In 2012, Prospect paid Leonard Green and its investors a total of $188 million in two rounds of dividends. In 2015, inspectors shut down all elective surgery at the hospital for eight days, citing a widespread pattern of poor infection control and sterility; the problems resulted from inadequate heating and cooling systems. Several million dollars more in improper claims, not yet processed, had to be canceled, according to Inter Valley. Theres so many other places to put their money in health care that they can flip faster, Phillips said. That same year, state health inspectors cited the hospital after a broken refrigeration system in its morgue caused a womans corpse to decompose so badly it produced a noticeable stench, making it impossible for her family to have an open-casket funeral. That is beyond the pale.. 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 (To inquire about syndication or licensing opportunities, contact. 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. In April 2003, Lee and Topper abruptly shut down two of their hospitals, placing them into bankruptcy (and eventually liquidation), while selling a third. 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. 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. Then, in early 2016, U.S. capital markets tightened amid fears of a recession, dashing the companys hopes to get even more. The stringent penny-pinching wasnt enough to generate profits at first. A second executive with an ownership stake took home $94 million. It convinced Kline that Topper could deliver growing revenues. It was too late. (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.). After digesting the acquisitions in the pipeline, the company projected, revenues and profits would surely soar. And opponents there are making a stand. (CMS did not respond to requests for comment.). Aleman is now CFO of Prime Healthcare. These arent mere anecdotes or anomalies. Thats when it reached agreements to spend more than $500 million to buy hospital systems in three states: East Orange General, in New Jersey; three community hospitals in Connecticut; and a four-hospital system in suburban Delaware County, Pennsylvania, west of Philadelphia. Meanwhile, one of the hospitals elevators has been out of order for 10 months. At least part of the delay in approving the sale in Rhode Island appears to be self-inflicted by Prospect. 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. They really didnt take us seriously, she said. 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. As far as the unions concerned, theyre not welcome in Rhode Island.. Proposed legislation in Rhode Island threatens to further stall the deal. Other firms, facing growing losses, have placed some hospitals into bankruptcy and closed others, offering up their real estate while seeking to sell the rest of their medical operations at bargain-basement prices. Theyre loaded with debt and anybody sensible is not prepared to buy them.. Locations Lee churned through executives and could turn brutal, screaming at subordinates or grilling them over a tiny issue. Peter Elkind is a reporter covering government and business. The sale of the land and buildings brought in much needed cash and stabilized the company. In a press release announcing the deal, Lee said the company will help ensure the long-term success of Nix.. (The company says it receives 80% of its revenues from Medicare and Medicaid reimbursements.) In March, Prospects New Jersey hospital made national headlines as the chief workplace of the first U.S. emergency room doctor to die of COVID-19. The next day youre absolutely in the doghouse., (Last fall, Lee abruptly terminated Aleman, who then filed suit claiming he is owed for unpaid compensation and canceled company stock options. Critical medical equipment and supplies, including drugs and tracheotomy kits, were routinely unavailable at Altas hospitals because bills hadnt been paid, according to a breach of contract suit later filed by a former Alta chief operating officer named Michael White. That success didnt last long. After hearing about a consultants 2017 report describing dirty and damaged operating room instruments, the union at Fatima requested documents about this and other problems revealed by various inspections. In 1998, most private equity firms avoided health care. ), The situation grew dire. 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. Doctors who had long relationships with Nix stopped referring patients. Some of Altas hospitals, according to company filings with the California health department, were averaging 30% occupancy. Filed: August 10, 2017 2:17-cv-03599-WB. He would just not pay people as a way to negotiate. Waterbury Hospital was found to have failed to properly monitor two suicidal patients on a single day in March 2019. What happened in California certainly is concerning, Prospects president, Lew, acknowledged at the hearing. Lee was demanding and unrelenting, according to people who worked for him. The state has sought details on topics such as COVID-19s impact on the companys finances and has requested interviews with multiple company officials, including the CEO. 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. 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. Rich Investors Stripped Millions From a Hospital Chain Dealing with the company, he added, has been a parade of horribles.. In October 2015, the firm hired Morgan Stanley to find a new private equity buyer for Prospect. We do not generally permit translation of our stories into another language. Three lawsuits assert that Prospect committed Medicare fraud at one of its facilities. After you rattle their chains, they pay part of the bill, get their credit hold lifted, and you can get fuel. (Prospect said the card was rejected because it placed a charge limit on it as a security measure, and when it was brought to our attention that the account was reaching the credit limit frequently, we increased the credit limit to ensure there was not disruption of services.), The systems eight ambulances are so old two have more than 275,000 miles on them that they frequently break down, according to Worrilow. Their model was really about just bare minimum, said Mike Heather, who later helped Prospect acquire Alta and served as Prospects CFO from 2004 through 2013. Meanwhile, the CEO whittled costs to the bone by finding cheap sources for medical supplies; through real-time monitoring of hospital staffing; and slow-walking every vendor payment. Just over two decades ago, Sam Lee and the private equity firm where he then worked were among the first such firms to invest in hospitals and it started almost by accident. 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. Prospect Medical Holdings, Inc. ("Prospect") leases and operates 13 of MPT's facilities. 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.. Sign up to receive our biggest stories as soon as theyre published. 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. After that is accomplished, firms then usually resell the operation to another buyer within five years. Leonard Green and Prospect responded to ProPublicas questions in written statements through Sitrick and Company, a crisis PR firm jointly retained on their behalf. In April 2008, Alta restated its 2006 revenues, lowering them by about $4 million. In Rhode Island, for a time in March, hospital employees at Our Lady of Fatima were threatened with discipline for wearing their own masks, even though the hospital didnt have enough to give them. Almost immediately, Prospect began contesting the agreement. That quality component was always lax in my opinion, one said. 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. CBS News submitted detailed questions to Prospect Medical about these financial decisions, including about the $457 million dividend and the lease-back The third suit alleged an illegal patient procurement scheme to generate fraudulent Medicare and Medicaid claims. WebLeonard Green & Partners, through its fund Green Equity Investors V, acquired Southern California-based Prospect Medical Holdings in December 2010 in a $363 million leveraged buyout, including the assumption of $158 million in debt.6 Leonard Green owns a 61.3% stake in Prospect. 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?.

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