Months later, Prospect acknowledged the problem was far more widespread. The receiver demanded that Prospect help make the fund whole. Prospect Medical Holdings, Inc. ("Prospect") leases and operates 13 of MPT's facilities. Born in South Korea and raised in Tampa, Florida, he was an industrial engineering graduate of Georgia Tech. After decades of profits, Nix began losing money. We reported everything, Inter Valley CEO Mike Nelson said. Eager to save jobs, Fatimas powerful United Nurses & Allied Professionals union endorsed Prospects bid. It began preparing to issue a $600 million dividend. Prospect executives tap danced, alternately denying problems and explaining away the repeated findings of imminent threat. They were very, very dirt cheap in every respect., Things began looking up for the business. The Baumers live about 30 minutes from the firms Santa Monica offices in a large oceanfront property on Manhattan Beach, purchased, through a corporate entity he set up, for $18.4 million. 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. 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. Christina DeMauro, an emergency room nurse at Culver City for six years, asserted that a special team of hospital marketers generated a stream of about 20 elderly patients a day, most suffering from chronic dementia, who were admitted through the ER despite having no problems that required hospitalization. You cant sell our material separately or syndicate it. Prospect today is at no risk of financial failure.. But a new problem had emerged behind the scenes during this period: improper Medicare billing. It has lobbied public-pension investors and members of Congress to press the firm to return its dividends to the company, saying its profiteering has put Prospects safety-net hospitals at risk. According to state health department inspectors, video monitors at a nurses station for maintaining watch over suicidal patients were turned off or ignored; an activity room was left unattended as psychiatric patients milled about; patients were placed in restraints or in seclusion without proper documentation; and facilities in the locked unit treating elderly psychiatric patients, some of them suicidal, presented multiple hanging hazards. 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. Over the three years that followed, neither Prospect nor anyone else paid a penny into the pension plan. The effects were felt almost immediately. WebLeonard Green & Partners, through its fund Green Equity Investors V, acquired Southern California-based Prospect Medical Holdings in December 2010 in a $363 million leveraged buyout, including the assumption of $158 million in debt.6 Leonard Green owns a 61.3% stake in Prospect. Three law firms hired by Alta later sued for unpaid bills. 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. (The statement from Green and Lee denies they tried to sell the company in 2018. Billionaire Harlan Crow Bought Property From Clarence Thomas. WebProspect Medical Holdings Inc - Company Profile and News - Bloomberg Markets Bloomberg TV+ Bloomberg Daybreak Middle East Bloomberg Daybreak Middle East. As it turns out, Prospect hasnt earned stellar grades in Connecticut either. In response, Rhode Island terminated the accounting firms contract to avoid any perception of impropriety, motivation, and influence. The state informed Prospect that the termination would delay the review process as Rhode Island needed to hire a new accounting firm. Call us today @ 800-708-3230. Proposed legislation in Rhode Island threatens to further stall the deal. Los Angeles-based Prospect Medical Holdings has inked deals to sell its seven hospitals in Connecticut and Pennsylvania. After digesting the acquisitions in the pipeline, the company projected, revenues and profits would surely soar. Kline was skeptical. Our comprehensive networks aim to provide coordinated, Almost as quickly as it rose, private equity firms ardor for hospitals has substantially cooled in the past few years, said Lisa Phillips, editor of HealthCareMandA.com, which tracks private equity health care deals. 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. As a result, Prospect reduced the dividend to $457 million. Its always the bottom line. In public testimony a few years ago, Prospect executives acknowledged the point. 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. The Justice Didnt Disclose the Deal. Nix included a 208-bed downtown hospital, an inpatient psychiatric center and multiple outpatient clinics. The company has also waged a four-year battle to halve the tax assessments on all its hospital properties. As far as the unions concerned, theyre not welcome in Rhode Island.. Creative Commons License (CC BY-NC-ND 3.0). On May 1, department supervisor Jerald Ferreira, 63, died of COVID-19. This one stemmed from patient-safety violations in a mental health ward at 300-bed Crozer-Chester Medical Center, the systems largest hospital. 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). In Culver City, nurses unable to get proper protective gear for a time donned plastic garbage bags. In September 2019, Californias attorney general formally charged Prospect executives, including Lee, the hospital and its supervising pharmacists, with gross negligence, initiating proceedings to revoke or suspend the hospitals pharmacy permit. 