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Pa. AG sues Prospect Medical Holdings for ‘corporate looting’

By Kenny Cooper Updated Oct. 30, 2024 3:25 pm

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The effects of private equity on Delco’s health care

Kearney highlighted the necessity to remember Prospect’s “original sin.”

“In 2019, the private equity firm, Leonard Green & Partners, loaded Prospect Medical Holdings with hundreds of millions of dollars in debt in exchange for a massive stakeholder dividend,” Kearney said. “This weakened Crozer financially, turning it into a house of cards.”

Prospect first acquired Crozer in 2016. Henry asserted that Prospect agreed to keep acute care services at its four hospitals open for a period of no less than 10 years. Now, only two of its hospitals are operational. Krueger said her district has been forced to live with the fallout of private equity.

“I have lost count of the number of times a nurse or doctor has reached out to me to tell me they didn’t have the supplies that they needed to treat their patients because Prospect refused to pay the vendor bill or that their caseloads were unmanageable because Prospect wasn’t willing to schedule enough nurses or doctors for that shift,” Krueger said.

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Crozer Health’s parent company has a long history of siphoning millions from its hospitals. Pa. officials were warned, but their hands were tied

By Kenny Cooper May 23, 2022

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But healthcare observers say Crozer’s troubles go back to a business deal that was initiated in 2019 — one that Pennsylvania officials were warned about, but had little power to stop.

That deal was made between Prospect’s previous owner, a private equity firm called Leonard Green & Partners, according to ProPublica. The firm siphoned $645 million from Prospect before announcing a deal to sell it in October 2019. The ProPublica report details how the transaction would hobble Prospect with $1.3 billion in lease obligations. This is after the company sold most of the hospital land to a real estate investment firm.

Leonard Green & Partners, which owned about 60% of the hospital chain, wanted to pass along its share to Prospect CEO Sam Lee and his associate, David Topper, for $12 million. This would give them 100% ownership control over Prospect.

The catch? The $12 million bill was footed by Prospect, and not the two executives — a deal that some believed was sure to leave hospitals owned by Prospect in dire financial straits.

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