Then we suffer and the patients suffer., Paramedics have repeatedly gone to fuel up ambulances using a hospital credit card, only to have it rejected, according to Larry Worrilow, assistant chief for the Crozer-Keystone EMS system. Investors Extracted $400 Million From a Hospital Chain That Sometimes Couldnt Pay for Medical Supplies or Gas for Ambulances Prospect Medical, which mostly serves low-income patients, has suffered a litany of problems: broken elevators, dirty surgical gear, bedbugs and more. The pattern would continue at Prospect. It is leaving a mess behind at Prospect. Leonard Green extracted $400 million in dividends and fees for itself and investors in its fund not from profits, but by loading up the company with debt. He says his dad covered for Lee after the merger by soft-pedaling Altas accounting problems only to have Lee turn on him. After the retirement plan settlement was announced, the company took out a large ad in The Providence Journal, stating that by making the $27 million payment, it was helping our retirees and employees, and doing so because we are fully committed to Rhode Island. A second ad solicited support for the companys sale: Today, Prospect seeks state approval to allow its founders to buy out the outside investors in Prospect. In addition, Prospect made accusations about the conduct or character of seven other former executives and employees critical of the company, including two other former CFOs of Prospect or Alta. Instead, retirees nervous about Prospects purchase were shown a PowerPoint presentation stating that Prospects one-time contribution would stabilize plan assets. Lee attested in writing that the payment would assure that the pensions and retirement of many former employees, who reside in the community, are protected. Prospect told the attorney general that any necessary future payments would be made based on recommended annual contribution amounts as provided by the Plans actuarial advisors. Remarkably, no one addressed who would actually make such payments. Many of these problems had yet to emerge by 2015, as Prospect struck rapid-fire deals to double the companys size. Private equity firm Leonard Green and other investors extracted $645 million from Prospect Medical before announcing a deal to sell it and leave it with $1.3 billion in Filed: August 10, 2017 2:17-cv-03599-WB. Inter Valley promptly notified Prospect, which expressed skepticism that anything was wrong, according to Inter Valley chief operating officer Susan Tenorio. By January 2019, Prospect had so little cash that it needed an emergency $41 million loan from Leonard Green, Lee and Topper to assuage auditor fears that the company might not remain a going concern and to avoid violating loan covenants, according to Aleman. In September 2019, Californias attorney general formally charged Prospect executives, including Lee, the hospital and its supervising pharmacists, with gross negligence, initiating proceedings to revoke or suspend the hospitals pharmacy permit. But it also meant that Prospect had shed by far its biggest asset, sharply reducing the value of the company. Doctors who had long relationships with Nix stopped referring patients. Doris Burke is a senior research reporter at ProPublica. In February, Aleman, whod been stripped of his stock options when he was suddenly fired last fall, filed suit in California, seeking restoration of his shares and payment of his 2018 bonus. That episode, as well as the death of the ER-overflow patient whose body was found on the beach, resulted in immediate jeopardy findings. And it said it is not uncommon for hospitals to utilize a mobile MRI, but plans are underway to relocate the MRI inside a nearby building. He was very proud of making it impossible to get a dollar out, former CFO Heather said. Now Theyre Back. (Near the end of the reporting for this article, Prospects CEO, Lee, spoke to ProPublica on the condition that he not be quoted.) Its owners, including Leonard Green & Partners and Prospects CEO, have cashed in. Learn More / Map Some current and former management shareholders, working with Aleman, contemplated trying to recruit another buyer who would pay a far higher price. On May 1, department supervisor Jerald Ferreira, 63, died of COVID-19. A drag-along provision of the agreement would force all shareholders to sell immediately, rather than wait and hope for a better price. A company consultant in one of its Rhode Island hospitals discovered dirty, corroded and cracked surgical instruments in the operating room. Text Size. They wanted to get rid of it at all costs. In its statement, Prospect said it will keep East Orange open into 2021 while it continues to seek a buyer and thus will surpass our five-year commitment of operating the hospital. The company also said it has met its $52 million capital-spending promise under provisions of its purchase agreement that allow it to count debt payments and routine maintenance costs toward that total. The cases are all pending. A 2018 state inspection found the pharmacy staff at the Culver City hospital had for months ignored findings of fungal air growth, bacterial organisms and mold in equipment used to mix patient medications in a sterile environment. Theyre loaded with debt and anybody sensible is not prepared to buy them.. All of a sudden COVID comes in, everybody should have surgical masks, and we dont have two days worth of surgical masks, much less two months of surgical masks. ), Despite the turmoil, Lee became CEO of Prospect and consolidated power. We cant find anything that will make us feel comfortable theyll be good stewards of these safety-net hospitals in Rhode Island, he said. Prospect CEO Sam Lee, who owns about 20% of the chain, made $128 million while expanding the company from five hospitals in California to 17 across the country. When GOP Attorneys General Embraced Jan. 6, Corporate Funders Fled. Starting around 2010, giant private equity firms like Cerberus Capital Management and