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. The $12 million is to be paid by the company, not the two executives. 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. Leonard Green struck a deal that aligned Lees financial interests with its own. He hasnt been quoted in the press in more than 20 years. Nix was an unusual acquisition for Prospect. (CVC declined to comment. Now Theyre Back. It had effectively replaced its debt payments with rent payments. Rhode Island approved the purchase in 2014. 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. The Private Equity Stakeholder Project, a union-backed research group, has produced detailed reports criticizing Greens history with Prospect. Prospect settled in 2017, agreeing to pay $275,000 while asserting that the claims were wholly without merit.. Given Sam Lees prowess at squeezing cash out of ailing institutions, Prospect undoubtedly will find profits left to extract. 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. Prospect Medical Holdings, a for-profit company based in California, has had a majority stake in the two hospitals since 2014. 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. And so, were not bringing Californias quality program to Connecticut, he said. Text Size. We have official accounts for ProPublica on. Citing Leonard Greens history with the hospital company, the Rhode Island state treasurer has said he will block any future investments by his state, which sunk $20 million into the fund that owns Prospect, in the private equity firms funds. (The company says it receives 80% of its revenues from Medicare and Medicaid reimbursements.) Duphily blames the hospitals frequent rotation of its limited staff to different floors for spreading infection. 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. The receiver then sued the company, asserting that Prospect had misled the public and 2,700 current and past hospital employees about the pension funds financial health. 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. Sign up to receive our biggest stories as soon as theyre published. 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. Get our investigations delivered to your inbox with the Big Story newsletter. 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. In 2012, Prospect paid $48 million for San Antonios Nix Health System. Other Prospect critics remain undeterred. 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. In one case, staff returned a belt to an actively suicidal psychiatric patient who then used it to hang himself in his hospital bathroom. (To inquire about syndication or licensing opportunities, contact. Instead, retirees nervous about Prospects purchase were shown a PowerPoint presentation stating that Prospects one-time contribution would stabilize plan assets. Lee attested in writing that the payment would assure that the pensions and retirement of many former employees, who reside in the community, are protected. Prospect told the attorney general that any necessary future payments would be made based on recommended annual contribution amounts as provided by the Plans actuarial advisors. Remarkably, no one addressed who would actually make such payments. It is leaving a mess behind at Prospect. Prospect has conducted a public relations counter-offensive. WebWe are hospitals and affiliated medical groups working for the benefit of every person who comes to us for care. Its okay to put our stories on pages with ads, but not ads specifically sold against our stories. 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. Prospects business, which involved spending as little as possible and squeezing profits out of Medicare and Medicaid reimbursements, while using Prospects physician groups to generate patients, didnt fit the pattern. The rosy numbers helped attract a buyer for Alta in 2007: Prospect Medical Holdings, a small, publicly traded company that managed 10 physician groups. 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?. Inter Valley promptly notified Prospect, which expressed skepticism that anything was wrong, according to Inter Valley chief operating officer Susan Tenorio. Medical Properties Trust, Inc. ( NYSE: MPW) has reported that alleged short seller Viceroy Research LLC, being sued by MPW for defamation and other claims, The Rhode Island officials have subjected the transaction to a high level of scrutiny. Leonard Greens sale to Lee and Topper requires approval from state officials in Rhode Island, since it involves hospitals there. 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.. (Prospect told the SEC the companys investigation had found no intentional wrongdoing. Lee, in his statement to ProPublica, dismissed the significance of the Alta restatement and said the bigger problem at the time was that Prospect was in far worse shape than hed been led to believe. That success didnt last long. We do not generally permit translation of our stories into another language. Lee convinced a Moss Adams senior partner to overrule him something that had never happened, Bogert said, during more than 300 previous hospital audits. 