WebWe are hospitals and affiliated medical groups working for the benefit of every person who comes to us for care. Leonard Green and the hospital chain, Prospect Medical Holdings, were the subject of a ProPublica investigation in September that explored Prospects history of patient-care violations including some that posed immediate jeopardy to patients, according to multiple government findings along with complaints about deteriorating facilities, broken financial commitments and allegations of Medicare fraud surrounding the company. In addition, Prospect made accusations about the conduct or character of seven other former executives and employees critical of the company, including two other former CFOs of Prospect or Alta. In the latest skirmish between Prospect Medical Holdings and Rhode Island Attorney General Peter Neronha, Prospect announced Friday it is withdrawing from the state process for changing its ownership. The stringent penny-pinching wasnt enough to generate profits at first. You cant republish our material wholesale, or automatically; you need to select stories to be republished individually. There is leakage from the ceiling when it rains you can taste the mold in the air.. How Cigna Saves Millions by Having Its Doctors Reject Claims Without Reading Them, Senate Committee Probes Top Universities, Museums Over Failures to Repatriate Human Remains, If youre republishing online, you must link to the URL of this story on propublica.org, include all of the links from our story, including our newsletter sign up language and link, and use our. What happened in California certainly is concerning, Prospects president, Lew, acknowledged at the hearing. The $12 million was to be paid by Prospect, not the two executives. 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. 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. 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. Established in 1996, Prospect Medical Holdings, Inc., is a national leader in fully integrated healthcare. ), At Crozer-Keystone, as elsewhere, Prospect has aggressively moved to lower costs. You cant state or imply that donations to your organization support ProPublicas work. In April 2008, Alta restated its 2006 revenues, lowering them by about $4 million. The portrait offered by White was affirmed by other executives, including Paul Smith, a former vice president for finance at Alta, who told ProPublica he recalled having to switch vendors sometimes because we would get cut off. Emergency room staff in at least one Alta hospital lacked chemical reagents needed to perform critical enzyme tests on heart attack patients, according to another former Alta executive who sued the company. The sale of the land and buildings brought in much needed cash and stabilized the company. In a press release announcing the deal, Lee said the company will help ensure the long-term success of Nix.. Moodys, the ratings agency, was dismayed by Prospects soaring debt. (CVC declined to comment. You have to send the next closest ambulance. What it will have to offer patients is less clear. During negotiations over the sale, Prospect was repeatedly briefed on actuarial studies showing that even after a $14 million contribution that Prospect agreed to make, the plan would run out of money by 2036, while still owing about $98 million in retirement benefits. He sensed a major opportunity, according to a corporate history his spokesman provided: While the cost of healthcare was growing at three times the rate of the US GDP, hospitals as a group were inefficient in delivering quality care. Lee quit the private equity firm in 2000 and joined Alta full time, becoming its co-president and a 50-50 partner with Topper. It found that Prospect had submitted an estimated $22.6 million in potentially improper charges, which the federal government had already paid. Prospect Medical Holdings, Inc. filed as a Statement & Designation By Foreign Corporation in the State of California on Friday, July Born in South Korea and raised in Tampa, Florida, he was an industrial engineering graduate of Georgia Tech. As they see it, this is merely the latest stage in a slow descent to the bottom. In Culver City, nurses unable to get proper protective gear for a time donned plastic garbage bags. And ProPublica has learned of a multiyear scheme at a key Prospect operation State regulators, who had to approve the sale, had two big concerns. That episode, as well as the death of the ER-overflow patient whose body was found on the beach, resulted in immediate jeopardy findings. That quality component was always lax in my opinion, one said. Those payments raised fears that Prospect wouldnt fulfill its pledge to spend $90 million on capital improvements over four years. ), The situation grew dire. 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.). Prospects own consultant, Alvarez & Marsal, largely confirmed Inter Valleys findings in September 2016 in a confidential draft document reviewed by ProPublica. Nobody has questioned it. Thats when I went back to our CEO and said, Theres a problem here.. We do not generally permit translation of our stories into another language. 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. After decades of profits, Nix began losing money. Three law firms hired by Alta later sued for unpaid bills. 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. 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. The bill comes from state senate president Dominick Ruggerio, a Democrat, who previously wrote a letter urging regulators to subject the Prospect sale to the utmost scrutiny and warning that approval posed a probability of serious harm to the health and welfare of all Rhode Islanders. On Jan. 12, Ruggerio introduced a bill, citing Prospects two Rhode Island hospitals, that would impose a one-year moratorium on all hospital ownership transfers involving a for-profit corporation as acquiree or acquiror. The bill has nine co-sponsors. As Mississippis oyster population continues its freefall, state leaders turn to a model that has helped in Louisiana. We were caught with our pants down. Investors Extracted $400 Million From a Hospital Chain That Sometimes Couldnt Pay for Medical Supplies or Gas for Ambulances Prospect Medical, which mostly serves low-income patients, has suffered a litany of problems: broken elevators, dirty surgical gear, bedbugs and more. On August 10, 2017, Stephan Zouras LLP filed a collective and class action lawsuit against Prospect Medical Holdings, Inc. for violations of the Fair Labor Standards Act and the Pennsylvania Minimum Wage Act. The Private Equity Stakeholder Project, a union-backed research group, has produced detailed reports criticizing Greens history with Prospect. (Prospects spokesman said the matter was referred to the court because efforts to resolve the amount of the payment were unsuccessful. Prospect finally paid, 18 months late, after the arbitrator awarded the foundation $23.7 million, including interest. Please contact. The Rhode Island officials have subjected the transaction to a high level of scrutiny. Leonard Green, a firm known for its investments in marquee consumer brands like Whole Food Markets and Neiman Marcus, joined the rush. Prospect has conducted a public relations counter-offensive. 