The for-profit Prospect Medical Holdings, which owns hospital facilities in California, Pennsylvania, Rhode Island, and Connecticut, has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Northern District of Texas.
The company said it plans to focus on its operations in California and to sell the Roger Williams Medical Center and Our Lady of Fatima Medical Center in Rhode Island and continue working with the Commonwealth of Pennsylvania to agree on terms for the divestiture of the Crozer-Chester Medical Center.
WHYY in Philadelphia reports that in an e-mail sent to Crozer employees, Prospect CEO Von Crockett cited a number of challenges, including the “lingering impacts of the COVID-19 pandemic, inflation, a significant cyberattack and increased denials from health plans” as the impetus behind its decision.
The Crozer system had four hospitals at one time, but is down to just two now. WHYY reports that state officials and local legislators “have sparred with hospital management in recent years as Prospect slashed services and wards within Crozer.” WHYY said the bankruptcy likely puts a pause on the Pennsylvania Office of Attorney General’s suit, filed in October against Prospect, accusing the company of mismanagement and “corporate looting.”
CBS News reported that Prospect Medical’s bankruptcy comes less than a year after the bankruptcy of Steward Health Care, another major hospital system once backed by private equity. Along with Steward, Prospect Medical has been one focus of a CBS News investigation revealing how private equity investors have siphoned hundreds of millions of dollars from community hospitals. CBS News said that among the similarities between Prospect Medical and Steward is that both of them relied on the value of their hospital real estate to help finance large payouts for their owners. The transactions, it said, resulted in onerous lease agreements that diverted funds away from direct patient care.
Prospect’s sale of three Connecticut hospitals to Yale New Haven Health has been tied up in court. CT Mirror reports that the Prospect-owned facilities in Connecticut — Waterbury, Rockville General, and Manchester Memorial Hospitals — have suffered financially and operationally over the last several years. “In August 2023, Prospect Medical Holdings was hit with a debilitating cyberattack that crippled many of its facilities around the country. The following month, the presidents of Prospect’s Connecticut hospitals warned the governor that the financial situation at all three hospitals was dire,” the Mirror noted.
The company stressed that the Chapter 11 proceedings do not include PHP Holdings and its subsidiaries, including Prospect Health Plan Inc., Prospect Medical Systems LLC and its affiliated medical groups in California, Arizona, and Texas, Gateway Medical Center, and Foothill Regional Medical Center. Their sale to Astrana Health is still expected close in mid-2025.
