New Documentary by PBS FRONTLINE and NPR: Leonard Green & Partners’ Looting of Safety Net Hospital Chain Prospect Medical Holdings
June 3, 2021
“The Healthcare Divide,” a new documentary by FRONTLINE and NPR, shines a light on the disparities faced by patients in safety net hospitals, highlighting hospital chain Prospect Medical Holdings and its private equity owner Leonard Green & Partners.
Safety net hospitals are hospitals that serve people without insurance, providing critical health care services to low-income and poor communities. Leonard Green-owned Prospect Medical Holdings, which operates 17 hospitals in 5 states, is emblematic of the risks of private equity ownership of safety net hospitals. The documentary features health care workers at Prospect hospitals describing how conditions at the hospitals worsened after Leonard Green and Prospect took over.
Cynthia Fenchel, a Medical Secretary at Prospect’s Our Lady of Fatima hospital in Rhode Island, said that after Prospect took over “we started seeing layoffs. Not only management, but the workers. They started laying off, cutting hours.”
Fenchel’s coworker Lynn Blais, a nurse at Our Lady of Fatima, described how for the first time in her 30 years at the hospital she was unable to access supplies: “We were always used to being able to just walking into the supply closet, reaching for what you need and knowing it’s there. And we find now that doesn’t happen. You call down to the supply room and say, ‘We need more saline.’ ‘Oh, we’re out of stock. It’s on back order.’”
Workers at Prospect’s Waterbury Hospital in Connecticut shared similar stories. Surgical assistant Romona Barnes said, “They were looking at giving us paper towels to wash patients. Not washcloths, paper…I said, ‘How do you charge a patient all this type of money and you give them a paper towel to wash themselves for the day? This is unacceptable.’”
Marylin Anthony, a nurse at Waterbury Hospital, raised concern about the impact of understaffing on patient care: “I got an email the other day that told us to stop talking in the hallways about being short-staffed because we don’t want the patients to think that their care is going to be compromised. Their care is compromised.”
The role of private equity features heavily in “The Healthcare Divide.” Paul Keckley, Managing Editor of the Keckley Report, described the private equity model in hospitals: “Private equity’s business model is perfect for hospitals. Private equity wants to buy an asset that’s undervalued, reduce its operating cost, borrow a lot of money, which ends up as debt on the balance sheet, and then sell the hospital to somebody else in five to seven years, having made a 20% compound annual rate of return on their money. Buy it, lean it, leverage it, sell it.”
Over the course of its ownership of Prospect, the Leonard Green-led investor group appears to have closely followed the playbook described by Keckley. The owners have collected approximately $658 million in fees and debt-funded dividends from the hospital company despite widespread quality concerns and operating challenges.
See our June 2020 report: UPDATE: Leonard Green-led ownership collected $658 million from safety-net hospital company despite challenges, commitment to regulators to forgo dividends
The dividends Leonard Green and the minority owners took from Prospect are central in FRONTLINE’s coverage. As FRONTLINE reports, in 2018 “Prospect borrowed over a billion dollars and paid out $457 million of it to its investors.”
“This is boundless greed,” Chris Callacci, a representative for the Rhode Island nurses’ union UNAP said of the dividends. “They go to struggling communities that need these safety-net hospitals to provide care….they’re going in there and they’re taking advantage of these communities and these people to buy these assets, borrow against the assets to then free up capital to make these grotesque dividend payments.”
