RAIDING THE SAFETY NET

The Private Equity Stakeholder Project alleges that Leonard Green & Partners extracted $570 million to $658 million in fees and dividends from Prospect Medical Holdings while the hospital chain suffered from declining financial performance, poor quality ratings, and underfunded pensions. The document details systemic failures across hospitals in Texas, Connecticut, New Jersey, Pennsylvania, and Rhode Island, including the total closure of the Nix Health System in Texas and lawsuits from pensioners in Rhode Island. It highlights a $457 million dividend paid in 2018 that contradicted assurances given to Rhode Island regulators. The author contends that Leonard Green is attempting to exit its majority stake for a fraction of its acquisition cost, leaving behind a legacy of financial and operational distress in safety net hospitals.

• Since acquiring Prospect Medical Holdings in 2010, Leonard Green & Partners and other owners extracted between $570.44 million and $658 million in fees and dividends, despite the company facing significant operating challenges and regulatory scrutiny.
• Prospect Medical Holdings' financial performance declined sharply between 2015 and 2018, with EBITDA falling from $142 million to $17 million and the EBITDA margin dropping from 10.8% to 0.6%.
• A $457 million dividend paid to owners in 2018 violated previous assurances made to the Rhode Island Office of the Attorney General and the State Department of Health that no additional dividend distributions were planned.
• Prospect's hospitals have suffered from poor quality of care, with almost all receiving one or two-star ratings from the Centers for Medicare and Medicaid Services (CMS), and some facilities in Connecticut being placed under review for conditions placing patients in "immediate jeopardy."
• The company faced severe pension crises, including $260 million in unfunded retirement benefit obligations as of September 2018 and a class action lawsuit from pensioners in Rhode Island alleging the company hid the plan's poor health.
• In Texas, Prospect permanently closed all Nix Health facilities by January 4, 2020, resulting in 972 layoffs and the sale of its downtown San Antonio building to a hotel developer.
• Leonard Green & Partners is selling its majority stake in Prospect to the company's management for $10 million to $12 million, which is a small fraction of the approximately $885 million spent to acquire Prospect and its systems in Connecticut, Pennsylvania, and Rhode Island.

APA

O’Grady, E. (2020). RAIDING THE SAFETY NET. Private Equity Stakeholder Project. https://pestakeholder.org/wp-content/uploads/2020/06/PMH-RI-transaction-letter-5-26-2020.pdf

Chicago

O’Grady, Eileen. RAIDING THE SAFETY NET. Private Equity Stakeholder Project, 2020. https://pestakeholder.org/wp-content/uploads/2020/06/PMH-RI-transaction-letter-5-26-2020.pdf.

Wikipedia

{{cite press release |last1=O’Grady |first1=Eileen |title=RAIDING THE SAFETY NET |publisher=Private Equity Stakeholder Project |date=26 May 2020 |url=https://pestakeholder.org/wp-content/uploads/2020/06/PMH-RI-transaction-letter-5-26-2020.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{ogrady2020raiding, author = {O’Grady, Eileen}, title = {{RAIDING THE SAFETY NET}}, publisher = {Private Equity Stakeholder Project}, year = {2020}, month = may, url = {https://pestakeholder.org/wp-content/uploads/2020/06/PMH-RI-transaction-letter-5-26-2020.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }