Indeed, the trail of litigation, unpaid bills and accusations was already lengthy. Prospect refused, and failed to turn over any of the materials, despite an order to do so from the National Labor Relations Board in April 2019, affirmed by the 1st U.S. We have official accounts for ProPublica on. Prospect Medical Holdings, Inc. ("Prospect") leases and operates 13 of MPT's facilities. As elsewhere, Prospects failure to pay bills on time has delayed repairs and resulted in supply shortages. Proposed legislation in Rhode Island threatens to further stall the deal. It is leaving a mess behind at Prospect. Then, in early 2016, U.S. capital markets tightened amid fears of a recession, dashing the companys hopes to get even more. But a new problem had emerged behind the scenes during this period: improper Medicare billing. ), Despite the turmoil, Lee became CEO of Prospect and consolidated power. Alta borrowed the rest. That quality component was always lax in my opinion, one said. State regulators, who had to approve the sale, had two big concerns. Prospect settled in 2017, agreeing to pay $275,000 while asserting that the claims were wholly without merit.. (To inquire about syndication or licensing opportunities, contact. Investors led by the private equity firm, Leonard Green & Partners, previously extracted $645 million in dividends from the investment, and the firm now seeks to leave behind another $1.3 billion in financial obligations at the chain. The Fatima union and the pension funds receiver have opposed the sale too. Altas facilities were sort of war-zone hospitals. Prospect Medical Holdings, the California-based hospital chain, finally got what it wanted when Attorney General Peter Neronha this week approved its long-sought ownership change involving two Rhode Island hospitals. The company denied the claims, pointing out that its 2014 purchase of the hospitals included contract language absolving it of any future liability for the retirement plan. Employee pensions was the other issue. 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. Prospect asserted that its cost was actually $8.5 million and that management was unaware of any inappropriate billing until after the fact. 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. 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. Medical Properties Trust, Inc. management reported that the Prospect situation appears to be progressing, although management will be contributing about $50 million in equity financing. Prospect denied it ever lacked PPE at any of its hospitals. Prospect vowed to spend $52 million on capital improvements and keep the hospital open for no less than five years. Three years into that vow, with losses still running about $1 million a month, Prospects warnings that it wanted to sell or close the hospital spurred state lawmakers to hand the company an emergency $15 million grant. When it rains in Culver City, water drips from ceilings throughout the hospitals two buildings, forcing staff to relocate patients and plant orange buckets in the hallways. In March, Prospects New Jersey hospital made national headlines as the chief workplace of the first U.S. emergency room doctor to die of COVID-19. We were caught with our pants down. 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. A company consultant in one of its Rhode Island hospitals discovered dirty, corroded and cracked surgical instruments in the operating room. 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. Text Size. The deal hasnt worked out quite as well for Prospects patients, many of whom have low incomes. When Prospect then missed the escrow deadline, the foundation began garnishing the companys accounts and sought to have a receiver appointed over all its financial transactions. 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. In a press release announcing the deal, Lee said the company will help ensure the long-term success of Nix.. Born in South Korea and raised in Tampa, Florida, he was an industrial engineering graduate of Georgia Tech. 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. In 2013, four years after buying the hospital, Prospect grouped Brotman with two of its other hospitals, renaming it Southern California Hospital at Culver City. After digesting the acquisitions in the pipeline, the company projected, revenues and profits would surely soar. 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. But that tension is particularly acute in the case of Leonard Green and Prospect, where private equity has extracted hefty profits from a business that acquires struggling hospitals and relies on Medicaid and other government programs to pay the bills for its impoverished patients. If you use canonical metadata, please use the ProPublica URL. And opponents there are making a stand. Lee disputed some of Whites claims, but acknowledged in the companys written responses that this was a difficult time, resulting in some bounced checks and some payables being missed. He insisted that ultimately, all the vendors were paid., Shedding those money-hemorrhaging operations helped Alta turn a financial corner. 