Investors extracting assets from hospitals

October 1, 2020

Topics: Quote of the Day

Prospect Medical, which mostly serves low-income patients, has suffered a litany of problems: broken elevators, dirty surgical gear, bedbugs and more. Its owners, including Leonard Green & Partners and Prospect’s CEO, have cashed in.

By Peter Elkind with Doris Burke
ProPublica, September 30, 2020

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.”

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.

https://www.propublica.org…

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Comment:

By Don McCanne, M.D. 

Above is the opening of a long investigative report by ProPublica. If it were fiction, it might be an interesting read, but for those of us concerned about the abuses of the medical-industrial complex, it is a very painful read indeed.

Most operating revenues here come from public funds – Medicare and Medicaid – while debt is used to build cash reserves. Massive dividends are going to private equity investors while patients are being shortchanged on their care.

Should we continue to grant the private sector enormous control over our health care dollars, or is it time to insist on public administration of our funds – 60 percent of which we already pay through the tax system and most of the rest through channels such as private insurance, forgone wage increases and out-of-pocket expenses?

We need single payer, improved Medicare for All, but that would be only the beginning. Today’s report cries out for a massive increase in regulatory oversight. It’s time to exercise people power.

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