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. 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. Prospect has defended its quality of care and denied any improprieties. 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. 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. The companys 92-page confidential information memorandum, prepared for prospective acquirers and obtained by ProPublica, promoted the companys cost-effective care model, including daily flex management of hospital staffing, use of low-cost sources for medical supplies and a focus on high-profit programs for treating the seriously mentally ill. Bain Capital and CVC Capital Partners were the two final bidders. One day youre like a superstar and the future of the company, said Steve Aleman, who became Prospects CFO in 2013. But Brotman has continued to deteriorate. (To inquire about syndication or licensing opportunities, contact. 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. Senate Committee Probes Top Universities, Museums Over Failures to Repatriate Human Remains. Lee became super-involved in overseeing Alta even as Kline Hawkes quickly found an exit, according to Kline. 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. 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. As Prospect and Lee put it in their statement for this article, In effect, the companys money is their money., To Lees management team, who dreamed of stock option riches, it was an outrage. 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. Those shares were enough to give Lee and Topper control of Prospect. Aleman confirmed to ProPublica the accuracy of his comments in this article. Please contact. (Through its spokesman, Leonard Green said this figure was wrong and that the firm would not respond to inaccurate guesses.). (The firms have lately turned their sights to outpatient clinics or staffing emergency rooms.) The concerns are dire enough that on 14 occasions since 2010, Prospect facilities have been deemed by government inspectors to pose immediate jeopardy to their patients, a situation the U.S. Department of Health and Human Services defines as having caused, or is likely to cause, serious injury, harm, impairment or death.. The lawsuit was filed in the United States District Court for the Northern District of Alabama and alleges violations of the Securities Exchange Act of 1934. When GOP Attorneys General Embraced Jan. 6, Corporate Funders Fled. The ProPublica report details how the transaction would hobble Or you get to the scene and the ambulance wont run.. Youll find, Terner said, if you go through the history of Sam Lee, theres a lot of corpses.. In 2018, less than four years after assuring a state attorney general that it had no plans to seek new dividends, Prospect attempted to do just that. We were caught with our pants down. COVID-19 caught many of Americas top medical centers by surprise. Lee churned through executives and could turn brutal, screaming at subordinates or grilling them over a tiny issue. 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. Some of Altas hospitals, according to company filings with the California health department, were averaging 30% occupancy. In 2012, Prospect paid Leonard Green and its investors a total of $188 million in two rounds of dividends. Were in this for the long term, OK?. 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. Eager to raise capital, Prospect sold its land and buildings last fall in a sale-leaseback transaction that allowed the operations to remain in the facilities. Get our investigations delivered to your inbox with the Big Story newsletter. Because the improper claims were eventually self-reported, the government has taken no action against Prospect. Prospect has a long history of breaking its word: It has closed hospitals it promised to preserve, failed to keep contractual commitments to invest millions in its facilities and paid its owners nine-figure dividends after saying it wouldnt. When Prospect then missed the escrow deadline, the foundation began garnishing the companys accounts and sought to have a receiver appointed over all its financial transactions. 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. Prospect officials never disclosed the plans dire straits during the state approval process. Yet Prospect claimed the role of savior. This January, a giant brown mold formation burst through the wall near a fourth-floor nurses station. After hearing about a consultants 2017 report describing dirty and damaged operating room instruments, the union at Fatima requested documents about this and other problems revealed by various inspections. He says his dad covered for Lee after the merger by soft-pedaling Altas accounting problems only to have Lee turn on him. (CMS did not respond to requests for comment.). The merger nearly wrecked Prospect. In 2019, after repeatedly promising to keep at least part of the system open, Prospect shut it all, laying off nearly 1,000 employees. We 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. The size of the problem was a secret. Their moves intensified