steward Health Care Bankruptcy:
Steward Health Care Declares Bankrupcty Amidst Controversy
You may have missed the story that almost 25% of hospital emergency rooms are now owned by private equity firms – and are structured to focus on profit rather than health care:
Private Equity Gobbles Up Emergency Rooms
While this corrupt procedure is probably technically “legal,” in our opinion it should be against the law and individuals who knowingly cripple health care systems for their own personal enrichment should be jailed.
