(Through its spokesman, Leonard Green said this figure was wrong and that the firm would not respond to inaccurate guesses.). We Were talking here about safety-net hospitals that are serving the poor, the unemployed, disproportionately people of color. 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. At the companys flagship Los Angeles hospital, persistent elevator breakdowns sometimes require emergency room nurses to wheel patients on gurneys across a public street as a security guard attempts to halt traffic. Doris Burke is a senior research reporter at ProPublica. Paramedics for Prospects hospital near Philadelphia told ProPublica that theyve repeatedly gone to fuel up their ambulances only to come away empty at the pump: Their hospital-supplied gas cards were rejected because Prospect hadnt paid its bill. As elsewhere, Prospects failure to pay bills on time has delayed repairs and resulted in supply shortages. Dealing with the company, he added, has been a parade of horribles.. The company has also waged a four-year battle to halve the tax assessments on all its hospital properties. Prospect Medical Holdings, a for-profit company based in California, has had a majority stake in the two hospitals since 2014. After her breathing grew weak while she was battling the virus at home, Long was rushed to another hospitals ER, where she lost two front teeth during an emergency intubation, and spent seven days on a ventilator. In 2017, the system was declared insolvent and placed in receivership. Some current and former management shareholders, working with Aleman, contemplated trying to recruit another buyer who would pay a far higher price. Say we need 4x4 sponges, dressing for a patient, IV fluids, said Leslie Heygood, a veteran registered nurse at one of Prospects Pennsylvania hospitals, we might not have it on the shelf because its on credit hold because they havent paid their creditors.. 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 At a Prospect hospital in Rhode Island, a locked ward for elderly psychiatric patients had to be evacuated and sanitized after poor infection control spread COVID-19 to 19 of its 21 residents; six of them died. Its such a brutal case of unabashed greed, said Rosemary Batt, a professor at Cornell Universitys School of Industrial and Labor Relations, who has studied private equitys involvement in health care. The ProPublica report details how the transaction would hobble The Justice Didnt Disclose the Deal. Lees first out-of-state acquisition would erase that claim. Prospect removed Nixs longtime CEO in 2015 and established control from headquarters in LA, while cycling through four more CEOs in the next four years. 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. The settlement agreement explicitly requires the receiver to notify state regulators that his objections to the sale are withdrawn. That success didnt last long. 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. When it rains in Culver City, water drips from ceilings throughout the hospitals two buildings, forcing staff to relocate patients and plant orange buckets in the hallways. Creditors would not come in to fix things because the hospital owed them money, she said. Its okay to put our stories on pages with ads, but not ads specifically sold against our stories. The ultimate total cost to Prospect from the improper billing episode, including expected income the company lost as a result, was in the tens of millions, Aleman estimated. Already deeply indebted, Alta had to borrow more to pay the $5.3 million. Given the cash and assets that private equity owners have already taken out of hospitals, their new owners will be left with heavy debt and limited resources as the saga of Leonard Green and Prospect demonstrates. 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.. Several million dollars more in improper claims, not yet processed, had to be canceled, according to Inter Valley. According to her suit, these patients were brought from nursing homes and other senior facilities, many well over 100 miles away, when their Medicare benefits there, capped at 100 days, were about to expire. CASE DETAILS: The filed complaint alleges that defendants made false statements and/or concealed that: (1) Prospect Medical Holdings, Inc. (Prospect), In the decade since Leonard Green & Partners, a private equity firm based in Los Angeles, bought control of a hospital company named Prospect Medical Holdings for $205 million, the owners have done handsomely. PROSPECT MEDICAL HOLDINGS IS A WOLF IN SHEEPS CLOTHING. The mailer urges recipients to press state officials to reject the proposed sale. He relented only after a bit of salesmanship: Topper surprised him by turning up at a dinner meeting with 15 doctors who promised to send patients to Altas hospitals. (CMS did not respond to requests for comment.). The founder of Kline Hawkes was an investor named Frank Kline, who told ProPublica that no person named Hawkes was ever involved with the firm. How Cigna Saves Millions by Having Its Doctors Reject Claims Without Reading Them, Senate Committee Probes Top Universities, Museums Over Failures to Repatriate Human Remains, If youre republishing online, you must link to the URL of this story on propublica.org, include all of the links from our story, including our newsletter sign up language and link, and use our. Call us today @ 800-708-3230. As an organization, we had delegated the role of the quality program to a local level, Senior Vice President Von Crockett testified, without the proper oversight at a corporate level.. But when an email exploring this effort was accidentally sent to Prospect, the company