Making it right is what we should do, Nelson said. The first was the $188 million in dividend payouts previously made to Leonard Green and other investors. COVID-19 caught many of Americas top medical centers by surprise. (The E&Y senior manager assigned to examine Altas financials told ProPublica the misstatement was very easy to find.) A company consultant in one of its Rhode Island hospitals discovered dirty, corroded and cracked surgical instruments in the operating room. 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 According to the suit, the company regularly changed vendors to avoid payment and bounced checks as part of its regular cash management process. (Whites suit was later settled.) And so, were not bringing Californias quality program to Connecticut, he said. Indeed, the trail of litigation, unpaid bills and accusations was already lengthy. Prospect is now poised to shutter another acquisition it eagerly pursued: East Orange General, outside Newark, New Jersey. Theres plenty of times when we went to go on an emergency call and the ambulance wouldnt start, he said. 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. Creditors would not come in to fix things because the hospital owed them money, she said. Big private equity firms were flooding into the hospital business. State regulators, who had to approve the sale, had two big concerns. Three lawsuits assert that Prospect committed Medicare fraud at one of its facilities. (Prospect denies any improper billing and says Harpers job was eliminated because of diminished demand for respiratory services. Find a Physician in Southern CA | Prospect Medical SVP Crockett testified, for example, that there was no specific patient harm that occurred, while insisting Prospect acted aggressively to address the allegations, including by creating new posts for a chief quality officer and a vice president of regulatory affairs and patient safety., The company claimed it would act differently in the new states it was entering. He would just not pay people as a way to negotiate. You are are free to republish it so long as you do the following: Copy and paste the following into your page to republish: (Courtesy of California Nurses Association), New Law Aims to Save Oysters on the Mississippi Coast, In Secret Recording, a Top City Library Official Calls Alaska Natives Woke and Racists. You cant sell our material separately or syndicate it. According to a pending suit filed by Charles Harper, a 28-year employee who served as director of cardiopulmonary therapy, the hospital fraudulently billed Medicare for individual respiratory therapy while regularly requiring its staff to treat two patients at the same time, a practice known as stacking. Harper claims he was fired for complaining about the wrongdoing. It is leaving a mess behind at Prospect. Don Andrews, a seasoned administrator who worked as emergency department director during part of this period, backed these claims in an interview with ProPublica. A Hospital Chain Said ProPublica Article Was Inaccurate. Its Not. The overflow area remained in use until about 2018, when it was permanently locked, hospital employees said. 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. ), Having collected that cash, Leonard Green made a second attempt to exit the investment in June 2018. Lee couldnt find a buyer, Aleman said: They would have just given East Orange away literally handed over the keys. The deal hasnt worked out quite as well for Prospects patients, many of whom have low incomes. Were talking here about safety-net hospitals that are serving the poor, the unemployed, disproportionately people of color. Prospect Medical Holdings, Inc. - Corporation Wiki The Fatima union and the pension funds receiver have opposed the sale too. The third suit alleged an illegal patient procurement scheme to generate fraudulent Medicare and Medicaid claims. This includes publishing or syndicating our work on platforms or apps such as Apple News, Google News, etc. The retirement system, and its massive funding deficit, would become the responsibility of a nonprofit community board, which had no reliable source of income. Only two years in, the private equity fund had made back most of its $205 million investment. Always eager to delay and reduce a big outlay, Prospect deferred $21.5 million of the foundation funding for 90 days and then refused to make the payment altogether, challenging how much it owed. Already deeply indebted, Alta had to borrow more to pay the $5.3 million. The company sold Nixs downtown building to a hotel chain and exited with a big loss. Employees told ProPublica the problem has persisted for years and provided photographs and videos documenting numerous leaks as well as the mold growth. More failures appeared in the companys biggest purchase yet, agreed to in late 2015: the four-hospital Crozer-Keystone system in Pennsylvania. Get our investigations delivered to your inbox with the Big Story newsletter. Kline was skeptical. Employee pensions was the other issue. Just over two decades ago, Sam Lee and the private equity firm where he then worked were among the first such firms to invest in hospitals and it started almost by accident. 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. 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. (Prospect says it believes the assessments are excessive and will pay once a final ruling is given as to what is fair and proper.). You cant use our work to populate a website designed to improve rankings on search engines or solely to gain revenue from network-based advertisements. Hospital workers have regularly reported staffing shortages, sometimes forcing delays of scheduled medical procedures. But not so in Rhode Island, where Prospect owns its other two hospitals. 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. 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. Lee convinced a Moss Adams senior partner to overrule him something that had never happened, Bogert said, during more than 300 previous hospital audits. ), Despite the turmoil, Lee became CEO of Prospect and consolidated power. Lawsuit Prospect Medical Holdings 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. Inter Valley promptly notified Prospect, which expressed skepticism that anything was wrong, according to Inter Valley chief operating officer Susan Tenorio. Prospect denied it ever lacked PPE at any of its hospitals. 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 financial obligations. The company denies the allegations, including that any of its hospitals suffer from staffing shortages. Aleman said the discussed reasoning was that Prospect could bring a far richer price after mining its pending acquisitions for bigger profits. Prospects own consultant, Alvarez & Marsal, largely confirmed Inter Valleys findings in September 2016 in a confidential draft document reviewed by ProPublica. 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. 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. The officials have postponed their decision until November, saying there are missing documents and unanswered questions. 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?. But a Jan. 29 deadline for the state to approve the deal has been extended indefinitely and other obstacles remain. Prospect finally paid, 18 months late, after the arbitrator awarded the foundation $23.7 million, including interest. (Prospects spokesman said the matter was referred to the court because efforts to resolve the amount of the payment were unsuccessful. In the decade since Leonard Green & Partners, a private equity firm based in Los Angeles, bought control of a hospital company named Prospect Medical Holdings for $205 million, the owners have done handsomely. Prospect Medical Holdings Incorporated : News & Locations The state has sought details on topics such as COVID-19s impact on the companys finances and has requested interviews with multiple company officials, including the CEO. 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 was profitable and had a higher federal quality rating, with four out of five stars, than any other Prospect hospital.