The first was the $188 million in dividend payouts previously made to Leonard Green and other investors. (Through its spokesman, Leonard Green said this figure was wrong and that the firm would not respond to inaccurate guesses.). The companys 92-page confidential information memorandum, prepared for prospective acquirers and obtained by ProPublica, promoted the companys cost-effective care model, including daily flex management of hospital staffing, use of low-cost sources for medical supplies and a focus on high-profit programs for treating the seriously mentally ill. Bain Capital and CVC Capital Partners were the two final bidders. In its statement, Prospect noted that its purchase agreements for the hospitals clearly spell out that the company had no responsibility for funding the pension plan. Six members of the environmental services staff, responsible for cleaning patient floors, also got sick. But it also meant that Prospect had shed by far its biggest asset, sharply reducing the value of the company. A similar penury afflicts medical supplies. For his part, Lee decided to stay. ), For Leonard Green, the exit made a certain sense. This January, a giant brown mold formation burst through the wall near a fourth-floor nurses station. Aleman is now CFO of Prime Healthcare. 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. A company consultant in one of its Rhode Island hospitals discovered dirty, corroded and cracked surgical instruments in the operating room. Theyre just doing this immoral sucking out of resources. As a result, Prospect was unable to complete its Securities and Exchange Commission filings, forced to cancel its annual shareholder meeting, delisted from the American Stock Exchange and defaulted on its loans, triggering millions in lender penalties. ER secretary Chudi Long says she became infected after being denied a mask despite working in close quarters with COVID-19 patients. The deal paid off Altas debt and netted Lee and Topper $50 million each in cash and Prospect stock. Lee became the primary decision-maker. COVID-19 caught many of Americas top medical centers by surprise. The transaction breezed past regulators in four states where Prospect owns a total of 15 hospitals. Were talking here about safety-net hospitals that are serving the poor, the unemployed, disproportionately people of color. After decades of profits, Nix began losing money. Doctors who had long relationships with Nix stopped referring patients. In addition to more than $2 million a year in salary and bonus, he would get 20.2% of Prospects shares (and dividends). 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. Duphily blames the hospitals frequent rotation of its limited staff to different floors for spreading infection. 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. In April 2008, Alta restated its 2006 revenues, lowering them by about $4 million. 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. As of December 31, 2021, Prospect was MPT's third largest tenant, 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. The union, which initially welcomed Prospects acquisition of the two hospitals in 2014, has waged a series of battles with company management in the years since. 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). He sensed a major opportunity, according to a corporate history his spokesman provided: While the cost of healthcare was growing at three times the rate of the US GDP, hospitals as a group were inefficient in delivering quality care. Lee quit the private equity firm in 2000 and joined Alta full time, becoming its co-president and a 50-50 partner with Topper. In 2018, less than four years after assuring a state attorney general that it had no plans to seek new dividends, Prospect attempted to do just that. WebProspect Medical Holdings, Inc. | 14,513 followers on LinkedIn. He had our partners convinced I was being too conservative, said Bogert, now executive vice president for corporate finance at Prime Healthcare, a Prospect rival. The response was: We do this all the time. You cant sell our material separately or syndicate it. Filed: August 10, 2017 2:17-cv-03599-WB. Any website our stories appear on must include a prominent and effective way to contact you. 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. Then, in early 2016, U.S. capital markets tightened amid fears of a recession, dashing the companys hopes to get even more. 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. By cutting costs and maximizing government reimbursements at its remaining facilities, Alta started to eke out profits from its four remaining hospitals. After learning this, Prospect negotiated contract language freeing it from any future pension liability. Andrews said Prospect marketers insisted that elderly mental health patients from nowhere near Culver City be admitted through the emergency room even when no psychiatric beds were available in the hospital. On May 1, department supervisor Jerald Ferreira, 63, died of COVID-19. He would shut off things youd say it was crazy to shut off., Through its spokesman, Prospect said we do not have a slow-pay policy at Sam Lees or anyone elses direction. It said the companys implementation of a new financial system over the past 12 months has caused a number of vendor payment delays and credit holds., Prospect was far less obsessive about patient care issues, according to former company executives. Hospital workers have regularly reported staffing shortages, sometimes forcing delays of scheduled medical procedures. They include United Nurses & Allied Professionals, the union for hospital workers at Our Lady of Fatima; elected officials, including five Democratic members of the U.S. Congress, Rhode Islands state treasurer and its senate majority leader; and the Private Equity Stakeholder Project, a union-backed research group that has produced critical reports about Leonard Greens conduct and lobbied the firms