Leonard Green and the hospital chain, Prospect Medical Holdings, were the subject of a ProPublica investigation in September that explored Prospects history of patient-care violations including some that posed immediate jeopardy to patients, according to multiple government findings along with complaints about deteriorating facilities, broken financial commitments and allegations of Medicare fraud surrounding the company. 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. The bill comes from state senate president Dominick Ruggerio, a Democrat, who previously wrote a letter urging regulators to subject the Prospect sale to the utmost scrutiny and warning that approval posed a probability of serious harm to the health and welfare of all Rhode Islanders. On Jan. 12, Ruggerio introduced a bill, citing Prospects two Rhode Island hospitals, that would impose a one-year moratorium on all hospital ownership transfers involving a for-profit corporation as acquiree or acquiror. The bill has nine co-sponsors. But it also meant that Prospect had shed by far its biggest asset, sharply reducing the value of the company. 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. 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. At Notre Dame, Baumer and his wife have endowed the lacrosse teams head coaching position ($3 million) and funded a new mens dormitory ($20 million). It found that Prospect had submitted an estimated $22.6 million in potentially improper charges, which the federal government had already paid. The firm siphoned $645 million from Prospect before announcing a deal to sell it in October 2019. This January, a giant brown mold formation burst through the wall near a fourth-floor nurses station. ), A second lawsuit filed in federal court claimed the hospital inflated Medicaid revenues at its Miracles detox center by admitting financially needy or homeless patients with no medical reason for being hospitalized for chemical dependency. The plaintiff, a former nurse there who sought whistleblower status for the suit, alleged that some patients were admitted so often, without undergoing standard addiction screenings, that the staff referred to them as frequent fliers. Federal prosecutors ultimately declined to join the case but allowed it to proceed as a private action against Prospect and the hospital under the False Claims Act. The exodus isnt necessarily good news, according to Batt and other experts. 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. Big private equity firms were flooding into the hospital business. by Ian Donnis. These arent mere anecdotes or anomalies. 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.). 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. As Connecticut in 2016 weighed whether to approve Prospects purchase of three hospitals, the state sent a team to California to investigate five recent immediate jeopardy findings, which had placed one Prospect hospital license on a termination track for cutoff of Medicare and Medicaid funding. As far as the unions concerned, theyre not welcome in Rhode Island.. Both made offers around $1.2 billion, according to sources familiar with the talks. The effects were felt almost immediately. Any website our stories appear on must include a prominent and effective way to contact you. The virus sickened a half-dozen members of the hospitals housekeeping staff, which had been given limited personal protective equipment. 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. The Justice Didnt Disclose the Deal. Crozer Health, the struggling four-hospital system in Delaware County, and its parent company Prospect Medical Holdings, have at times been unable to pay vendors and contractors who provide vital services to patients at Crozer-Chester Medical Center in Upland, according to staff. Eager to save jobs, Fatimas powerful United Nurses & Allied Professionals union endorsed Prospects bid. Kline assigned Lee, then 32, to oversee the investment. Those payments raised fears that Prospect wouldnt fulfill its pledge to spend $90 million on capital improvements over four years. 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. 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. On April 19, 2021, the Court entered the parties stipulated order to submit the matter to binding arbitration pursuant to the binding mutual When you looked on paper, it was a beautiful turnaround, said Jack Lahidjani, who was Altas CFO from 2003 to 2006. As of December 31, 2021 , Prospect was MPT's third largest tenant, We have official accounts for ProPublica on. Before the monitoring period expired, two of Prospects newly acquired Connecticut hospitals were slapped with immediate jeopardy findings. Filed in 2018, the case remains pending in Los Angeles. Were in this for the long term, OK?. Long called Brotman Medical Center, it is best known for its burn center, which treated Michael Jackson in 1984 after his hair and jacket caught fire during the filming of a Pepsi commercial. The Fatima union and the pension funds receiver have opposed the sale too. Lee was whip smart, could be charming when he wanted to and preferred to operate behind the scenes. When Leonard Green made its third attempt to exit, the nominal price was a pittance. Investors Extracted $400 Million From a Hospital Chain That Sometimes Couldnt Pay for Medical Supplies or Gas for Ambulances Prospect Medical, which mostly serves low-income patients, has suffered a litany of problems: broken elevators, dirty surgical gear, bedbugs and more. 