a shift to for-profit ownership among the nations 5,200 general hospitals: from about 15% for-profit in 2000 to 25% for-profit in 2018, the most recent year for which data is available. Employees sometimes had to spend their own money to buy toilet paper for patients. Then 49, Topper started Alta after recovering from a fire at his home that left him on a respirator, with third-degree burns over 70% of his body. As criticism of Prospect grew during 2020, Rhode Island officials first delayed their decision on the sale to November, citing missing documents and unanswered questions, then extended it again to the end of January 2021. On this news, MPT's stock price allegedly fell $0.80, or 8.7%, to close at $11.14 per share on February 23, 2023. That quality component was always lax in my opinion, one said. The transaction breezed past regulators in four states where Prospect owns a total of 15 hospitals. CASE DETAILS: The filed complaint alleges that defendants made false statements and/or concealed that: (1) Prospect Medical Holdings, Inc. ("Prospect"), Kline Hawkes, the young Los Angeles firm where Lee worked, had made only one previous health care investment, in a medical instruments company. Theyre just doing this immoral sucking out of resources. As a result, Prospect was unable to complete its Securities and Exchange Commission filings, forced to cancel its annual shareholder meeting, delisted from the American Stock Exchange and defaulted on its loans, triggering millions in lender penalties. There is leakage from the ceiling when it rains you can taste the mold in the air.. 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. Theres plenty of times when we went to go on an emergency call and the ambulance wouldnt start, he said. You cant sell our material separately or syndicate it. (Moss Adams declined to comment.). "Prospect Medical Holdings has notified the Department of Attorney General and the Department of Health this morning At the companys flagship Los Angeles hospital, persistent elevator breakdowns sometimes require emergency room nurses to wheel patients on gurneys across a public street as a security guard attempts to halt traffic. Billionaire Harlan Crow Bought Property From Clarence Thomas. It said it is working with state and local officials to expedite the broken elevators replacement. Lee was whip smart, could be charming when he wanted to and preferred to operate behind the scenes. Prospect raised the money by issuing junk bonds. The pattern would continue at Prospect. WebProspect Medical Holdings, Inc. Overview. These arent mere anecdotes or anomalies. Another of the Medicare Advantage plans that received payments because of Prospects improper claims, CalOptima, said in a statement that Prospect first informed it in March 2016 of an inadvertent and isolated billing error from a single month in 2015. (Near the end of the reporting for this article, Prospects CEO, Lee, spoke to ProPublica on the condition that he not be quoted.) Kline picked a British-sounding name to add a dash of gravitas. It went from making about $20 million to losing money. Were talking here about safety-net hospitals that are serving the poor, the unemployed, disproportionately people of color. ), But once again, the sale collapsed. You cant state or imply that donations to your organization support ProPublicas work. These problems surfaced over the past decade, after the private equity firm purchased the company in 2010. The Justice Didnt Disclose the Deal. Their model was really about just bare minimum, said Mike Heather, who later helped Prospect acquire Alta and served as Prospects CFO from 2004 through 2013. 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. Prospect used much of the cash to pay off its loans. 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. In November 2018 came yet another immediate jeopardy finding. Theyve squeezed it as dry as they can., Those actions have made it hard for the firms to sell hospitals, according to Eileen Appelbaum, senior economist at the Center for Economic and Policy Research, who studies private equity. The private equity board members focused on profits and wasted little time in beginning to reap returns. Moodys, the ratings agency, was dismayed by Prospects soaring debt. After the retirement plan settlement was announced, the company took out a large ad in The Providence Journal, stating that by making the $27 million payment, it was helping our retirees and employees, and doing so because we are fully committed to Rhode Island. A second ad solicited support for the companys sale: Today, Prospect seeks state approval to allow its founders to buy out the outside investors in Prospect. 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. Peter Elkind is a reporter covering government and business. The industry was complicated and highly regulated, both anathema to private equity. Its okay to put our stories on pages with ads, but not ads specifically sold against our stories. After his death, the hospital failed to notify police. 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. Six members of the environmental services staff, responsible for cleaning patient floors, also got sick.