public pension fund investors. Waterbury Hospital was found to have failed to properly monitor two suicidal patients on a single day in March 2019. We reported everything, Inter Valley CEO Mike Nelson said. But Neronhas approval, announced Tuesday, came at a cost to the company. In 2012, Prospect paid $48 million for San Antonios Nix Health System. Inter Valleys CEO and its chief compliance officer then sent a letter detailing their findings to the Centers for Medicare and Medicaid Services in August 2016. You cant republish our material wholesale, or automatically; you need to select stories to be republished individually. The settlement agreement explicitly requires the receiver to notify state regulators that his objections to the sale are withdrawn. Theres plenty of times when we went to go on an emergency call and the ambulance wouldnt start, he said. The lawsuit was filed in the United States District Court for the Northern District of Alabama and alleges violations of the Securities Exchange Act of 1934. With all that Prospect has done for Rhode Island, and will continue to do, we hope the state will recognize the benefits and approve this request. The company issued a press release noting that an outside monitor for the state had found that Prospect had met the commitments it had made for capital spending at the two hospitals. Correction, Oct. 12, 2020: An earlier version of this article misspelled the name of Doreena Duphily. But not so in Rhode Island, where Prospect owns its other two hospitals. You cant state or imply that donations to your organization support ProPublicas work. Prospect was reporting revenues of about $1 billion in 2015, with operating profits of $108 million. These problems surfaced over the past decade, after the private equity firm purchased the company in 2010. Prospect asserted, by contrast, that all leaks are identified and fixed as they occur. The company said roof replacement has begun on the main patient building. The suit singles out one of MPTs tenants, Prospect Medical Holdings Inc. Last year, according to its 2022 10-K annual report, MPT Recorded a $283 million If you use canonical metadata, please use the ProPublica URL. Prospect has a long history of breaking its word: It has closed hospitals it promised to preserve, failed to keep contractual commitments to invest millions in its facilities and paid its owners nine-figure dividends after saying it wouldnt. The low cash price would value their shares and options at a pittance, dashing their expectations of a windfall. Their ambitions were only growing. Prospects story is also a bleak omen for the future of Americas health care system and a particularly telling one because the company is effectively on its second tour through the private equity system. Prospect Medical Holdings is a healthcare system that provides compassionate, accessible, quality healthcare and physician services, the statement asserted. You cant use our work to populate a website designed to improve rankings on search engines or solely to gain revenue from network-based advertisements. In 1998, most private equity firms avoided health care. That in turn led Prospect to retract its threat of legal action and say, in effect, never mind. In an interview, the woman, who asked not to be identified, told ProPublica, They blamed me for something I didnt do. Inter Valleys Tenorio called her a scapegoat., Meanwhile, three lawsuits have charged Prospect with different allegations of billing fraud at its flagship hospital in Culver City. According to state health department inspectors, video monitors at a nurses station for maintaining watch over suicidal patients were turned off or ignored; an activity room was left unattended as psychiatric patients milled about; patients were placed in restraints or in seclusion without proper documentation; and facilities in the locked unit treating elderly psychiatric patients, some of them suicidal, presented multiple hanging hazards. The deal hasnt worked out quite as well for Prospects patients, many of whom have low incomes. Almost immediately, Prospect began contesting the agreement. We havent closed hospitals, and we dont close services, Dr. Mitchell Lew, Prospects president, said at a Connecticut public hearing in March 2016. Medical Properties Trust, Inc. ( NYSE: MPW) has reported that alleged short seller Viceroy Research LLC, being sued by MPW for defamation and other claims, The stringent penny-pinching wasnt enough to generate profits at first. Lee became super-involved in overseeing Alta even as Kline Hawkes quickly found an exit, according to Kline. In late October, the company which has a lengthy history of litigation threatened to sue an accounting firm hired by Rhode Island to assess the deal because a former accountant at the firm made critical comments to ProPublica about a company that Prospect CEO Lee had been involved with more than a decade ago. CBS News submitted detailed questions to Prospect Medical about these financial decisions, including about the $457 million dividend and the lease-back Alta borrowed the rest. The officials have postponed their decision until November, saying there are missing documents and unanswered questions. 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. Billionaire Harlan Crow Bought Property From Clarence Thomas. Peter Elkind is a reporter covering government and business. Prospect used much of the cash to pay off its loans. You cant use our work to populate a website designed to improve rankings on search engines or solely to gain revenue from network-based advertisements. As Prospect cranked up its ambitious expansion plans, it consistently told the targets of its acquisitions and the government regulators who needed to approve them that it was in the business of saving troubled hospitals. Prospect Medical Holdings, Inc. ("Prospect") leases and operates 13 of MPT's facilities. Filed in 2018, the case remains pending in Los Angeles. Prospect promised to spend hundreds of millions more on pension and capital improvements. The ProPublica report details how the transaction would hobble They really didnt take us seriously, she said. 