responded by dispatching a letter to Alemans attorney, accusing the former CFO of colluding with others in an attempt to interfere with a Company transaction. It demanded that he immediately cease and desist.. In the restatement, filed with the SEC, Moss Adams explained that Alta had misused and ignored factual information that existed at the time it compiled the inflated financial statements. Leonard Green, which owns about 60% of the hospital chain, announced plans in October 2019 to sell its stake to Prospect CEO Sam Lee and his longtime business partner for $12 million plus the assumption of $1.3 billion in lease obligations. The question of whether profits and good medical care can coexist is not a new one in the United States. The $12 million was to be paid by Prospect, not the two executives. Volume and physicians, the company said, never returned to pre-flood levels.. 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. In the latest skirmish between Prospect Medical Holdings and Rhode Island Attorney General Peter Neronha, Prospect announced Friday it is withdrawing from the state process for changing its ownership. Meanwhile Prospect sought to cut costs by reducing the workforce, trimming benefits and tightly monitoring each hospitals patient count throughout the day from its LA headquarters, sending nurses and aides home whenever possible in mid-shift. As it turns out, Prospect hasnt earned stellar grades in Connecticut either. He says this routinely resulted in a handful of patients being held for days in a crowded ER overflow area with no beds or privacy just chairs and a single bathroom serving as a sort of bootleg inpatient psychiatric unit. A few years before Andrews got there, one 79-year-old man suffering from dementia disappeared after being left unattended in the overflow area, according to a state inspection report and a lawsuit by his family. It sought, unsuccessfully, to reduce nurses accrued vacation time and to cut pension benefits for all employees who didnt work full time. The third suit alleged an illegal patient procurement scheme to generate fraudulent Medicare and Medicaid claims. On February 11, 2021, Plaintiff Godofredo Solsona filed this employment action against Defendant Prospect Medical Holdings, Inc. asserting five causes of action under FEHA and a Tameny claim. Alvarez & Marsal was also concerned the problem extended far beyond what Inter Valley had discovered: that Prospect had submitted bogus claims for more than 20 other Medicare Advantage plans, including United Healthcare and Blue Shield. Its owners, including Leonard Green & Partners and Prospects CEO, have cashed in. This one stemmed from patient-safety violations in a mental health ward at 300-bed Crozer-Chester Medical Center, the systems largest hospital. The sale of the two Rhode Island hospitals and thus the entire deal requires approval from the states health department and attorney general, which first must conduct a review process to assure the transaction meets nine statutory criteria. The money is part of a broader settlement with the court-appointed receiver for the employee retirement plan at Our Lady of Fatima hospital, one of Prospects two facilities in the state. In Rhode Island, Prospect was welcomed as a savior in 2013 when it agreed to pay $45 million for controlling ownership of two money-losing Providence-area hospitals: 220-bed Roger Williams and 359-bed Our Lady of Fatima. It was too late. But that tension is particularly acute in the case of Leonard Green and Prospect, where private equity has extracted hefty profits from a business that acquires struggling hospitals and relies on Medicaid and other government programs to pay the bills for its impoverished patients. Prospect Medical Holdings, a for-profit company based in California, has had a majority stake in the two hospitals since 2014. A company consultant in one of its Rhode Island hospitals discovered dirty, corroded and cracked surgical instruments in the operating room. ProPublica is a nonprofit newsroom that investigates abuses of power. In 2013, four years after buying the hospital, Prospect grouped Brotman with two of its other hospitals, renaming it Southern California Hospital at Culver City. Read Complaint. The business model for private equity firms like Leonard Green involves stripping cash out of the organization, loading down operations with debt and reducing every conceivable expense. For more information about canonical metadata, You cant edit our material, except to reflect relative changes in time, location and editorial style. 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. By cutting costs and maximizing government reimbursements at its remaining facilities, Alta started to eke out profits from its four remaining hospitals. Leonard Green extracted $400 million in dividends and fees for itself and investors in its fund not from profits, but by loading up the company with debt. We have official accounts for ProPublica on. It made other promises as part of the deal: to spend an additional $200 million in capital improvements within five years; to keep all the hospitals open for a decade; to fund $171 million in pension benefits within five years; and to endow a community health care foundation for $53 million. Two former senior executives at Alta claimed that Lee and his longtime partner had cheated them out of a promised equity stake. Don Andrews, a seasoned administrator who worked as emergency department director during part of this period, backed these claims in an interview with ProPublica. The problem had escaped federal ERISA oversight because of the hospitals affiliation with the Catholic Diocese of Providence, making its pension system a legally exempt church plan.. Then, in early 2016, U.S. capital markets tightened amid fears of a recession, dashing the companys hopes to get even more. Now Theyre Back. Almost immediately, Prospect began contesting the agreement. ), The situation grew dire. The overflow area remained in use until about 2018, when it was permanently locked, hospital employees said. 