The letter, obtained by ProPublica, reported that Prospect had submitted thousands of claims dating back to 2013 that were not supported by audited medical charts. It added: In many instances, diagnosis codes were submitted for dates of service for which there was no evidence in a medical chart confirming that the [Prospect physician] had a face-to-face visit with the beneficiary. Most of this upcoding involved claims that individual patients had made two visits to Prospect doctors on the same day. Aleman said the discussed reasoning was that Prospect could bring a far richer price after mining its pending acquisitions for bigger profits. You cant state or imply that donations to your organization support ProPublicas work. Detailed management presentations to the two 2015 finalists were followed by dinners in Beverly Hills, leading to informal discussions with CVC, which was contemplating a considerably richer offer this time, according to Aleman. Kline picked a British-sounding name to add a dash of gravitas. Already deeply indebted, Alta had to borrow more to pay the $5.3 million. Prospect Medical Holdings, Inc. - Corporation Wiki The transaction breezed past regulators in four states where Prospect owns a total of 15 hospitals. The first was the $188 million in dividend payouts previously made to Leonard Green and other investors. Please contact. We cant find anything that will make us feel comfortable theyll be good stewards of these safety-net hospitals in Rhode Island, he said. Theyre loaded with debt and anybody sensible is not prepared to buy them.. Thank you for your interest in republishing this story. In the face of more than a year of often-vehement public opposition in Rhode Island, the hospital chain suddenly agreed in the final days of December to pay $27.25 million to resolve a group of lawsuits they had previously refused to settle. In late 2015, Prospect outbid two other companies with a $44 million offer for the 196-bed hospital, then in bankruptcy and losing more than $2 million a month. A second executive with an ownership stake took home $94 million. As always, the plan envisioned funding that payment through debt. 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. Theres so many other places to put their money in health care that they can flip faster, Phillips said. In Rhode Island, Prospect was welcomed as a savior in 2013 when it agreed to pay $45 million for controlling ownership of two money-losing Providence-area hospitals: 220-bed Roger Williams and 359-bed Our Lady of Fatima. Eventually, word of Prospects practices spread, causing alarm when the company sought to acquire new hospitals in other states. He hasnt been quoted in the press in more than 20 years. Prospect Medical, which mostly serves low-income patients, has suffered a litany of problems: broken elevators, dirty surgical gear, bedbugs and more. Prospect paid $300 million. It also said it would have been economically impossible for Prospect to take over liability for the retirement system and called the receivers allegations about the companys actions false and unsubstantiated. Both Prospect and the diocese deny concealing the pension systems condition. Prospect has defended its quality of care and denied any improprieties. As of December 31, 2021 , Prospect was MPT's third largest tenant, 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. There is leakage from the ceiling when it rains you can taste the mold in the air.. As elsewhere, Prospects failure to pay bills on time has delayed repairs and resulted in supply shortages. Lee couldnt find a buyer, Aleman said: They would have just given East Orange away literally handed over the keys. 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. 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. Many of these problems had yet to emerge by 2015, as Prospect struck rapid-fire deals to double the companys size. You cant republish our material wholesale, or automatically; you need to select stories to be republished individually. Big private equity firms were flooding into the hospital business. The size of the problem was a secret. Occupancy climbed, and individual hospitals began reporting growing profits though perhaps not as much as Altas financial reports suggested. When Leonard Green made its third attempt to exit, the nominal price was a pittance. Nelson said the three parties set aside a combined $22 million to cover the reimbursements while CMS completed its still-unfinished audit of how much is due. It warns: RHODE ISLANDERS BEWARE! But it also meant that Prospect had shed by far its biggest asset, sharply reducing the value of the company. Creditors would not come in to fix things because the hospital owed them money, she said. That fund has doubled in value overall, according to data on its investors websites. PROSPECT MEDICAL HOLDINGS 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. Inter Valleys CEO and its chief compliance officer then sent a letter detailing their findings to the Centers for Medicare and Medicaid Services in August 2016. We do not generally permit translation of our stories into another language. But not so in Rhode Island, where Prospect owns its other two hospitals. (Another $14 million in fees went to the private equity fund. It lowered the companys credit rating in response. His body was later found on a beach 7 miles away; the man had drowned. Trident is a company that inserts something called a PICC The plan was declared insolvent and placed in receivership in 2017. WebWelcome to Prospect Medical Group, an independent physician association (IPA) supporting residents of Southern California. PROSPECT MEDICAL HOLDINGS IS A WOLF IN SHEEPS CLOTHING. The mailer urges recipients to press state officials to reject the proposed sale. 