California: The privately owned healthcare company listed total liabilities of $1 billion to $10 billion on a Chapter 11 petition filed in Dallas, Texas, bankruptcy court.
Prospect entered bankruptcy with an agreement in place to sell two Rhode Island hospitals, Roger Williams Medical Center and Our Lady of Fatima Medical Center, to the Centurion Foundation, a private non-profit foundation which specializes in real estate financing and development for non-profit institutions.
Prospect said it will seek quick approval of that sale early in its bankruptcy, while working to divest from a Pennsylvania hospital, the Crozer-Chester Medical Center.
The Los Angeles, California-based company currently operates seven hospitals in California, with nine others in Connecticut, Pennsylvania and Rhode Island and employs more than 9,000 healthcare providers, according to bankruptcy court documents.
The bankruptcy will not impact a previously announced $745 million sale of one California hospital and other assets to Astrana Health, a California-based healthcare company. That transaction, which includes physician groups in California, Texas, Arizona and Rhode Island is expected to close in mid-2025, according to Prospect.
Prospect Medical, formerly owned by private equity firm Leonard Green & Partners, was recently cited by a bipartisan Senate panel as an example of how private equity investors prioritize “profits over patients” in healthcare. Leonard Green sold its majority stake in the company in 2021 to a group of investors led by Prospect’s co-CEO David Topper and its board chairman Sam Lee.
Under Leonard Green’s ownership, Prospect loaded the company with debt and undermined its ability to provide quality healthcare to patients, according a Jan. 7 report by the U.S. Senate Budget Committee.
Prospect sold off its real estate to an investment firm and took out a $325 million loan so that it could make payments to Leonard Green’s shareholders, according to the report. Prospect Medical’s decline followed the same pattern as Steward Health, another private equity-backed hospital chain that racked up massive debts before filing for bankruptcy, according to the report.
Prospect declined to comment on the Senate report. Leonard Green did not immediately respond to a request for comment.
Prospect also faces a lawsuit filed by Pennsylvania’s attorney general in October, which alleges that the company mismanaged four hospitals in the Crozer Health System. Prospect shuttered two hospitals while diverting $450 million to its private investors, and adding $35 million in new annual rent costs through its sale of the hospitals’ real estate, according to the attorney general’s complaint. Prospect Medical declined to comment on the lawsuit.
The case is In re: Prospect Medical Holdings Inc, U.S. Bankruptcy Court for the Northern District of Texas, No. 25-80002
For Prospect Medical: Thomas Califano of Sidley Austin
