A private health care company with nearly 200 locations across the country has filed for bankruptcy after former executives made millions while leaving the company deeply in debt and patients with an uncertain future.
The company, Prospect Medical Holdings, Inc., is headquartered in Los Angeles and operates 16 hospitals and 166 clinics throughout California and the Northeast, some of which are already in negotiations for sale.
3
3
3
According to bankruptcy filings in the Northern District of Texas Bankruptcy Court, Prospect has more than $400 million in debt.
Prospect has been hit by higher interest and debt costs, according to its legal filings, and lists $1 billion to $10 billion in assets and liabilities.
The company also announced more than 100,000 creditors.
In bankruptcy court documents, the company stated that its hospitals would remain open and that hospital care would continue without interruption.
Read more in the American newspaper The Sun
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 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 repurchasing preferred stock from its investors.
The Senate committee also found that $424 million of that went to Leonard Green shareholders alone, while Prospect CEO Sam Lee received $90 million himself.
Prospect also took out hundreds of millions in loans before defaulting on them, generating huge profits for the private equity firm while draining the health system, according to the report.
Pattern of alleged mismanagement
In May 2024, Yale New Haven Health (YNHH) sued Prospect to exit an acquisition that would have given it ownership of Prospect's three Connecticut hospitals.
In the lawsuit, YNHH accused Prospect of financial mismanagement, including allegations of changing vendors to avoid payments, regularly bouncing checks, and other violations of the agreement, the Connecticut Mirror reported.
YNHH also accused Prospect of neglecting its facilities and failing to maintain proper cybersecurity.
Crozer Health, a Pennsylvania health system with four hospitals, has experienced service outages and facility closures under Prospect's ownership.
In October 2024, the Pennsylvania Attorney General filed a lawsuit against Prospect alleging mismanagement and negligence by Crozer Health.
Prospect Medical Holdings full statement
Vaughn Crockett, CEO of Prospect Medical Holdings, made the following statement regarding the bankruptcy filing on Saturday:
Today's actions represent an important step forward in our long-standing commitment to best serve the interests of our patients, doctors, employees and communities.
Divesting our operations outside of California will ensure they receive the necessary financial support so that the communities that rely on those facilities can maintain continued access to coordinated, personalized, and vital health care services long into the future.
Through this process, Prospect Holdings will regain its financial footing while we rededicate ourselves to our original mission of community service.
We look forward to working alongside our stakeholders to execute these strategic transactions, and we are confident that through these actions, Prospect Holdings will be better positioned to prioritize and execute on its core strengths.
In its bankruptcy filings, the company blamed the COVID-19 pandemic, inflation and high rates of health plan denials.
In one case last year, Prospect began cutting services at Delaware County Memorial Hospital before eventually closing its emergency department entirely in November, leaving about 85,000 people in suburban Philadelphia without emergency care, CBS News reported.
Prospect intends to use its bankruptcy to accelerate sales of its properties outside of California, including divesting from Crozer Health and two hospitals in Rhode Island.
However, an uncertain future faces Prospect-run hospitals, one that local officials have been quick to highlight, reassuring residents that no closures are imminent.
This isn't just a financial issue — it's also a public health crisis.
Tim Kearney
“Declaring bankruptcy does not mean that this hospital will close today and we will fight hard to keep it open,” Pennsylvania State Representative Leanne Krueger said at a rally in front of Crozer-Chester Medical Center in Pennsylvania, owned by Prospect Medical. Collectibles.
“This isn't just a financial issue — it's also a public health crisis. Prospect Medical Holdings has systematically stripped its facilities of resources, prioritized profits over patient care, and left our communities to bear the consequences,” said Tim Kearney, a Pennsylvania state senator. .
In a statement, Prospect responded to claims that care and service would change.
“Divesting our operations outside of California will ensure they receive the necessary financial support so that the communities that rely on these facilities can maintain continued access to highly coordinated personal and critical health care services long into the future,” said Vaughn Crockett, co-CEO of Prospect. .
“Through this process, Prospect Holdings will regain its financial footing as we rededicate ourselves to our original mission of community service.”
In 2021, a majority stake in Prospect was purchased from Leonard Green by current Chairman David Topper and Co-CEO Sam Lee.
The Senate Budget Committee report estimated that Lee diverted $112 million from the company, with Teuber receiving about $83.2 million.
