A prominent healthcare organization, operating 16 hospitals across four states, has filed for bankruptcy and intends to divest several of its facilities.
Prospect Medical Holdings, which owns 166 clinics in California, Connecticut, Pennsylvania, and Rhode Island and employs approximately 12,600 individuals, initiated Chapter 11 protection in Texas on Saturday.
Historically, the company has been an active acquirer of struggling hospitals; however, it currently faces liabilities exceeding $400 million.
Prospect announced that, during the restructuring process, its hospitals, medical centers, clinics, and physicians’ offices would continue to function without interruption.
Following this phase, the organization will concentrate exclusively on its operations in California, which includes seven hospitals.
Plans have been established to sell its facilities in the other three states to competing healthcare providers, along with the associated workforce.
Despite previous attempts, the company has encountered difficulties in offloading its operations.
In Rhode Island, the Roger Williams Medical Center and Our Lady of Fatima Medical Center are slated for sale to another healthcare entity, as confirmed by Prospect.
In contrast, the company has yet to identify a buyer for its facilities in Pennsylvania, which include Crozer-Chester Medical Center in Chester and Taylor Hospital in Ridley Park.
Additionally, three hospitals in Connecticut—Waterbury, Manchester Memorial, and Rockville General—are on the market.
A prior prospective buyer is currently pursuing legal action against Prospect, alleging that the facilities are in a state of disrepair.
Von Crockett, the Chief Executive Officer of Prospect Medical Holdings, stated, “These actions represent a significant move toward fulfilling our ongoing commitment to best serve the interests of our patients, physicians, employees, and communities.
Divesting our operations outside of California will ensure that these facilities receive the necessary financial support, thereby enabling the communities that depend on them to continue accessing high-quality, coordinated, and critical healthcare services into the future.”
According to the full report from the Daily Mail, Problems at Prospect comes less than a year after the collapse of Steward Health Care, another major hospital system backed by private equity.
Steward, which owned more than 30 hospitals across eight states, was reported by CBS to have been drained of hundreds of millions of dollars by private equity investors, potentially contributing to shortages of life-saving medical equipment.
Along with Steward, Prospect Medical has also been a focus of ongoing investigations by CBS into how private equity investors have extracted millions from community hospitals.
Between 2010 and 2021, private equity firm Leonard Green & Partners held a majority stake in Prospect Medical.
