A healthcare firm that owns and operates greater than 182 hospitals and clinics nationwide filed for Chapter 11 chapter safety in a Texas federal court docket on Saturday.
Prospect Medical Holdings, the Los Angeles-based healthcare firm, sought chapter safety after its earlier proprietor extracted a whole lot of thousands and thousands of {dollars} in dividends and administration charges whereas shareholders and executives had been lavished with tens of thousands and thousands of {dollars} in revenue.
The corporate, which cited money owed exceeding $400 million, attributed its monetary challenges to the lingering results of the COVID-19 pandemic, inflation, and elevated well being plan denials, in keeping with paperwork filed in US Chapter Courtroom for the Northern District of Texas.
Prospect firm reported liabilities ranging between $1 billion and $10 billion, attributing its monetary misery to rising curiosity prices and substantial debt.
Prospect desires to make use of the chapter course of to expedite the sale of its hospitals outdoors California whereas sustaining operations throughout all services.
This technique consists of agreements to promote two Rhode Island hospitals — Roger Williams Medical Middle and Our Woman of Fatima Hospital — to the Centurion Basis, a personal non-profit specializing in actual property financing for non-profit establishments.
Moreover, Prospect intends to divest from Crozer-Chester Medical Middle in Pennsylvania.
Prospect’s monetary collapse trajectory has been attributed to its former majority proprietor, the non-public fairness agency Leonard Inexperienced & Companions.
Underneath Leonard Inexperienced’s possession, Prospect initiated a $1.31 billion dividend recapitalization, leading to Leonard Inexperienced receiving $658.4 million in dividends and administration charges.
This transfer saddled Prospect with much more debt.
A bipartisan Senate committee report accused Prospect of prioritizing “earnings over sufferers” by extracting vital dividends and costs.
In 2018, Leonard Inexperienced secured a $1.12 billion mortgage, utilizing $457 million to problem dividends to executives. Prospect’s CEO, Sam Lee, reportedly obtained roughly $90 million from this dividend, in keeping with the Senate report.
Lee and David Topper, the corporate president, personal the vast majority of the agency after they purchased out Leonard Inexperienced in 2021.
In an announcement, the corporate pledged that its hospitals and clinics would proceed to supply uninterrupted care throughout the proceedings.
A Prospect spokesperson denied these allegations, asserting that the Senate report contained inaccuracies and omitted important context.
In 2019, Prospect Medical Holdings offered its hospital actual property in California, Connecticut, and Pennsylvania to Medical Properties Belief (MPT) for $1.386 billion as a part of a sale-leaseback deal.
The corporate then leased again the properties, taking over obligations for hire, property taxes, and upkeep.
This association added vital monetary pressure to Prospect, which was already burdened with substantial debt.
Prospect has confronted lawsuits filed by a number of states, together with Connecticut, Pennsylvania and Rhode Island.
In Pennsylvania, the corporate was sued after the closure of one in all its hospitals left a neighborhood of almost 85,000 residents with out instant entry to emergency care.
The Publish has sought remark from Prospect.