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 Neronhas approval, announced Tuesday, came at a cost to the company. We cant find anything that will make us feel comfortable theyll be good stewards of these safety-net hospitals in Rhode Island, he said. (The company says it receives 80% of its revenues from Medicare and Medicaid reimbursements.) Nix was an unusual acquisition for Prospect. Long called Brotman Medical Center, it is best known for its burn center, which treated Michael Jackson in 1984 after his hair and jacket caught fire during the filming of a Pepsi commercial. You cant state or imply that donations to your organization support ProPublicas work. It sought, unsuccessfully, to reduce nurses accrued vacation time and to cut pension benefits for all employees who didnt work full time. In addition to more than $2 million a year in salary and bonus, he would get 20.2% of Prospects shares (and dividends). Employees sometimes had to spend their own money to buy toilet paper for patients. 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.. The $12 million is to be paid by the company, not the two executives. The problem was discovered in August 2015 during a routine compliance audit by nurses with Inter Valley Health Plan, a California HMO that sent Medicare Advantage patients to Prospect doctors and, as a result, had shared in the improper windfall (unknowingly, according to Inter Valley). Yet Prospect claimed the role of savior. We reported everything, Inter Valley CEO Mike Nelson said. A similar penury afflicts medical supplies. (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. Roughly $386 million had gone to Leonard Greens investors and the firm (which gets 20% of all fund profits); $128 million to Lee; $94 million to Topper; and the remaining $37 million was divided among other Prospect executives. 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. 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. This time, two patient deaths triggered the jeopardy findings. Six members of the environmental services staff, responsible for cleaning patient floors, also got sick. Correction, Oct. 12, 2020: An earlier version of this article misspelled the name of Doreena Duphily. Just weeks after the deal closed, Prospects audit firm, Ernst & Young, discovered inflated revenues and profits on Altas books. Filed: August 10, 2017 2:17-cv-03599-WB. Before the monitoring period expired, two of Prospects newly acquired Connecticut hospitals were slapped with immediate jeopardy findings. Prospect, Inter Valley and a hospital used by the plans patients had to repay the federal government for the improper income theyd received. In 1998, most private equity firms avoided health care. Circuit Court of Appeals in March 2020. Prospect Medical, which mostly serves low-income patients, has suffered a litany of problems: broken elevators, dirty surgical gear, bedbugs and more. 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. ), Michael Terner worked as an executive vice president at Prospect for five years and departed around the same time as his father. 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. 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. A second executive with an ownership stake took home $94 million. Minority investors in Brotman accused Lee of cooking its books to defraud them. A company consultant in one of its Rhode Island hospitals discovered dirty, corroded and cracked surgical instruments in the operating room. Its such a brutal case of unabashed greed, said Rosemary Batt, a professor at Cornell Universitys School of Industrial and Labor Relations, who has studied private equitys involvement in health care. In its responses for this story, Prospect made an array of unsubstantiated allegations about Alemans workplace conduct during his 12 years at the company. It was mismanaged at the corporate level, Aleman said. Big private equity firms were flooding into the hospital business. Kline assigned Lee, then 32, to oversee the investment. How Cigna Saves Millions by Having Its Doctors Reject Claims Without Reading Them, If youre republishing online, you must link to the URL of this story on propublica.org, include all of the links from our story, including our newsletter sign up language and link, and use our. We have official accounts for ProPublica on. Hed go through three hours of literally just peeling the skin off somebody, Aleman said. Its okay to put our stories on pages with ads, but not ads specifically sold against our stories. For more information about canonical metadata, You cant edit our material, except to reflect relative changes in time, location and editorial style. As far as the unions concerned, theyre not welcome in Rhode Island.. After that is accomplished, firms then usually resell the operation to another buyer within five years. Prospect today is at no risk of financial failure.. At a Prospect hospital in Rhode Island, a locked ward for elderly psychiatric patients had to be evacuated and sanitized after poor infection control spread COVID-19 to 19 of its 21 residents; six of them died. Alvarez & Marsal was also concerned the problem extended far beyond what Inter Valley had discovered: that Prospect had submitted bogus claims for more than 20 other Medicare Advantage plans, including United Healthcare and Blue Shield. 