Dive Brief:
- Prospect Medical Systems plans to lay off 125 administrative workers in California effective July 1, according to notices filed with state regulators last week.
- The management services organization is owned by Prospect Medical Holdings, which filed for Chapter 11 bankruptcy in January. Prospect Medical Systems is responsible for the care of 600,000 members in 28 owned or managed networks across five states, according to Prospect’s website.
- Prospect Medical Holdings is currently working to sell Prospect Medical Systems, as well as its pharmacy business, health plan, medical groups and a medical center, to California-based Astrana Health for $745 million.
Dive Insight:
Prospect has been shedding assets since it declared bankruptcy at the start of the year, disclosing billions in liabilities.
Prospect struck a deal in February to sell its two hospitals in Rhode Island to the Centurion Foundation, a nonprofit healthcare operator based in Georgia, for $160 million.
However, the health system told the bankruptcy court it failed to find suitable buyers for facilities in Pennsylvania and Connecticut. Watchdogs allege the lack of interested buyers is due to facility mismanagement from Prospect.
In May, Prospect closed two Pennsylvania-based hospitals — Crozer-Chester Medical Center and Taylor Hospital — telling the court that it didn’t have cash to keep the lights on without a buyer. The closures sparked outrage throughout the state and prompted local lawmakers to push for more oversight into corporate ownership of healthcare.
Meanwhile, Prospect remains in litigation with Yale New Haven Health over a yearslong effort to sell three of its hospitals. Yale New Haven has wanted out of the deal for over a year, claiming Prospect’s poor financial management of the facilities and general neglect of the hospitals made a sale untenable.
Part of the problem, critics allege, stems from Prospect’s former relationship with private equity firm Leonard Green & Partners. A yearlong bipartisan report from the Senate found the private equity firm pushed the health system to take on excessive debt and employ “profit maximization tactics” at the expense of patient care.
During Leonard Green’s management of Prospect, the health system paid out $645 million in dividends and preferred stock redemption to its investors — $424 million of which went directly to pay Leonard Green investors. Meanwhile, quality at the hospitals deteriorated, according to the Senate report.
This month, Sen. Chris Murphy, D-Conn., launched a campaign asking Connecticut residents to share their stories of how Prospect Medical Holdings’ mismanagement had negatively impacted their access to care in an effort to drum up support for more regulation of private equity in healthcare.
“It was a mistake to let private equity control so much of our health care system, but it’s not too late for us to change course,” said Murphy, echoing statements made by Pennsylvania Gov. Josh Shapiro during a visit to the closed Crozer hospitals a month prior.
