A health care company that owns and operates more than 182 hospitals and clinics across the country filed for Chapter 11 bankruptcy protection in Texas federal court on Saturday.
Prospect Medical Holdings, a Los Angeles-based health care company, goes bankrupt after its previous owner siphoned off hundreds of millions of dollars in dividends and management fees, while shareholders and management reaped tens of millions of dollars in profits. I applied for protection.
In documents filed in the U.S. Bankruptcy Court for the Northern District of Texas, the company said it has more than $400 million in debt and is facing the lingering effects of the COVID-19 pandemic, inflation and rising health insurance denials. This is cited as a financial issue.
Prospect reports debt in the range of $1 billion to $10 billion, blaming its deteriorating financial position on interest costs and high debt.
Prospect hopes to use the bankruptcy process to facilitate the sale of its hospitals outside California while keeping all its facilities open.
The strategy includes an agreement to sell two Rhode Island hospitals, Roger Williams Medical Center and Our Lady of Fatima Hospital, to the Centurion Foundation, a private nonprofit organization that specializes in real estate lending to nonprofit institutions. Masu.
In addition, Prospect plans to withdraw from Crozer-Chester Medical Center in Pennsylvania.
Prospect's trajectory of financial collapse has been blamed on its former majority owner, private equity firm Leonard Green & Partners.
Under Leonard Green's ownership, Prospect initiated a $1.31 billion dividend recapitalization, resulting in Leonard Green receiving $658.4 million in dividends and management fees.
This move left Prospect with even more debt.
A bipartisan Senate committee report accused Prospect of putting “profits before patients” by collecting large dividends and fees.
In 2018, Leonard Green secured $1.12 billion in financing and allocated $457 million to executive dividends. Prospect CEO Sam Lee reportedly received about $90 million from the dividend, according to the Senate report.
Lee and company president David Topper own the majority of the company after acquiring Leonard Green in 2021.
The company pledged in a statement that its hospitals and clinics will continue to provide uninterrupted care during the lawsuit.
A spokesperson for Prospect denied these allegations and claimed the Senate report contained inaccuracies and omitted important context.
In 2019, Prospect Medical Holdings sold hospital properties in California, Connecticut and Pennsylvania to Medical Property Trust (MPT) for $1.386 billion as part of a sale-leaseback agreement.
The company then leased back the property and assumed rent, property tax and maintenance obligations.
This arrangement added a significant financial burden to Prospect, which was already heavily in debt.
Mr. Prospect faces lawsuits brought by several states, including Connecticut, Pennsylvania, and Rhode Island.
In Pennsylvania, the company was sued after one of its hospitals closed, leaving nearly 85,000 residents without access to emergency care.
The Post has reached out to Prospect for comment.