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. If you share republished stories on social media, wed appreciate being tagged in your posts. Say we need 4x4 sponges, dressing for a patient, IV fluids, said Leslie Heygood, a veteran registered nurse at one of Prospects Pennsylvania hospitals, we might not have it on the shelf because its on credit hold because they havent paid their creditors.. After you rattle their chains, they pay part of the bill, get their credit hold lifted, and you can get fuel. (Prospect said the card was rejected because it placed a charge limit on it as a security measure, and when it was brought to our attention that the account was reaching the credit limit frequently, we increased the credit limit to ensure there was not disruption of services.), The systems eight ambulances are so old two have more than 275,000 miles on them that they frequently break down, according to Worrilow. Lee churned through executives and could turn brutal, screaming at subordinates or grilling them over a tiny issue. If you use canonical metadata, please use the ProPublica URL. 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. 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. The pattern would continue at Prospect. Lee would make executives cry, recalled former Alta CFO Lahidjani, who counted himself in that category. Volume and physicians, the company said, never returned to pre-flood levels.. A Prospect lawyer also wrote Aleman, accusing him of making false and defamatory statements to ProPublica. The settlement agreement explicitly requires the receiver to notify state regulators that his objections to the sale are withdrawn. Theres plenty of times when we went to go on an emergency call and the ambulance wouldnt start, he said. The retirement plan for Our Lady of Fatima, which 2,700 past and current hospital employees were counting on, had been woefully underfunded since 2008. The founder of Kline Hawkes was an investor named Frank Kline, who told ProPublica that no person named Hawkes was ever involved with the firm. That fund has doubled in value overall, according to data on its investors websites. 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. Leonard Green and Prospect responded to ProPublicas questions in written statements through Sitrick and Company, a crisis PR firm jointly retained on their behalf. 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. The ultimate total cost to Prospect from the improper billing episode, including expected income the company lost as a result, was in the tens of millions, Aleman estimated. The officials have postponed their decision until November, saying there are missing documents and unanswered questions. The business model for private equity firms like Leonard Green involves stripping cash out of the organization, loading down operations with debt and reducing every conceivable expense. Noted the resulting complaint to the California health department: There are mushrooms growing out of the wall (which they cut off and patched back up). Aleman confirmed to ProPublica the accuracy of his comments in this article. Any website our stories appear on must include a prominent and effective way to contact you. ), But once again, the sale collapsed. 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. Billionaire Harlan Crow Bought Property From Clarence Thomas. Employees told ProPublica the problem has persisted for years and provided photographs and videos documenting numerous leaks as well as the mold growth. 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. That in turn led Prospect to retract its threat of legal action and say, in effect, never mind. All of a sudden COVID comes in, everybody should have surgical masks, and we dont have two days worth of surgical masks, much less two months of surgical masks. Prospect asserts that it promptly addressed the consultants concerns about dirty and damaged surgical instruments, but that it viewed the report as proprietary and thus availed itself of the court system. The company added: As we recently received a ruling from the Federal Court to produce the document, we have complied with the order., Prospect has yet to hand over any documents, according to the union. Lee convinced a Moss Adams senior partner to overrule him something that had never happened, Bogert said, during more than 300 previous hospital audits. 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. (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. 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. Theyre just doing this immoral sucking out of resources. As Mississippis oyster population continues its freefall, state leaders turn to a model that has helped in Louisiana. But a Jan. 29 deadline for the state to approve the deal has been extended indefinitely and other obstacles remain. It warns: RHODE ISLANDERS BEWARE! (A Prospect spokesman disputed the claim, insisting that the company had ample liquidity. The companys 2020 financial results have not been made public yet.). The biggest corporations still own more hospitals than private equity firms: HCA, for example, owns about 180; Apollo claims 89 and Cerberus had 37 at its peak, before selling this year. As of December 31, 2021, Prospect was MPT's third largest tenant, representing 7.3% of its total assets. The issue, described in internal documents obtained by ProPublica and interviews, involved unsupported reimbursement codes submitted by Prospects physician-management business, whose dramatically increased profits the company had promoted to potential buyers. Now Theyre Back. But Leonard Green viewed Prospects approach as one that could be applied widely and used to acquire more hospitals and reap more profit. The company has little cash, weighty pension debts and lease commitments, and uncertain future earnings. 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. He would just not pay people as a way to negotiate. The lawsuit on behalf of Medical Properties Trust investors has been commenced in the United States District Court for the Southern District of New York. 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. Kline Hawkes, the young Los Angeles firm where Lee worked, had made only one previous health care investment, in a medical instruments company. 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.
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