By Dorothy Ma | Bloomberg
Prospect Medical Holdings, once an active buyer of cash-strapped hospitals, filed for bankruptcy after struggling with debt piles and soaring costs.
The company listed $1 billion to $10 billion in assets and liabilities each, along with more than 100,000 creditors, in a bankruptcy petition filed in Texas on Saturday.
Prospect Medical, which provides services in places including Southern California, Connecticut and New Jersey, has about 12,600 employees, according to a court document. A majority of these employees are physicians, nurses and other health-care professionals.
In Southern California, the company owns Bellflower Behavioral Health Hospital, Foothill Regional Medical Center, Los Angeles Community Hospital, Norwalk Community Hospital, Southern California Hospital at Culver City, Southern California Hospital at Hollywood and Van Nuys Behavioral Health Hospital.
The firm is the latest hospital operator to stumble after a May bankruptcy filing by Steward Health Care System, which provides services in Massachusetts. The failure prompted debate about the regulation of private equity-owned hospitals, whose failure could post a serious threat to local communities.
There had been signs of distress at Prospect Medical since last year, when hospital landlord Medical Properties Trust Inc. sought to take control of some of the firm’s health care entities while accusing it of defaulting on debt.
Medical Properties said Sunday its priority will be to protect its investment in Prospect’s California hospitals. The landlord also expects to support Prospect’s efforts to complete a sale of its Connecticut facilities, according to a statement.
William Tong, attorney general of Connecticut, said in a statement that he’s “disappointed” with Prospect Medical’s decision to file for bankruptcy and that his office is watching the matter closely.
Hospital sales
Prospect Medical said it will prioritize focusing on operating community hospitals in California, in a Saturday statement. The plan includes sale of two medical centers in Rhode Island to Centurion Foundation, it said.
It’s also engaging with key stakeholders to finalize necessary funding for the Chapter 11 bankruptcy process.
The bankrupt firm listed nearly $230 million in workforce obligations, including employee compensation and benefits, a court document showed. It’s asking for court’s approval to pay for those obligations.
The company has appointed Sidley Austin LLP as general bankruptcy attorney, Alvarez & Marsal as financial adviser, and Houlihan Lokey Inc. as investment banker, according to the court document.
The case is Prospect Medical Holdings, Inc., 25-80002, in the U.S. Bankruptcy Court Northern District of Texas.