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Investors Extracted $400 Million From a Hospital Chain That Sometimes Couldn’t Pay for Medical Supplies or Gas for Ambulances

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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.

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. Prospect CEO Sam Lee, who owns about 20% of the chain, made $128 million while expanding the company from five hospitals in California to 17 across the country. A second executive with an ownership stake took home $94 million.

The deal hasn’t worked out quite as well for Prospect’s patients, many of whom have low incomes. (The company says it receives 80% of its revenues from Medicare and Medicaid reimbursements.) At the company’s 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. Paramedics for Prospect’s hospital near Philadelphia told ProPublica that they’ve repeatedly gone to fuel up their ambulances only to come away empty at the pump: Their hospital-supplied gas cards were rejected because Prospect hadn’t paid its bill. A similar penury afflicts medical supplies. “Say we need 4×4 sponges, dressing for a patient, IV fluids,” said Leslie Heygood, a veteran registered nurse at one of Prospect’s Pennsylvania hospitals, “we might not have it on the shelf because it’s on ‘credit hold’ because they haven’t paid their creditors.”

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In March, Prospect’s New Jersey hospital made national headlines as the chief workplace of the first U.S. emergency room doctor to die of COVID-19. Before his death, the physician told a friend he’d become sick after being forced to reuse a single mask for four days. 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. The virus sickened a half-dozen members of the hospital’s housekeeping staff, which had been given limited personal protective equipment. The head of the department died.

The litany goes on. Various Prospect facilities in California have had bedbugs in patient rooms, rampant water leaks from the ceilings and what one hospital manager acknowledged to a state inspector “looks like feces” on the wall. A company consultant in one of its Rhode Island hospitals discovered dirty, corroded and cracked surgical instruments in the operating room.

These aren’t mere anecdotes or anomalies. All but one of Prospect’s hospitals rank below average in the federal government’s annual quality-of-care assessments, with just one or two stars out of five, placing them in