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. Our comprehensive networks aim to provide coordinated, personalized care to California, Connecticut, Pennsylvania, Texas and Rhode Island. Patients needing MRI scans must be taken outdoors and down an alley, past dumpsters and into a hospital parking lot, where the scan is done in a rented trailer. Indeed, the trail of litigation, unpaid bills and accusations was already lengthy. As of this year, when the firm hopes to close the sale, Green has retained its Prospect stake for 10 years; indeed, the $5.3 billion fund that holds that and other investments was launched in 2007, making it venerable in private equity years. Hed go through three hours of literally just peeling the skin off somebody, Aleman said. Kline Hawkes, the young Los Angeles firm where Lee worked, had made only one previous health care investment, in a medical instruments company. That is beyond the pale.. Prospect was reporting revenues of about $1 billion in 2015, with operating profits of $108 million. Prospect in turn is controlled by the Theyre loaded with debt and anybody sensible is not prepared to buy them.. That germ was all over the floor.. After learning this, Prospect negotiated contract language freeing it from any future pension liability. Then we suffer and the patients suffer., Paramedics have repeatedly gone to fuel up ambulances using a hospital credit card, only to have it rejected, according to Larry Worrilow, assistant chief for the Crozer-Keystone EMS system. (Another $14 million in fees went to the private equity fund. Given Sam Lees prowess at squeezing cash out of ailing institutions, Prospect undoubtedly will find profits left to extract. Sign up to receive our biggest stories as soon as theyre published. We do not generally permit translation of our stories into another language. 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. 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. Occupancy climbed, and individual hospitals began reporting growing profits though perhaps not as much as Altas financial reports suggested. In response, Rhode Island terminated the accounting firms contract to avoid any perception of impropriety, motivation, and influence. The state informed Prospect that the termination would delay the review process as Rhode Island needed to hire a new accounting firm. Leonard Green, a firm known for its investments in marquee consumer brands like Whole Food Markets and Neiman Marcus, joined the rush. We do not generally permit translation of our stories into another language. Nix was an unusual acquisition for Prospect. Nobody has questioned it. Thats when I went back to our CEO and said, Theres a problem here.. Theyve squeezed it as dry as they can., Those actions have made it hard for the firms to sell hospitals, according to Eileen Appelbaum, senior economist at the Center for Economic and Policy Research, who studies private equity. As Prospect previously told ProPublica, In effect, the companys money is their money. At the time the deal was announced, Prospect said it expected the sale to close by the spring of 2020. Its always the bottom line. In public testimony a few years ago, Prospect executives acknowledged the point. Citing Leonard Greens history with the hospital company, the Rhode Island state treasurer has said he will block any future investments by his state, which sunk $20 million into the fund that owns Prospect, in the private equity firms funds. The company denied the claims, pointing out that its 2014 purchase of the hospitals included contract language absolving it of any future liability for the retirement plan. Prospect Medical, which mostly serves low-income patients, has suffered a litany of problems: broken elevators, dirty surgical gear, bedbugs and more. When GOP Attorneys General Embraced Jan. 6, Corporate Funders Fled. Eager to save jobs, Fatimas powerful United Nurses & Allied Professionals union endorsed Prospects bid. It also bars any statements to media which would reasonably be expected to cause the reader or hearer thereof to question the solvency or honesty of, or the quality of care or other services provided by Prospect. 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. Text Size. In 2014, a patients wife filed suit after soaked ceiling tiles fell and struck her in the head while she was sitting in the hospital lobby. Almost as quickly as it rose, private equity firms ardor for hospitals has substantially cooled in the past few years, said Lisa Phillips, editor of HealthCareMandA.com, which tracks private equity health care deals. The Private Equity Stakeholder Project, a union-backed research group, has produced detailed reports criticizing Greens history with Prospect. The problem was discovered in August 2015 during a routine compliance audit by nurses with Inter Valley Health Plan, a California HMO that sent Medicare Advantage patients to Prospect doctors and, as a result, had shared in the improper windfall (unknowingly, according to Inter Valley). Because the improper claims were eventually self-reported, the government has taken no action against Prospect. Prospect, Inter Valley and a hospital used by the plans patients had to repay the federal government for the improper income theyd