Apollo Global Management rushed into the hospital business, buying up facilities and assembling chains. Its okay to put our stories on pages with ads, but not ads specifically sold against our stories. This January, a giant brown mold formation burst through the wall near a fourth-floor nurses station. The deal hasnt worked out quite as well for Prospects patients, many of whom have low incomes. Paramedics for Prospects hospital near Philadelphia told ProPublica that theyve repeatedly gone to fuel up their ambulances only to come away empty at the pump: Their hospital-supplied gas cards were rejected because Prospect hadnt paid its bill. The company denied the claims, pointing out that its 2014 purchase of the hospitals included contract language absolving it of any future liability for the retirement plan. Lee was demanding and unrelenting, according to people who worked for him. The concerns are dire enough that on 14 occasions since 2010, Prospect facilities have been deemed by government inspectors to pose immediate jeopardy to their patients, a situation the U.S. Department of Health and Human Services defines as having caused, or is likely to cause, serious injury, harm, impairment or death.. Theres plenty of times when we went to go on an emergency call and the ambulance wouldnt start, he said. This includes publishing or syndicating our work on platforms or apps such as Apple News, Google News, etc. Prospect removed Nixs longtime CEO in 2015 and established control from headquarters in LA, while cycling through four more CEOs in the next four years. Faced with that financial plight, these hospitals will be compelled to cut costs even further, making it ever harder to deliver quality care. As late as Dec. 10, the receivers special counsel told a public hearing that Lee and his partner were predators, using the hospitals as their private piggy banks. A financial consultant for the receiver also warned in a report that Prospects financial statements through fiscal year 2019 (even preceding the financial stress caused by the COVID-19 pandemic) revealed a worsening state of insolvency and imminent bankruptcy, absent a big capital infusion. And ProPublica has learned of a multiyear scheme at a key Prospect operation Prospect paid $300 million. Moodys, the ratings agency, was dismayed by Prospects soaring debt. Prospects about-face, a Rhode Island official responded, couldnt remove the initial taint of the original receipt of threatened litigation. (Prospect declined to comment on this matter.). In its responses for this story, Prospect made an array of unsubstantiated allegations about Alemans workplace conduct during his 12 years at the company. Noted the resulting complaint to the California health department: There are mushrooms growing out of the wall (which they cut off and patched back up). ), At Crozer-Keystone, as elsewhere, Prospect has aggressively moved to lower costs. I dont know the answer, but I think theres something wicked going on here, Max Wistow, the receivers special counsel, told a public hearing. That quality component was always lax in my opinion, one said. Citing Leonard Greens history with the hospital company, the Rhode Island state treasurer has said he will block any future investments by his state, which sunk $20 million into the fund that owns Prospect, in the private equity firms funds. The companys 92-page confidential information memorandum, prepared for prospective acquirers and obtained by ProPublica, promoted the companys cost-effective care model, including daily flex management of hospital staffing, use of low-cost sources for medical supplies and a focus on high-profit programs for treating the seriously mentally ill. Bain Capital and CVC Capital Partners were the two final bidders. Prospects management and representatives have given assurances that this was a one-time event and that there are no plans to make a similar distribution in the foreseeable future, the Rhode Island attorney general noted in his written findings on the hospitals sale in 2014. It was profitable and had a higher federal quality rating, with four out of five stars, than any other Prospect hospital. He would shut off things youd say it was crazy to shut off., Through its spokesman, Prospect said we do not have a slow-pay policy at Sam Lees or anyone elses direction. It said the companys implementation of a new financial system over the past 12 months has caused a number of vendor payment delays and credit holds., Prospect was far less obsessive about patient care issues, according to former company executives. On August 10, 2017, Stephan Zouras LLP filed a collective and class action lawsuit against Prospect Medical Holdings, Inc. for violations of the Fair Labor Standards Act and the Pennsylvania Minimum Wage Act. It lowered the companys credit rating in response. The court-appointed receiver has filed multiple lawsuits accusing Prospect and the diocese of omissions and half-truths actionable as fraud, demanding that they help make the pension whole. It found that Prospect had submitted an estimated $22.6 million in potentially improper charges, which the federal government had already paid. These arent mere anecdotes or anomalies. WebAt Prospect Medical Holdings, we are dedicated to delivering quality, compassionate, accessible healthcare to the patients in the communities we serve in California, Connecticut, New Jersey, Pennsylvania and Rhode Island. As Prospect cranked up its ambitious expansion plans, it consistently told the targets of its acquisitions and the government regulators who needed to approve them that it was in the business of saving troubled hospitals. He sensed a major opportunity, according to a corporate history his spokesman provided: While the cost of healthcare was growing at three times the rate of the US GDP, hospitals as a group were inefficient in delivering quality care. Lee quit the private equity firm in 2000 and joined Alta full time, becoming its co-president and a 50-50 