Other Prospect critics remain undeterred. (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. Theyre just doing this immoral sucking out of resources. ), At Crozer-Keystone, as elsewhere, Prospect has aggressively moved to lower costs. 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. In April 2008, Alta restated its 2006 revenues, lowering them by about $4 million. No problem, Prospect responded; it wouldnt pay out any more dividends. 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. In a letter responding to the company, Alemans lawyer denied that his client made any defamatory statements. Correction, Oct. 12, 2020: An earlier version of this article misspelled the name of Doreena Duphily. Trident is a company that inserts something called a PICC In October, the private equity firm agreed to sell the firms 60% stake to Lee and Topper for $12 million in cash plus the assumption of $1.3 billion in lease obligations. But Prospects penchant for scrimping on staff and medical supplies left its hospitals with little margin for error. Lee professed his innocence and fought the actions, typically settling for discounted amounts. These arent mere anecdotes or anomalies. We were probably about three weeks behind every other hospital in getting just the basics, said Fatima RN Lynn Blais. Their ambitions were only growing. CBS News submitted detailed questions to Prospect Medical about these financial decisions, including about the $457 million dividend and the lease-back In 2017, the system was declared insolvent and placed in receivership. WebProspect Medical Holdings, Inc. | 14,513 followers on LinkedIn. 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. The receiver demanded that Prospect help make the fund whole. Lee decided to hold off on a sale. The move, made to qualify for extra government subsidies for treating low-income patients, helped Brotman generate profits. Born in South Korea and raised in Tampa, Florida, he was an industrial engineering graduate of Georgia Tech. Get our investigations delivered to your inbox with the Big Story newsletter. After that is accomplished, firms then usually resell the operation to another buyer within five years. Waterbury Hospital was found to have failed to properly monitor two suicidal patients on a single day in March 2019. You have to send the next closest ambulance. "Prospect Medical Holdings has notified the Department of Attorney General and the Department of Health this morning He decided to invest, putting up $3 million in equity toward the $34 million purchase price. Doctors who had long relationships with Nix stopped referring patients. Yet Prospect claimed the role of savior. Prospect and Leonard Green declined to comment on the bill. Aleman said the discussed reasoning was that Prospect could bring a far richer price after mining its pending acquisitions for bigger profits. We do not generally permit translation of our stories into another language. Prospect settled in 2017, agreeing to pay $275,000 while asserting that the claims were wholly without merit.. With all that Prospect has done for Rhode Island, and will continue to do, we hope the state will recognize the benefits and approve this request. The company issued a press release noting that an outside monitor for the state had found that Prospect had met the commitments it had made for capital spending at the two hospitals. Employees told ProPublica the problem has persisted for years and provided photographs and videos documenting numerous leaks as well as the mold growth. We reported everything, Inter Valley CEO Mike Nelson said. Aleman is now CFO of Prime Healthcare. Those payments raised fears that Prospect wouldnt fulfill its pledge to spend $90 million on capital improvements over four years. Hed go through three hours of literally just peeling the skin off somebody, Aleman said. 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. He would just not pay people as a way to negotiate. Any website our stories appear on must include a prominent and effective way to contact you. The biggest corporations still own more hospitals than private equity firms: HCA, for example, owns about 180; Apollo claims 89 and Cerberus had 37 at its peak, before selling this year. We do not generally permit translation of our stories into another language. The transaction breezed past regulators in four states where Prospect owns a total of 15 hospitals. Prospect executives tap danced, alternately denying problems and explaining away the repeated findings of imminent threat. Lee churned through executives and could turn brutal, screaming at subordinates or grilling them over a tiny issue. Leonard Green, which owns about 60% of the hospital chain, announced plans in October 2019 to sell its stake to Prospect CEO Sam Lee and his longtime business partner for $12 million plus the assumption of $1.3 billion in lease obligations. 