Prospect Medical Holdings, a Los Angeles-based company owning over 12 hospitals in four states, has filed for bankruptcy after its owners took hundreds of millions of dollars in payouts. The company listed debts of over $400 million and stated it will continue to operate as normal during the Chapter 11 process.
Similar to another major hospital system, Steward Health Care, which also filed for bankruptcy last year, Prospect Medical’s collapse has drawn attention to private equity firms’ financial practices. An ongoing CBS News investigation revealed how these investors have extracted hundreds of millions from community hospitals, resulting in devastating public health consequences.
The investigation found that both Prospect Medical and Steward relied on the value of their hospital real estate to finance large payouts for their owners. This led to onerous lease agreements that diverted funds away from direct patient care. A Senate committee report concluded that private equity’s financial model may pose a threat to the nation’s healthcare infrastructure, particularly in underserved areas.
Prospect Medical’s CEO Sam Lee took home around $90 million, while Leonard Green shareholders received $257 million. The company has disputed the Senate findings, stating they drew false conclusions and omitted key facts.
Source: https://www.cbsnews.com/news/prospect-medical-holdings-bankruptcy-private-equity