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. According to a pending suit filed by Charles Harper, a 28-year employee who served as director of cardiopulmonary therapy, the hospital fraudulently billed Medicare for individual respiratory therapy while regularly requiring its staff to treat two patients at the same time, a practice known as stacking. Harper claims he was fired for complaining about the wrongdoing. Prospect said it quickly resolved all immediate jeopardy findings, something a hospital is required to do to remain eligible for federal reimbursements. 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. ), Having collected that cash, Leonard Green made a second attempt to exit the investment in June 2018. Employees told ProPublica the problem has persisted for years and provided photographs and videos documenting numerous leaks as well as the mold growth. 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. When GOP Attorneys General Embraced Jan. 6, Corporate Funders Fled. 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. Call us today @ 800-708-3230. Nobody has questioned it. Thats when I went back to our CEO and said, Theres a problem here.. Prospect is lying in claiming that theyve complied with the order, union general counsel Chris Callaci said. The rest was distributed in the form of stock options to Prospects top executives, to whom Lee dangled the possibility of a big future payoff. Just weeks after the deal closed, Prospects audit firm, Ernst & Young, discovered inflated revenues and profits on Altas books. Before the monitoring period expired, two of Prospects newly acquired Connecticut hospitals were slapped with immediate jeopardy findings. You are are free to republish it so long as you do the following: Copy and paste the following into your page to republish: New Law Aims to Save Oysters on the Mississippi Coast, In Secret Recording, a Top City Library Official Calls Alaska Natives Woke and Racists. The foundation sued, eventually extracting Prospects agreement to submit the matter to arbitration while putting the money into escrow. You have to send the next closest ambulance. 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. In 2012, Prospect paid Leonard Green and its investors a total of $188 million in two rounds of dividends. Because the improper claims were eventually self-reported, the government has taken no action against Prospect. The union is responding to Prospects claims with a postcard that is being mailed this week to 4,000 state opinion-makers. We The saga of Leonard Green and Prospect embodies a broader trend. Aleman called the charges an offensive smear campaign that Prospect is attempting against myself and others who are no more than victims of Lees broader plan to enrich a few and hurt many.). Three law firms hired by Alta later sued for unpaid bills. In Culver City, nurses unable to get proper protective gear for a time donned plastic garbage bags. The $12 million is to be paid by the company, not the two executives. Prospect Medical Holdings, Inc. ("Prospect") leases and operates 13 of MPT's facilities. We have official accounts for ProPublica on. The receiver demanded that Prospect help make the fund whole. The retirement plan for Our Lady of Fatima, which 2,700 past and current hospital employees were counting on, had been woefully underfunded since 2008. Prospects about-face, a Rhode Island official responded, couldnt remove the initial taint of the original receipt of threatened litigation. (Prospect declined to comment on this matter.). Inter Valley promptly notified Prospect, which expressed skepticism that anything was wrong, according to Inter Valley chief operating officer Susan Tenorio. Leonard Green and Prospect, which have operated hand-in-glove throughout this period, both declined requests for interviews. Another of the Medicare Advantage plans that received payments because of Prospects improper claims, CalOptima, said in a statement that Prospect first informed it in March 2016 of an inadvertent and isolated billing error from a single month in 2015. This includes publishing or syndicating our work on platforms or apps such as Apple News, Google News, etc. Aleman confirmed to ProPublica the accuracy of his comments in this article. 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. 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. Prospect Medical Holdings, Inc. filed as a Statement & Designation By Foreign Corporation in the State of California on Friday, July Their moves intensified a shift to for-profit ownership among the nations 5,200 general hospitals: from about 15% for-profit in 2000 to 25% for-profit in 2018, the most recent year for which data is available. 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?. Already deeply indebted, Alta had to borrow more to pay the $5.3 million. It eventually turned out there were 3,847 erroneous claims over four years, requiring $2.8 million in repayments to CMS, including $1.7 million from Prospect. 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. And so, were not bringing Californias quality program to Connecticut, he said. Kline assigned Lee, then 32, to oversee the investment. 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. (A Prospect spokesman disputed the claim, insisting that the company had ample liquidity. The companys 2020 financial results have not been made public yet.). 600 City Parkway West, Suite 1000, Orange, CA 92868 | (800) 708-3230 Various Prospect facilities in California have had bedbugs in patient rooms, rampant water leaks from the ceilings and what one hospital manager acknowledged to a state inspector looks like feces on the wall. The Private Equity Stakeholder Project, a union-backed research group, has produced detailed reports criticizing Greens history with Prospect. There have been multiple rounds of public hearings and questions to both Prospect and Leonard Green, generating thousands of pages of submissions in response. WebProspect Medical Holdings, Inc. Overview. 