A once-thriving healthcare company that operates over 182 hospitals and clinics across the nation has filed for Chapter 11 bankruptcy, revealing yet another cautionary tale of private equity greed crippling critical industries. Prospect Medical Holdings, based in Los Angeles, submitted its bankruptcy filing in a Texas federal court on Saturday, citing debts exceeding $400 million and liabilities estimated between $1 billion and $10 billion.
The company’s collapse is a direct result of reckless financial maneuvers orchestrated under the ownership of Leonard Green & Partners, a private equity firm notorious for prioritizing profits over patients.
While Prospect struggles to stay afloat, the root of its financial ruin lies in a staggering $1.31 billion dividend recapitalization initiated under Leonard Green’s leadership. This move funneled an astonishing $658.4 million into dividends and management fees, saddling the company with insurmountable debt. Among the beneficiaries was Prospect CEO Sam Lee, who reportedly pocketed $90 million.
This exploitation didn’t end with Leonard Green’s exit in 2021. By then, the damage was done, and the current leadership—Lee and President David Topper—has been left grappling with the fallout of financial irresponsibility.
The consequences of these decisions extend far beyond balance sheets. Communities have been left without essential healthcare services as Prospect shuttered hospitals to manage its debts. In Pennsylvania, for example, the closure of one hospital deprived 85,000 residents of immediate access to emergency care, prompting lawsuits from multiple states, including Connecticut and Rhode Island.
Even more troubling, the company’s woes were compounded by a 2019 sale-leaseback deal with Medical Properties Trust. Prospect sold its hospital real estate for $1.386 billion, only to lease the properties back, taking on costly obligations for rent, taxes, and maintenance. This deal added another layer of financial strain to an already precarious situation.
Despite the turmoil, Prospect claims its hospitals and clinics will continue operating during bankruptcy proceedings. The company’s strategy involves selling off hospitals outside California, including two Rhode Island facilities—Roger Williams Medical Center and Our Lady of Fatima Hospital—to the Centurion Foundation, a nonprofit specializing in real estate financing.
Additionally, Prospect plans to divest from Crozer-Chester Medical Center in Pennsylvania.
A spokesperson for Prospect has dismissed allegations of mismanagement, claiming a Senate report criticizing the company was riddled with inaccuracies. Yet, the facts paint a damning picture of a healthcare system increasingly dominated by corporate greed at the expense of patient care.
The downfall of Prospect Medical Holdings underscores the dangers of allowing private equity firms to exploit critical industries like healthcare. When profit is prioritized over service, patients inevitably suffer.
This isn’t just a story of one company’s bankruptcy—it’s a wake-up call. America’s healthcare system must focus on patients, not lining the pockets of executives and investors. Until this shift occurs, stories like Prospect’s will remain all too common.
