Prospect Medical Holdings’ downward spiral into bankruptcy left many of its 16 hospitals and related facilities in limbo as the for-profit company looks to condense that portfolio and sell off facilities.
Los Angeles-based Prospect, once majority-owned by private equity firm Leonard Green & Partners, has struggled for months under piles of debt and rising expenses. Those financial woes culminated in Prospect's decision to file for Chapter 11 bankruptcy protection last month.
Related: Prospect Medical Holdings files for bankruptcy
Prospect is the second high-profile hospital operator to file for bankruptcy protection in less than a year, following Steward Health Care’s filing in May.
Bankruptcy experts say the Chapter 11 process helps ensure day-to-day operations across Prospect’s four-state footprint can continue as usual. In the meantime, Prospect is scrambling to find buyers and wrap up existing deals for most of its facilities, despite some allegations of mismanagement, to avoid closures and thousands of potential layoffs.
Here’s a look at where Prospect’s facilities stand amid the bankruptcy process.
Rhode Island
Prospect entered into an amended purchase agreement this week to sell CharterCare Health Partners to the Centurion Foundation, subject to approval from the bankruptcy court. CharterCare includes two Rhode Island hospitals — Providence-based Roger Williams Medical Center and North Providence-based Our Lady of Fatima Hospital — plus the related health network.
No details on the amendments were provided.
Prospect and the Centurion Foundation, which works with providers to develop facilities, arrange financing for facilities and lease them, first struck an agreement in November 2022. However, state regulatory approval was not granted until two years later when Rhode Island's Director of Health Dr. Jerry Larkin signed off on the deal. State Attorney General Peter Neronha signed off in June.
The regulatory approval came with conditions, such as ensuring the facilities remain in good financial standing, hiring a chief restructuring officer and avoiding significant reductions in healthcare services without approval.
CharterCare CEO Jeffrey Liebman called the latest agreement “a positive development” and said in a Monday news release it will ensure continued access to care in the area. Liebman was not made available for an interview.
Prospect will seek approval for the deal at a Feb. 12 bankruptcy court hearing.
Pennsylvania
On Friday, Prospect announced a deal to sell Crozer Health, including its hospitals, ambulatory surgery centers and clinics, to a nonprofit consortium. Consortiums typically involve multiple entities, but no further information about the group was provided.
Prospect will seek approval at a bankruptcy court hearing scheduled Thursday.
Crozer CEO Tony Esposito was not made available for an interview.
This isn’t Prospect’s first attempt to sell Upland, Pennsylvania-based Crozer. The company announced a letter of intent in August to sell Crozer to real estate company CHA Partners. Pennsylvania Attorney General Michelle Henry filed a lawsuit in October against Prospect for allegedly mismanaging Crozer’s facilities. Prospect said at the time CHA had not withdrawn from the deal, but CHA confirmed Tuesday it is no longer involved.
Bankruptcy proceedings typically pause any court cases in progress, particularly suits brought against the debtor.
Wilmington, Delaware-based ChristianaCare also signed a letter of intent to buy Crozer in early 2022, but the deal fell apart several months later.
Connecticut
Prospect is embroiled in a legal battle with Yale New Haven Health over the fate of three hospitals in Manchester, Rockville and Waterbury. In late 2022, Prospect signed a definitive agreement with Yale New Haven to sell Waterbury HEALTH and Eastern Connecticut Health Network in a $435 million deal, which would convert those facilities to nonprofit status.
However, Yale New Haven sued Prospect last May to get out of the agreement, alleging Prospect violated the terms of the contract by mismanaging the facilities. Prospect hit back with its own lawsuit in June, arguing Yale New Haven should adhere to the previous agreement.
The lawsuits are unresolved. Last month, Prospect requested the case be transferred to bankruptcy court — a move Yale New Haven opposes.
“Prospect’s decision to file for bankruptcy is much larger than just the state of Connecticut — this is a national matter and of grave concern to many hospitals around the country. Yale New Haven Health raised the alarm about this inevitability in the lawsuit we filed last year,” a Yale New Haven spokesperson said this week in a statement.
California
Much of Prospect’s footprint is concentrated in its home state of California, but the company was already looking to offload a substantial portion of its assets there even before the bankruptcy filing.
Subsidiary Prospect Health signed a definitive agreement in November to sell Prospect Health Plan, Prospect Medical Groups, Prospect Medical Systems, RightRx and Foothill Regional Medical Center to Alhambra, California-based Astrana Health for $745 million. The transaction is expected to close later this year pending regulatory approval.
If that transaction closes, Prospect would still own six hospitals in the state: Bellflower Behavioral Health Hospital, Los Angeles Community Hospital, Norwalk Community Hospital, Southern California Hospital at Culver City, Southern California Hospital at Hollywood and Van Nuys Behavioral Health Hospital.
A Prospect spokesperson did not respond to a request for comment on whether the company plans to sell more hospitals in California.