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. WebThe filed complaint alleges that defendants made false statements and/or concealed that: (1) Prospect Medical Holdings, Inc. (Prospect), which leases and operates 13 of the Prospect asserts that it promptly addressed the consultants concerns about dirty and damaged surgical instruments, but that it viewed the report as proprietary and thus availed itself of the court system. The company added: As we recently received a ruling from the Federal Court to produce the document, we have complied with the order., Prospect has yet to hand over any documents, according to the union. It made other promises as part of the deal: to spend an additional $200 million in capital improvements within five years; to keep all the hospitals open for a decade; to fund $171 million in pension benefits within five years; and to endow a community health care foundation for $53 million. Then 49, Topper started Alta after recovering from a fire at his home that left him on a respirator, with third-degree burns over 70% of his body. Prospect Medical Holdings, Inc. ("Prospect") leases and operates 13 of MPT's facilities. Prospect Medical Holdings, Inc. filed as a Statement & Designation By Foreign Corporation in the State of California on Friday, July 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. The Rhode Island officials have subjected the transaction to a high level of scrutiny. That fund has doubled in value overall, according to data on its investors websites. But Brotman has continued to deteriorate. Many of these problems had yet to emerge by 2015, as Prospect struck rapid-fire deals to double the companys size. Prospect asserted that no patient harm occurred from the error, which has been corrected, and said the pharmacy is now fully operational.. (Moss Adams declined to comment.). Get our investigations delivered to your inbox with the Big Story newsletter. Chris Callaci, general counsel for the Fatima hospital union, said his group is also considering running a radio ad to boost public opposition to the sale. (Prospect says it believes the assessments are excessive and will pay once a final ruling is given as to what is fair and proper.). Prospect has a long history of breaking its word: It has closed hospitals it promised to preserve, failed to keep contractual commitments to invest millions in its facilities and paid its owners nine-figure dividends after saying it wouldnt. In 2013, four years after buying the hospital, Prospect grouped Brotman with two of its other hospitals, renaming it Southern California Hospital at Culver City. In 2019, after repeatedly promising to keep at least part of the system open, Prospect shut it all, laying off nearly 1,000 employees. (Another $14 million in fees went to the private equity fund. (The E&Y senior manager assigned to examine Altas financials told ProPublica the misstatement was very easy to find.) 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.. Theyve squeezed it as dry as they can., Those actions have made it hard for the firms to sell hospitals, according to Eileen Appelbaum, senior economist at the Center for Economic and Policy Research, who studies private equity. As Connecticut in 2016 weighed whether to approve Prospects purchase of three hospitals, the state sent a team to California to investigate five recent immediate jeopardy findings, which had placed one Prospect hospital license on a termination track for cutoff of Medicare and Medicaid funding. As Prospect headed toward the September close of its 2018 fiscal year, its business began deteriorating rapidly, torpedoing the projections it had given potential buyers. Our comprehensive networks aim to provide coordinated, personalized care to California, Connecticut, Pennsylvania, Texas and Rhode Island. If you share republished stories on social media, wed appreciate being tagged in your posts. 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. Private equity really wants to see growth fast and get out, Phillips said. 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. During negotiations over the sale, Prospect was repeatedly briefed on actuarial studies showing that even after a $14 million contribution that Prospect agreed to make, the plan would run out of money by 2036, while still owing about $98 million in retirement benefits. The size of the problem was a secret. SVP Crockett testified, for example, that there was no specific patient harm that occurred, while insisting Prospect acted aggressively to address the allegations, including by creating new posts for a chief quality officer and a vice president of regulatory affairs and patient safety., The company claimed it would act differently in the new states it was entering. 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. A similar penury afflicts medical supplies. But Leonard Green viewed Prospects approach as one that could be applied widely and used to acquire more hospitals and reap more profit. In April 2003, Lee and Topper abruptly shut down two of their hospitals, placing them into bankruptcy (and eventually liquidation), while selling a third. We havent closed hospitals, and we dont close services, Dr. Mitchell Lew, Prospects president, said at a Connecticut public hearing in March 2016. Prospect used much of the cash to pay off its loans. You cant republish our material wholesale, or automatically; you need to select stories to be republished individually. Moodys, the ratings agency, was dismayed by Prospects soaring debt. The deal hasnt worked out quite as well for Prospects patients, many of whom have low incomes. The company denies the allegations, including that any of its hospitals suffer from staffing shortages. He relented only after a bit of salesmanship: Topper surprised him by turning up at a dinner meeting with 15 doctors who promised to send patients to Altas hospitals. In October 2015, the firm hired Morgan Stanley to find a new private equity buyer for Prospect. Aleman confirmed to ProPublica the accuracy of his comments in this article. How Cigna Saves Millions by Having Its Doctors Reject Claims Without Reading Them, If youre republishing online, you must link to the URL of this story on propublica.org, include all of the links from our story, including our newsletter sign up language and link, and use our. 