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. But Neronhas approval, announced Tuesday, came at a cost to the company. 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. 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. 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 As Prospect previously told ProPublica, In effect, the companys money is their money. At the time the deal was announced, Prospect said it expected the sale to close by the spring of 2020. 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. If you want to look at us as performing an F on the test in California, that student is not coming here to tutor Connecticut on quality, OK?. In one case, staff returned a belt to an actively suicidal psychiatric patient who then used it to hang himself in his hospital bathroom. In the restatement, filed with the SEC, Moss Adams explained that Alta had misused and ignored factual information that existed at the time it compiled the inflated financial statements. 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 Dealing with the company, he added, has been a parade of horribles.. Leonard Green, which owns about 60% of the hospital chain, announced plans in October 2019 to sell its stake to Prospect CEO Sam Lee and his longtime business partner for $12 million plus the assumption of $1.3 billion in lease obligations. Given the cash and assets that private equity owners have already taken out of hospitals, their new owners will be left with heavy debt and limited resources as the saga of Leonard Green and Prospect demonstrates. Prospects story is also a bleak omen for the future of Americas health care system and a particularly telling one because the company is effectively on its second tour through the private equity system. 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. In April 2008, Alta restated its 2006 revenues, lowering them by about $4 million. As late as Dec. 10, the receivers special counsel told a public hearing that Lee and his partner were predators, using the hospitals as their private piggy banks. A financial consultant for the receiver also warned in a report that Prospects financial statements through fiscal year 2019 (even preceding the financial stress caused by the COVID-19 pandemic) revealed a worsening state of insolvency and imminent bankruptcy, absent a big capital infusion. The retirement system, and its massive funding deficit, would become the responsibility of a nonprofit community board, which had no reliable source of income. Prospect Medical Holdings Incorporated : News & Locations Making it right is what we should do, Nelson said. Kline Hawkes, the young Los Angeles firm where Lee worked, had made only one previous health care investment, in a medical instruments company. Doctors who had long relationships with Nix stopped referring patients. Established in 1996, Prospect Medical Holdings, Inc., is a national leader in fully integrated healthcare. The industry was complicated and highly regulated, both anathema to private equity. Los Angeles-based Prospect Medical Holdings is making a last-minute attempt to block Prime Healthcare Services from buying a 384-bed bankrupt 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. Prospects management and representatives have given assurances that this was a one-time event and that there are no plans to make a similar distribution in the foreseeable future, the Rhode Island attorney general noted in his written findings on the hospitals sale in 2014. ), At Crozer-Keystone, as elsewhere, Prospect has aggressively moved to lower costs. Other firms, facing growing losses, have placed some hospitals into bankruptcy and closed others, offering up their real estate while seeking to sell the rest of their medical operations at bargain-basement prices. Three lawsuits assert that Prospect committed Medicare fraud at one of its facilities. 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.). Medical Properties Trust Lawsuit Submission Form 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. He decided to invest, putting up $3 million in equity toward the $34 million purchase price. ), Michael Terner worked as an executive vice president at Prospect for five years and departed around the same time as his father. 