partner with Topper. Prospect used much of the cash to pay off its loans. In April 2003, Lee and Topper abruptly shut down two of their hospitals, placing them into bankruptcy (and eventually liquidation), while selling a third. On February 11, 2021, Plaintiff Godofredo Solsona filed this employment action against Defendant Prospect Medical Holdings, Inc. asserting five causes of action under FEHA and a Tameny claim. Medical Properties Trust, Inc. management reported that the Prospect situation appears to be progressing, although management will be contributing about $50 million in equity financing. WebWe are hospitals and affiliated medical groups working for the benefit of every person who comes to us for care. In a letter to Rhode Island officials, Prospect insisted it didnt violate the pledge it made back in 2014 because in 2014, no dividends were planned., That $457 million raised the total in dividends extracted from Prospect since Leonard Green acquired it to $645 million. In October 2015, the firm hired Morgan Stanley to find a new private equity buyer for Prospect. Volume and physicians, the company said, never returned to pre-flood levels.. Lee churned through executives and could turn brutal, screaming at subordinates or grilling them over a tiny issue. In its statement, Prospect noted that its purchase agreements for the hospitals clearly spell out that the company had no responsibility for funding the pension plan. For more information about canonical metadata, You cant edit our material, except to reflect relative changes in time, location and editorial style. The virus sickened a half-dozen members of the hospitals housekeeping staff, which had been given limited personal protective equipment. It was an absolute disaster., In its responses to ProPublica, Prospect blamed the failure on a catastrophic broken water pipe in 2016 that flooded the entire hospital infrastructure, forcing doctors and patients to go elsewhere for months. There is leakage from the ceiling when it rains you can taste the mold in the air.. Prospect today is at no risk of financial failure.. Please contact. Private equity really wants to see growth fast and get out, Phillips said. WebProspect Medical Holdings, Inc. | 14,513 followers on LinkedIn. Prospect Medical Holdings, Inc. ("Prospect") leases and operates 13 of MPT's facilities. Lee had worked for Andersen Consulting (as a grunt, he later explained in a deposition) and a Florida software company before getting an MBA at Harvard and joining Kline Hawkes. You cant use our work to populate a website designed to improve rankings on search engines or solely to gain revenue from network-based advertisements. This one stemmed from patient-safety violations in a mental health ward at 300-bed Crozer-Chester Medical Center, the systems largest hospital. Prospect Medical Holdings, Inc. filed as a Statement & Designation By Foreign Corporation in the State of California on Friday, July Prospect refused, and failed to turn over any of the materials, despite an order to do so from the National Labor Relations Board in April 2019, affirmed by the 1st U.S. Eager to raise capital, Prospect sold its land and buildings last fall in a sale-leaseback transaction that allowed the operations to remain in the facilities. The move, made to qualify for extra government subsidies for treating low-income patients, helped Brotman generate profits. The settlement, subject to multiple court approvals that will take several months, will end the receivers public opposition to Prospects pending sale. There have been multiple rounds of public hearings and questions to both Prospect and Leonard Green, generating thousands of pages of submissions in response. Patients needing MRI scans must be taken outdoors and down an alley, past dumpsters and into a hospital parking lot, where the scan is done in a rented trailer. You cant use our work to populate a website designed to improve rankings on search engines or solely to gain revenue from network-based advertisements. Prospect asserted that its cost was actually $8.5 million and that management was unaware of any inappropriate billing until after the fact. The company raised $1.55 billion. In April 2008, Alta restated its 2006 revenues, lowering them by about $4 million. The stringent penny-pinching wasnt enough to generate profits at first. Their model was really about just bare minimum, said Mike Heather, who later helped Prospect acquire Alta and served as Prospects CFO from 2004 through 2013. He hasnt been quoted in the press in more than 20 years. When Prospect then missed the escrow deadline, the foundation began garnishing the companys accounts and sought to have a receiver appointed over all its financial transactions. Two former senior executives at Alta claimed that Lee and his longtime partner had cheated them out of a promised equity stake. In Culver City, nurses unable to get proper protective gear for a time donned plastic garbage bags. At a Prospect hospital in Rhode Island, a locked ward for elderly psychiatric patients had to be evacuated and sanitized after poor infection control spread COVID-19 to 19 of its 21 residents; six of them died. After digesting the acquisitions in the pipeline, the company projected, revenues and profits would surely soar. Correction, Oct. 12, 2020: An earlier version of this article misspelled the name of Doreena Duphily. You have to send the next closest ambulance. Were in this for the long term, OK?. (For example, yesterday can be changed to last week, and Portland, Ore. to Portland or here.), You cannot republish our photographs or illustrations without specific permission. Crozer Health, the struggling four-hospital system in Delaware County, and its parent company Prospect Medical Holdings, have at times been unable to pay vendors and contractors who provide vital services to patients at Crozer-Chester Medical Center in Upland, according to staff. Already deeply indebted, Alta had to borrow more to pay the $5.3 million.