Private equity firms’ involvement in hospital management has raised concerns over patient care after Prospect Medical Holdings filed for bankruptcy last weekend. The company, which operates 16 hospitals across four states, cited decreased revenue and increased costs due to the COVID-19 pandemic as major contributors to its financial distress.
Prospect’s situation echoes that of Steward Health, another multistate hospital chain formerly owned by private equity firms. Both chains sold their real estate to Medical Properties Trust (MPT), a real estate investment firm, and leased it back from the same company. Critics argue that this practice is a result of financially extractive business practices that strip value from hospital systems and load them with debt.
“This is not just about bad management; it’s about the systemic risks surrounding private equity ownership of hospitals,” said Mary Bugbee of the Private Equity Stakeholder Project. “The regulatory system allows pillaging of hospitals, and we’re seeing consequences for patients.”
As Prospect navigates its bankruptcy process, it has closed some facilities or service lines and put others on the market with varying degrees of success. The outcome will have significant implications for patient care in California, where Prospect’s hospitals remain financially viable.
The prospect of new regulations is looming, with Congress having zeroed in on private equity ownership of health-care providers in recent months. A bipartisan report from the Senate Budget Committee slams the industry’s stewardship of hospital chains, and experts are watching to see whether this bankruptcy will have political repercussions similar to Steward Health’s.
Source: https://www.axios.com/2025/01/15/prospect-bankruptcy-private-equity