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. 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. After that is accomplished, firms then usually resell the operation to another buyer within five years. This one stemmed from patient-safety violations in a mental health ward at 300-bed Crozer-Chester Medical Center, the systems largest hospital. Hed go through three hours of literally just peeling the skin off somebody, Aleman said. The company has little cash, weighty pension debts and lease commitments, and uncertain future earnings. After hearing about a consultants 2017 report describing dirty and damaged operating room instruments, the union at Fatima requested documents about this and other problems revealed by various inspections. In Culver City, nurses unable to get proper protective gear for a time donned plastic garbage bags. You cant republish our material wholesale, or automatically; you need to select stories to be republished individually. Learn More / Map (Under agreements Prospect makes virtually all employees sign, the case is scheduled to go to arbitration. We do not generally permit translation of our stories into another language. At Delaware County Hospital, veteran nurse Angela Neopolitano said a call-bell system in one unit, which patients use to summon help from nurses, has been broken for more than two years. It began preparing to issue a $600 million dividend. The stringent penny-pinching wasnt enough to generate profits at first. 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. Filed in 2018, the case remains pending in Los Angeles. We reported everything, Inter Valley CEO Mike Nelson said. He acquired a moldering flagship hospital, the 420-bed Brotman Medical Center, in Culver City, California, out of bankruptcy; replaced Ernst & Young; fired and sued the companys outside law firm; and ousted Prospects 74-year-old founder, Dr. Jacob Terner. 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. Conflict between Prospect and Neronha flared on Thursday when the hospital chain threatened to close the hospitals, and take legal action, if the state 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 Prospect paid $300 million. CBS News submitted detailed questions to Prospect Medical about these financial decisions, including about the $457 million dividend and the lease-back 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. WebAt Prospect Medical Holdings, we are dedicated to delivering quality, compassionate, accessible healthcare to the patients in the communities we serve in California, Connecticut, New Jersey, Pennsylvania and Rhode Island. 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. 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. By this point, Prospect had grown to 20 hospitals. Thank you for your interest in republishing this story. 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. Prospect promised to spend hundreds of millions more on pension and capital improvements. At least part of the delay in approving the sale in Rhode Island appears to be self-inflicted by Prospect. In 2019, after repeatedly promising to keep at least part of the system open, Prospect shut it all, laying off nearly 1,000 employees. Ive seen the whole M&A market for hospitals dry up., Making quick profits from operating hospitals proved daunting. Eager to raise capital, Prospect sold its land and buildings last fall in a sale-leaseback transaction that allowed the operations to remain in the facilities. Yet Prospect claimed the role of savior. The Baumers live about 30 minutes from the firms Santa Monica offices in a large oceanfront property on Manhattan Beach, purchased, through a corporate entity he set up, for $18.4 million. But Leonard Green viewed Prospects approach as one that could be applied widely and used to acquire more hospitals and reap more profit. Before his death, the physician told a friend hed become sick after being forced to reuse a single mask for four days. We cant find anything that will make us feel comfortable theyll be good stewards of these safety-net hospitals in Rhode Island, he said. Prospect has defended its quality of care and denied any improprieties. (Moss Adams declined to comment.). Correction, Oct. 12, 2020: An earlier version of this article misspelled the name of Doreena Duphily. ), The situation grew dire. Prospect was reporting revenues of about $1 billion in 2015, with operating profits of $108 million. When you looked on paper, it was a beautiful turnaround, said Jack Lahidjani, who was Altas CFO from 2003 to 2006. 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 Lee became the primary decision-maker. Big private equity firms were flooding into the hospital business. Sign up to receive our biggest stories as soon as theyre published. Leonard Green and Prospect responded to ProPublicas questions in written statements through Sitrick and Company, a crisis PR firm jointly retained on their behalf. The $12 million is to be paid by the company, not the two executives. 