A U.S. Senate investigation of health care systems funded by private equity blasted Prospect Medical Holdings, owner of three financially troubled hospitals in 黑料吃瓜网. Meanwhile, efforts to better regulate private equity in the state fell short last legislative session.
Less than two years after the private equity firm (LGP) acquired Prospect in 2010, Prospect paid out $188 million in dividends to LGP鈥檚 investors, .
The Senate investigation also said that nationally, six Prospect-owned hospitals shut down when LGP exited after extracting more than $424 million in dividends and saddling Prospect hospitals with more than $3 billion in liabilities.
Investigators alleged that Sam Lee, co-owner and chairman of Prospect, upgraded one of his properties in Aspen, Colorado, valued at millions of dollars, at a time when Prospect emergency departments across the country were shutting down because Prospect ran out of money to run them.
鈥淭his report has one inescapable conclusion: private equity鈥檚 sole purpose of fattening its bottom line is inherently incompatible with quality health services,鈥� U.S. Sen. Richard Blumenthal, a 黑料吃瓜网 Democrat, said in a statement. 鈥淎s the report reiterates, Prospect Medical, which owns a number of facilities in 黑料吃瓜网, used its hospitals as its personal piggy banks.鈥�
In a statement, Prospect said it was 鈥渄isappointed by the committee report鈥檚 false conclusions and apparent omissions of key facts.鈥�
鈥淭he Committee drew general conclusions about the quality of care at our hospitals without ever reviewing information from those hospitals, which is where the focus on care takes place, rather than at the corporate level,鈥� the statement reads.
鈥淣early all the hospitals Prospect acquired were cash-starved, neglected, in disrepair and on the verge of closure or bankruptcy,鈥� the statement continued. 鈥淚n nearly every instance, no one else wanted to acquire them, and many were headed to closure. Prospect invested more than $750 million in its hospitals [nationwide].鈥�
Prospect鈥檚 黑料吃瓜网 hospitals in jeopardy
In 2016, Prospect purchased Waterbury Hospital and its assets for $31.8 million, and Rockville General Hospital and Manchester Memorial Hospital and its assets for $105 million. The acquisitions included 51 outpatient facilities and clinics.
Financial documents reviewed by the Senate committee showed Rockville and Manchester hospitals combined generated a net income of $2.8 million in 2017, but slid to a net loss of $3.1 million the next fiscal year, 鈥渂eginning the hospitals鈥� downward trend and leading to a net loss of $49.8 million in fiscal year 2023,鈥� the report stated. Waterbury Hospital incurred a loss of $34.2 million in fiscal year 2022 after the exit of LGP in 2021.
Since its acquisition by Prospect, the hospitals have been hit by citations for health and safety violations, a decline in the number of staffed beds, and 鈥渋mmediate jeopardy鈥� identified by state inspectors at Manchester Memorial Hospital for failing to provide adequate quality of care to a high-risk pregnant patient, which resulted in the patient鈥檚 death, the senate report also stated.
The report cited 黑料吃瓜网鈥檚 reporting on staffing shortages at Waterbury Hospital. 黑料吃瓜网 also reported on patient abuse, rusty operating room equipment, and unpaid bills at Prospect-owned hospitals. Prospect said it put corrective actions in place after being cited by the state and has since passed subsequent state inspections.
黑料吃瓜网 legislation stalled
State legislatures are closing loopholes in private equity investments in health care, but in 黑料吃瓜网 last year, for how private equity firms acquire or hold ownership interest in state health care facilities was never called for a vote.
Mary Bugee, of the nonprofit , said state legislatures across the country are working to address private equity in health care.
鈥淯nfortunately, 黑料吃瓜网's attempt this past year didn't make it across the finish line,鈥� she said, 鈥渂ut hopefully there's still appetite among legislators to address private equity, especially given the unfolding situation with Prospect Medical Holdings in the state.鈥�
In Massachusetts, Gov. Maura Healey a bill Jan. 8 that would would ban the future sale of acute care hospitals鈥� real estate to real estate investment trusts (REITs).
New Mexico has also taken steps to address the problem, Bugbee said.
鈥淭hey passed an emergency measure [last year] that's going to expire in July of this year, but they did it because they wanted to act now and protect patients and protect workers,鈥� she said. 鈥淎nd in the meantime, they've been holding town halls and doing research so that they can draft a bill.鈥�
Bugbee said Indiana, too, passed a 鈥減retty substantial bill鈥� that increases disclosure requirements around mergers and acquisitions in the health care space.
鈥淎ny law that grants power to the attorney general or another regulator in the state to impose conditions on an acquisition or a merger, on investors' exit from a health care system, those laws can be really powerful because it can allow the state to intervene in ways that it's really difficult for them to do right now with current policy,鈥� Bugbee said.