received. Hospital workers have regularly reported staffing shortages, sometimes forcing delays of scheduled medical procedures. The portrait offered by White was affirmed by other executives, including Paul Smith, a former vice president for finance at Alta, who told ProPublica he recalled having to switch vendors sometimes because we would get cut off. Emergency room staff in at least one Alta hospital lacked chemical reagents needed to perform critical enzyme tests on heart attack patients, according to another former Alta executive who sued the company. It was profitable and had a higher federal quality rating, with four out of five stars, than any other Prospect hospital. Lee decided to hold off on a sale. The private equity board members focused on profits and wasted little time in beginning to reap returns. Leonard Green defended the transaction to state officials and a Rhode Island congressman, writing that the sale price reflects Prospects future obligations and was agreed to by sophisticated investors who wanted to not burden the company with additional debt. The firm added: We reject any implication that we have managed Prospect in a financially irresponsible fashion or that we have put our own financial interests ahead of the interests of the hospital system. The settlement, subject to multiple court approvals that will take several months, will end the receivers public opposition to Prospects pending sale. WebWelcome to Prospect Medical Holdings Locations We are hospitals and affiliated medical groups working for the benefit of every person who comes to us for care. Over the three years that followed, neither Prospect nor anyone else paid a penny into the pension plan. Prospect paid $300 million. Filed: August 10, 2017 2:17-cv-03599-WB. Lee was eager to expand, too, confident that his business model could be applied to many more struggling hospitals, multiplying the companys revenues from about $470 million in 2010 to several billion. Its okay to put our stories on pages with ads, but not ads specifically sold against our stories. SVP Crockett testified, for example, that there was no specific patient harm that occurred, while insisting Prospect acted aggressively to address the allegations, including by creating new posts for a chief quality officer and a vice president of regulatory affairs and patient safety., The company claimed it would act differently in the new states it was entering. And ProPublica has learned of a multiyear scheme at a key Prospect operation that resulted in millions of dollars in improper claims being submitted to the government. ), At Crozer-Keystone, as elsewhere, Prospect has aggressively moved to lower costs. In February, Aleman, whod been stripped of his stock options when he was suddenly fired last fall, filed suit in California, seeking restoration of his shares and payment of his 2018 bonus. All but one of Prospects hospitals rank below average in the federal governments annual quality-of-care assessments, with just one or two stars out of five, placing them in the bottom 17% of all U.S. hospitals. The deal paid off Altas debt and netted Lee and Topper $50 million each in cash and Prospect stock. Leonard Greens point man for the Prospect stake was a former investment banker named John Baumer, a graduate of Wharton and Notre Dame, where his father had worked as the universitys comptroller. Dozens of lenders, executives, doctors, staffing agencies and hospital vendors filed lawsuits and court claims over unpaid debts and broken agreements. The saga of Leonard Green and Prospect embodies a broader trend. Prospect settled in 2017, agreeing to pay $275,000 while asserting that the claims were wholly without merit.. All of a sudden COVID comes in, everybody should have surgical masks, and we dont have two days worth of surgical masks, much less two months of surgical masks. As Prospect and Lee put it in their statement for this article, In effect, the companys money is their money., To Lees management team, who dreamed of stock option riches, it was an outrage. Now Theyre Back. Medical Properties Trust, Inc. ( NYSE: MPW) has reported that alleged short seller Viceroy Research LLC, being sued by MPW for defamation and other claims, 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. You are are free to republish it so long as you do the following: Copy and paste the following into your page to republish: (Courtesy of California Nurses Association), New Law Aims to Save Oysters on the Mississippi Coast, In Secret Recording, a Top City Library Official Calls Alaska Natives Woke and Racists. Lee disputed some of Whites claims, but acknowledged in the companys written responses that this was a difficult time, resulting in some bounced checks and some payables being missed. He insisted that ultimately, all the vendors were paid., Shedding those money-hemorrhaging operations helped Alta turn a financial corner. The stringent penny-pinching wasnt enough to generate profits at first. It warns: RHODE ISLANDERS BEWARE! The pattern would continue at Prospect. The $12 million is to be paid by the company, not the two executives. And so, were not bringing Californias quality program to Connecticut, he said. They wanted to get rid of it at all costs. In its statement, Prospect said it will keep East Orange open into 2021 while it continues to seek a buyer and thus will surpass our five-year commitment of operating the hospital. The company also said it has met its $52 million capital-spending promise under provisions of its purchase agreement that allow it to count debt payments and routine maintenance costs toward that total.
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