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. As Mississippis oyster population continues its freefall, state leaders turn to a model that has helped in Louisiana. Four states approved it but Rhode Island is holding out. 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. by Ian Donnis. Kline picked a British-sounding name to add a dash of gravitas. For his part, Lee decided to stay. The transaction breezed past regulators in four states where Prospect owns a total of 15 hospitals. Get our investigations delivered to your inbox with the Big Story newsletter. As criticism of Prospect grew during 2020, Rhode Island officials first delayed their decision on the sale to November, citing missing documents and unanswered questions, then extended it again to the end of January 2021. But Neronhas approval, announced Tuesday, came at a cost to the company. Dealing with the company, he added, has been a parade of horribles.. When GOP Attorneys General Embraced Jan. 6, Corporate Funders Fled. The reality, he said, was that Lee was putting out aggressive financial statements., Lee fought tooth and nail to hike Altas reported profits in 2006 by booking inflated estimates for forthcoming Medicaid revenues, according to Michael Bogert, who prepared Altas audited financial statements for Moss Adams LLP, the companys accounting firm. It found that Prospect had submitted an estimated $22.6 million in potentially improper charges, which the federal government had already paid. 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. Medical Properties Trust, Inc. ( NYSE: MPW) has reported that alleged short seller Viceroy Research LLC, being sued by MPW for defamation and other claims, Nix was an unusual acquisition for Prospect. 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. 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. 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. The rosy numbers helped attract a buyer for Alta in 2007: Prospect Medical Holdings, a small, publicly traded company that managed 10 physician groups. The firm siphoned $645 million from Prospect before announcing a deal to sell it in October 2019. (The E&Y senior manager assigned to examine Altas financials told ProPublica the misstatement was very easy to find.) COVID-19 caught many of Americas top medical centers by surprise. 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. WebProspect Medical Holdings, Inc. | 14,513 followers on LinkedIn. As they see it, this is merely the latest stage in a slow descent to the bottom. Billionaire Harlan Crow Bought Property From Clarence Thomas. 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.). Lee had worked for Andersen Consulting (as a grunt, he later explained in a deposition) and a Florida software company before getting an MBA at Harvard and joining Kline Hawkes. Moodys, the ratings agency, was dismayed by Prospects soaring debt. Two former senior executives at Alta claimed that Lee and his longtime partner had cheated them out of a promised equity stake. 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. Callaci told ProPublica that attorneys representing Prospect approached him to explore what it would take to get the union to drop its opposition, but that the discussions went nowhere. Lee decided to hold off on a sale. The effects were felt almost immediately. Lee would make executives cry, recalled former Alta CFO Lahidjani, who counted himself in that category. The company sold Nixs downtown building to a hotel chain and exited with a big loss. Those shares were enough to give Lee and Topper control of Prospect. Leonard Green struck a deal that aligned Lees financial interests with its own. In a David-and-Goliath battle, a group of Rhode Island officials and a union for hospital workers have so far stymied a multi-billion-dollar private equity funds attempt to unload its controlling stake in a national for-profit hospital chain. 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 today is at no risk of financial failure.. After an unnecessary hospital admission requalified them for Medicare benefits, the patients were then returned to their facilities, according to the suit, boosting government billings for both Prospect and the senior facilities. It lowered the companys credit rating in response. Prospect finally paid, 18 months late, after the arbitrator awarded the foundation $23.7 million, including interest. He hasnt been quoted in the press in more than 20 years. WebHospital chain Prospect Medical Holdings has reached a $1.9 million settlement with employees in a proposed class and collective action who argued for overtime pay 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. The problem had escaped federal ERISA oversight because of the hospitals affiliation with the Catholic Diocese of Providence, making its pension system a legally exempt church plan.. WebWelcome to Prospect Medical Group, an independent physician association (IPA) supporting residents of Southern California. The foundation sued, eventually extracting Prospects agreement to submit the matter to arbitration while putting the money into escrow.