Private Equity Firm's Bankruptcy Raises Concerns About Profit Over Patient Care

Private Equity Firm Files for Bankruptcy After Prioritizing Profits Over Patients

Prospect Medical Holdings, a Los Angeles-based company owning hospitals in four states, filed for bankruptcy on Saturday night. This marks the second major hospital system acquired by private equity to collapse in less than a year.

The company, facing debts exceeding $400 million, claims its hospitals, medical centers, and physician offices will remain open, and patient care will continue uninterrupted. However, this assurance comes amidst concerns about the impact of private equity ownership on healthcare quality.

CBS News has documented how private equity investors have extracted hundreds of millions of dollars from community hospitals like Steward Health Care, potentially leading to shortages of life-saving medical equipment. Similar concerns surround Prospect Medical, where financial maneuvers resulted in a $457 million dividend payout to leadership in 2018, including $90 million for CEO Sam Lee.

A Senate committee report found "overwhelming evidence of financial mismanagement" by Prospect Medical and its private equity owner, Leonard Green & Partners. The report highlights how prioritizing profits led to cuts in services and closures, particularly in underserved and rural areas.

Both Prospect Medical and Leonard Green disputed the findings, claiming the report draws false conclusions and omits key facts. They emphasize investments made in the hospitals and charitable contributions. However, the concerns about the impact of private equity on patient care and healthcare infrastructure remain significant.