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. The stringent penny-pinching wasnt enough to generate profits at first. State regulators, who had to approve the sale, had two big concerns. The settlement, subject to multiple court approvals that will take several months, will end the receivers public opposition to Prospects pending sale. CASE DETAILS: The filed complaint alleges that defendants made false statements and/or concealed that: (1) Prospect Medical Holdings, Inc. (Prospect), ProPublica is a nonprofit newsroom that investigates abuses of power. He acquired a moldering flagship hospital, the 420-bed Brotman Medical Center, in Culver City, California, out of bankruptcy; replaced Ernst & Young; fired and sued the companys outside law firm; and ousted Prospects 74-year-old founder, Dr. Jacob Terner. (In recent years, his wifes Facebook account has shown him celebrating holidays with her and their three college-age sons; family vacations in Maui, Aspen and Las Vegas; and pilgrimages to the Super Bowl and the American Music Awards.). 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. Prospect paid $300 million. The Baumers live about 30 minutes from the firms Santa Monica offices in a large oceanfront property on Manhattan Beach, purchased, through a corporate entity he set up, for $18.4 million. Four states approved it but Rhode Island is holding out. Prospect has conducted a public relations counter-offensive. Eager to save jobs, Fatimas powerful United Nurses & Allied Professionals union endorsed Prospects bid. What happened in California certainly is concerning, Prospects president, Lew, acknowledged at the hearing. WebWelcome to Prospect Medical Holdings Locations We are hospitals and affiliated medical groups working for the benefit of every person who comes to us for care. It was mismanaged at the corporate level, Aleman said. Three law firms hired by Alta later sued for unpaid bills. As it turns out, Prospect hasnt earned stellar grades in Connecticut either. A drag-along provision of the agreement would force all shareholders to sell immediately, rather than wait and hope for a better price. By 2010, the investing trends had changed. If you want to look at us as performing an F on the test in California, that student is not coming here to tutor Connecticut on quality, OK?. Prospect Medical Holdings, Inc. ("Prospect") leases and operates 13 of MPT's facilities. Prospect raised the money by issuing junk bonds. The Joint Commission on Hospital Accreditation responded by initially denying Waterburys accreditation, required to receive Medicare and Medicaid funding, after an inspection that found 42 quality standards out of compliance. In December 2019, Connecticut regulators extended the monitoring of the states three Prospect hospitals until May 2021. 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. You cant sell our material separately or syndicate it. Thank you for your interest in republishing this story. Sign up to receive our biggest stories as soon as theyre published. A Prospect lawyer also wrote Aleman, accusing him of making false and defamatory statements to ProPublica. Already deeply indebted, Alta had to borrow more to pay the $5.3 million. (Prospect denies any improper billing and says Harpers job was eliminated because of diminished demand for respiratory services. What it will have to offer patients is less clear. The question of whether profits and good medical care can coexist is not a new one in the United States. It had effectively replaced its debt payments with rent payments. Dozens of lenders, executives, doctors, staffing agencies and hospital vendors filed lawsuits and court claims over unpaid debts and broken agreements. The exodus isnt necessarily good news, according to Batt and other experts. 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. From the beginning, Lee and Topper brought the cost-slashing philosophy of private equity firms to Alta and its hospitals, according to interviews with former executives and multiple lawsuits. You cant republish our material wholesale, or automatically; you need to select stories to be republished individually. Don Andrews, a seasoned administrator who worked as emergency department director during part of this period, backed these claims in an interview with ProPublica. 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. According to the report, this resulted in the dispensing of about 21,000 doses of adulterated dangerous drugs to patients over a nine-month period. The lawsuit on behalf of Medical Properties Trust investors has been commenced in the United States District Court for the Southern District of New York. Just weeks after the deal closed, Prospects audit firm, Ernst & Young, discovered inflated revenues and profits on Altas books. The problem had escaped federal ERISA oversight because of the hospitals affiliation with the Catholic Diocese of Providence, making its pension system a legally exempt church plan.. Faced with that financial plight, these hospitals will be compelled to cut costs even further, making it ever harder to deliver quality care. 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.
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