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. 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. Based on our communications with RI regulators, they stated, we expect to complete the transaction in the coming months.. Last year, Prime Healthcare agreed to pay $65 million in penalties to settle a lawsuit brought by the Department of Justice alleging that it filed false claims and made ), The situation grew dire. Those shares were enough to give Lee and Topper control of Prospect. He says his dad covered for Lee after the merger by soft-pedaling Altas accounting problems only to have Lee turn on him. 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. CASE DETAILS: The filed complaint alleges that defendants made false statements and/or concealed that: (1) Prospect Medical Holdings, Inc. ("Prospect"), Eager to save jobs, Fatimas powerful United Nurses & Allied Professionals union endorsed Prospects bid. 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 When GOP Attorneys General Embraced Jan. 6, Corporate Funders Fled. Lee would make executives cry, recalled former Alta CFO Lahidjani, who counted himself in that category. 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. Sign up to receive our biggest stories as soon as theyre published. 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. Private equity really wants to see growth fast and get out, Phillips said. The issue, described in internal documents obtained by ProPublica and interviews, involved unsupported reimbursement codes submitted by Prospects physician-management business, whose dramatically increased profits the company had promoted to potential buyers. 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. On Jan. 18, the health department and attorney general wrote to Prospect confirming that the Jan. 29, 2021 deadline would be extended, and advised the company, as of this date, we do not have a new deadline for completing the review.. Youll find, Terner said, if you go through the history of Sam Lee, theres a lot of corpses.. Lee decided to hold off on a sale. ), Michael Terner worked as an executive vice president at Prospect for five years and departed around the same time as his father. "Prospect Medical Holdings has notified the Department of Attorney General and the Department of Health this morning Kline Hawkes, the young Los Angeles firm where Lee worked, had made only one previous health care investment, in a medical instruments company. We were probably about three weeks behind every other hospital in getting just the basics, said Fatima RN Lynn Blais. Chris Callaci, general counsel for the Fatima hospital union, said his group is also considering running a radio ad to boost public opposition to the sale. 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. It began preparing to issue a $600 million dividend. You cant state or imply that donations to your organization support ProPublicas work. Volume and physicians, the company said, never returned to pre-flood levels.. I dont know the answer, but I think theres something wicked going on here, Max Wistow, the receivers special counsel, told a public hearing. Baumer and two Leonard Green colleagues, who together made up a majority of Prospects five-member board, left day-to-day health care operations to Lee. Prospect raised the money by issuing junk bonds. 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. Circuit Court of Appeals in March 2020. Prospect asserted that its cost was actually $8.5 million and that management was unaware of any inappropriate billing until after the fact. Thank you for your interest in republishing this story. And ProPublica has learned of a multiyear scheme at a key Prospect operation 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. Sign up to receive our biggest stories as soon as theyre published. Prospect and Leonard Green declined to comment on the bill. PROSPECT MEDICAL HOLDINGS IS A WOLF IN SHEEPS CLOTHING. The mailer urges recipients to press state officials to reject the proposed sale. Before his death, the physician told a friend hed become sick after being forced to reuse a single mask for four days. 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. 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. Private equity firm Leonard Green and other investors extracted $645 million from Prospect Medical before announcing a deal to sell it and leave it with $1.3 billion in financial obligations. (The company says it receives 80% of its revenues from Medicare and Medicaid reimbursements.) Nursing assistant Doreena Duphily, who worked in the geriatric mental-health ward, where 19 of 21 patients were infected, was out sick for three weeks with COVID-19 herself. They were very, very dirt cheap in every respect., Things began looking up for the business. Get our investigations delivered to your inbox with the Big Story newsletter. Now Theyre Back. It went from making about $20 million to losing money. State regulators, who had to approve the sale, had two big concerns. The plan was declared insolvent and placed in receivership in 2017. Or you get to the scene and the ambulance wont run.. In its responses for this story, Prospect made an array of unsubstantiated allegations about Alemans workplace conduct during his 12 years at the company. Prospect finally paid, 18 months late, after the arbitrator awarded the foundation $23.7 million, including interest. 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. This same hospital, the companys largest, is also the most visible monument to Prospects neglect. 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.
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