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. CASE DETAILS: The filed complaint alleges that defendants made false statements and/or concealed that: (1) Prospect Medical Holdings, Inc. (Prospect), Prospect, Inter Valley and a hospital used by the plans patients had to repay the federal government for the improper income theyd received. If you share republished stories on social media, wed appreciate being tagged in your posts. They include United Nurses & Allied Professionals, the union for hospital workers at Our Lady of Fatima; elected officials, including five Democratic members of the U.S. Congress, Rhode Islands state treasurer and its senate majority leader; and the Private Equity Stakeholder Project, a union-backed research group that has produced critical reports about Leonard Greens conduct and lobbied the firms public pension fund investors. That episode, as well as the death of the ER-overflow patient whose body was found on the beach, resulted in immediate jeopardy findings. In November 2018 came yet another immediate jeopardy finding. (The company says it receives 80% of its revenues from Medicare and Medicaid reimbursements.) In a letter to Rhode Island officials, Prospect insisted it didnt violate the pledge it made back in 2014 because in 2014, no dividends were planned., That $457 million raised the total in dividends extracted from Prospect since Leonard Green acquired it to $645 million. Those shares were enough to give Lee and Topper control of Prospect. The Justice Didnt Disclose the Deal. He was very proud of making it impossible to get a dollar out, former CFO Heather said. The head of the department died. 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. (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. In 2014, a patients wife filed suit after soaked ceiling tiles fell and struck her in the head while she was sitting in the hospital lobby. Because the improper claims were eventually self-reported, the government has taken no action against Prospect. 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. 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. State regulators, who had to approve the sale, had two big concerns. Theyre just doing this immoral sucking out of resources. The Rhode Island officials have subjected the transaction to a high level of scrutiny. (A Prospect spokesman disputed the claim, insisting that the company had ample liquidity. The companys 2020 financial results have not been made public yet.). On May 1, department supervisor Jerald Ferreira, 63, died of COVID-19. The response was: We do this all the time. Billionaire Harlan Crow Bought Property From Clarence Thomas. One day youre like a superstar and the future of the company, said Steve Aleman, who became Prospects CFO in 2013. Lee decided to hold off on a sale. MPW LAWSUIT ALERT: Levi & Korsinsky Reminds Medical Prospect asserted that no patient harm occurred from the error, which has been corrected, and said the pharmacy is now fully operational.. Or you get to the scene and the ambulance wont run.. Our comprehensive networks aim to provide coordinated, personalized care to California, Connecticut, Pennsylvania, Texas and Rhode Island. Leonard Green extracted $400 million in dividends and fees for itself and investors in its fund not from profits, but by loading up the company with debt. Theres plenty of times when we went to go on an emergency call and the ambulance wouldnt start, he said. Prospect in turn is controlled by the Leonard Green struck a deal that aligned Lees financial interests with its own. Doris Burke is a senior research reporter at ProPublica. When GOP Attorneys General Embraced Jan. 6, Corporate Funders Fled. Hospital shutdown in Pennsylvania spurs questions about private 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. According to her suit, these patients were brought from nursing homes and other senior facilities, many well over 100 miles away, when their Medicare benefits there, capped at 100 days, were about to expire. The litany goes on. From the beginning, Lee and Topper brought the cost-slashing philosophy of private equity firms to Alta and its hospitals, according to interviews with former executives and multiple lawsuits. 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 2013, four years after buying the hospital, Prospect grouped Brotman with two of its other hospitals, renaming it Southern California Hospital at Culver City. Just three years after investing $3 million, the firm cashed out in 2001 with $5.3 million, a 73% profit. It found that Prospect had submitted an estimated $22.6 million in potentially improper charges, which the federal government had already paid. Recognizing that the bad numbers would surely blow up the deal, Leonard Green and Lee decided to hold off again. In 2018, Manchester Memorial Hospital mishandled two high-risk pregnancies: One woman died after delivering a stillborn baby; a second gave birth to an infant with severe encephalopathy, a form of brain damage, after an emergency cesarean section was performed too late. As it turns out, Prospect hasnt earned stellar grades in Connecticut either. 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. But when an email exploring this effort was accidentally sent to Prospect, the company responded by dispatching a letter to Alemans attorney, accusing the former CFO of colluding with others in an attempt to interfere with a Company transaction. It demanded that he immediately cease and desist.. Sign up to receive our biggest stories as soon as theyre published. 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.. In October 2015, the firm hired Morgan Stanley to find a new private equity buyer for Prospect. In April 2003, Lee and Topper abruptly shut down two of their hospitals, placing them into bankruptcy (and eventually liquidation), while selling a third.