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. All told, for all investments in the fund over 13 years, ProPublica estimates Leonard Green has made more than $1.5 billion for itself from fees and its share of the funds profits. It was an absolute disaster., In its responses to ProPublica, Prospect blamed the failure on a catastrophic broken water pipe in 2016 that flooded the entire hospital infrastructure, forcing doctors and patients to go elsewhere for months. If you use canonical metadata, please use the ProPublica URL. Given Sam Lees prowess at squeezing cash out of ailing institutions, Prospect undoubtedly will find profits left to extract. After that is accomplished, firms then usually resell the operation to another buyer within five years. His body was later found on a beach 7 miles away; the man had drowned. The question of whether profits and good medical care can coexist is not a new one in the United States. But Brotman has continued to deteriorate. Youll find, Terner said, if you go through the history of Sam Lee, theres a lot of corpses.. DeMauro alleges that unlawful retaliatory conduct she faced after complaints about these practices forced her to resign. Nobody has questioned it. Thats when I went back to our CEO and said, Theres a problem here.. After decades of profits, Nix began losing money. Lee decided to hold off on a sale. 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. On May 1, department supervisor Jerald Ferreira, 63, died of COVID-19. Theres so many other places to put their money in health care that they can flip faster, Phillips said. Indeed, the trail of litigation, unpaid bills and accusations was already lengthy. 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. 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. The union is responding to Prospects claims with a postcard that is being mailed this week to 4,000 state opinion-makers. In November 2018 came yet another immediate jeopardy finding. Indeed, Leonard Green is now on its third attempt to sell Prospect. 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. (The company says it receives 80% of its revenues from Medicare and Medicaid reimbursements.) Employee pensions was the other issue. 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. State officials approved the companys acquisitions on a conditional basis in 2016, while imposing a three-year monitoring regime that health department officials describe as unprecedented. Please contact. Other Prospect critics remain undeterred. You cant republish our material wholesale, or automatically; you need to select stories to be republished individually. Prospect paid $300 million. By cutting costs and maximizing government reimbursements at its remaining facilities, Alta started to eke out profits from its four remaining hospitals. Prospect is now poised to shutter another acquisition it eagerly pursued: East Orange General, outside Newark, New Jersey. A 2018 state inspection found the pharmacy staff at the Culver City hospital had for months ignored findings of fungal air growth, bacterial organisms and mold in equipment used to mix patient medications in a sterile environment. The company sold Nixs downtown building to a hotel chain and exited with a big loss. In one case, staff returned a belt to an actively suicidal psychiatric patient who then used it to hang himself in his hospital bathroom. 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. Four states approved it but Rhode Island is holding out. 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. Thank you for your interest in republishing this story. Toppers main role was to be Altas salesman, schmoozing doctors and nursing home administrators to feed Medicaid and Medicare patients into their small community hospitals, located in low-income neighborhoods. The company has also waged a four-year battle to halve the tax assessments on all its hospital properties. Doris Burke is a senior research reporter at ProPublica. The court-appointed receiver has filed multiple lawsuits accusing Prospect and the diocese of omissions and half-truths actionable as fraud, demanding that they help make the pension whole. 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. The $12 million is to be paid by the company, not the two executives. The size of the problem was a secret. This includes publishing or syndicating our work on platforms or apps such as Apple News, Google News, etc. 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. Or you get to the scene and the ambulance wont run.. (Under agreements Prospect makes virtually all employees sign, the case is scheduled to go to arbitration. Just weeks after the deal closed, Prospects audit firm, Ernst & Young, discovered inflated revenues and profits on Altas books. Filed: August 10, 2017 2:17-cv-03599-WB. 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. The Private Equity Stakeholder Project, a union-backed research group, has produced detailed reports criticizing Greens history with Prospect. In October, the private equity firm agreed to sell the firms 60% stake to Lee and Topper for $12 million in cash plus the assumption of $1.3 billion in lease obligations. Prospect said it quickly resolved all immediate jeopardy findings, something a hospital is required to do to remain eligible for federal reimbursements. He would just not pay people as a way to negotiate. Doctors who had long relationships with Nix stopped referring patients. Peter Elkind is a reporter covering government and business. Prospect asserted that no patient harm occurred from the error, which has been corrected, and said the pharmacy is now fully operational.. 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. 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. The company has little cash, weighty pension debts and lease commitments, and uncertain future earnings. 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.). Moodys, the ratings agency, was dismayed by Prospects soaring debt. When GOP Attorneys General Embraced Jan. 6, Corporate Funders Fled. 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. A year later, Lee halted payment on Terners exit package. Don Andrews, a seasoned administrator who worked as emergency department director during part of this period, backed these claims in an interview with ProPublica. Read Complaint. WebProspect Medical Holdings, Inc. Overview. As they see it, this is merely the latest stage in a slow descent to the bottom. 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. Two medical employees at Delaware County Memorial Hospital are lead plaintiffs in a national class action against Prospect, claiming insufficient staffing regularly forces hospital employees to work, unpaid, through meal breaks. If you share republished stories on social media, wed appreciate being tagged in your posts. Were talking here about safety-net hospitals that are serving the poor, the unemployed, disproportionately people of color. 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. Established in 1996, Prospect Medical Holdings, Inc., is a national leader in fully integrated healthcare. 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. That episode, as well as the death of the ER-overflow patient whose body was found on the beach, resulted in immediate jeopardy findings. Prospect used much of the cash to pay off its loans. A Prospect lawyer also wrote Aleman, accusing him of making false and defamatory statements to ProPublica. These problems surfaced over the past decade, after the private equity firm purchased the company in 2010. If you use canonical metadata, please use the ProPublica URL. As elsewhere, Prospects failure to pay bills on time has delayed repairs and resulted in supply shortages. 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. 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. 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. In 1998, most private equity firms avoided health care. Instead, retirees nervous about Prospects purchase were shown a PowerPoint presentation stating that Prospects one-time contribution would stabilize plan assets. Lee attested in writing that the payment would assure that the pensions and retirement of many former employees, who reside in the community, are protected. Prospect told the attorney general that any necessary future payments would be made based on recommended annual contribution amounts as provided by the Plans actuarial advisors. Remarkably, no one addressed who would actually make such payments. Aleman is now CFO of Prime Healthcare. As a result, Prospect reduced the dividend to $457 million. Already deeply indebted, Alta had to borrow more to pay the $5.3 million. Lee convinced a Moss Adams senior partner to overrule him something that had never happened, Bogert said, during more than 300 previous hospital audits. That in turn led Prospect to retract its threat of legal action and say, in effect, never mind. Starting around 2010, giant private equity firms like Cerberus Capital Management and Apollo Global Management rushed into the hospital business, buying up facilities and assembling chains. How Cigna Saves Millions by Having Its Doctors Reject Claims Without Reading Them, 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. 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. State regulators, who had to approve the sale, had two big concerns. Based on our communications with RI regulators, they stated, we expect to complete the transaction in the coming months.. 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 Some of Altas hospitals, according to company filings with the California health department, were averaging 30% occupancy. Prospect has conducted a public relations counter-offensive. Now Theyre Back. The foundation sued, eventually extracting Prospects agreement to submit the matter to arbitration while putting the money into escrow. By January 2019, Prospect had so little cash that it needed an emergency $41 million loan from Leonard Green, Lee and Topper to assuage auditor fears that the company might not remain a going concern and to avoid violating loan covenants, according to Aleman. 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. 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. He decided to invest, putting up $3 million in equity toward the $34 million purchase price. At least part of the delay in approving the sale in Rhode Island appears to be self-inflicted by Prospect. Inter Valley promptly notified Prospect, which expressed skepticism that anything was wrong, according to Inter Valley chief operating officer Susan Tenorio. 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. Prospect raised the money by issuing junk bonds. Altas facilities were sort of war-zone hospitals. 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. Prospect finally paid, 18 months late, after the arbitrator awarded the foundation $23.7 million, including interest. Waterbury Hospital was found to have failed to properly monitor two suicidal patients on a single day in March 2019. As of December 31, 2021, Prospect was MPT's third largest tenant, representing 7.3% of its total assets. ), At Crozer-Keystone, as elsewhere, Prospect has aggressively moved to lower costs. 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. After his death, the hospital failed to notify police. By this point, Prospect had grown to 20 hospitals. 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. 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. CASE DETAILS: The filed complaint alleges that defendants made false statements and/or concealed that: (1) Prospect Medical Holdings, Inc. ("Prospect"), What it will have to offer patients is less clear. (For example, yesterday can be changed to last week, and Portland, Ore. to Portland or here.), You cannot republish our photographs or illustrations without specific permission. You cant republish our material wholesale, or automatically; you need to select stories to be republished individually. 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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