Private equity companies are facing scrutiny for the collapse of two major hospital chains that left thousands without medical care.
Prospect Medical Holdings filed for bankruptcy in January, forcing the closure of two hospitals in Pennsylvania.
Another major chain, Steward Health Care, filed for bankruptcy in 2024.
Both companies were owned by large private equity vehicles — Leonard Green & Partners and Cerberus Capital Management, respectively — which extracted millions for their investors between 2011 and 2018.
Probes into the chains’ operations found the practice depleted their finances so badly it contributed to their collapse, The Wall Street Journal reported.
Communities affected by both Prospect and Steward’s collapses have been forced to pay tens of millions of dollars to bail out their healthcare providers.
The funds have had to come from state and local government as well as non-profit community groups.
Both Steward and Prospect have unpaid property taxes and other unmet bills, forcing some communities to hike property taxes, according to the Journal.
Steward’s ‘greedy’ former CEO Ralph de la Torre is being sued by his former company
As well as the financial hit, communities across the US have been left without critical healthcare services due to the collapse of the chains.
Prospect operated 16 hospitals and more than 165 clinics across California, Connecticut, Pennsylvania and Rhode Island.
Once an aggressive acquirer of struggling hospitals, it collapsed under mounting debt earlier this year.
As part of its bankruptcy proceedings Steward closed two hospitals in Massachusetts — Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer — and sold off a further six.
Steward is now suing its former CEO Ralph de la Torre, claiming he pilfered millions from the hospital chain as it went bankrupt.
Filings previously revealed by The Wall Street Journal showed that after de la Torre took over majority ownership of Steward in 2020, he received personal payments of at least $250 million over the next four years.
He went on to use the money to purchase a $7.2 million 500-acre ranch in Waxahachie, Texas, and a 190-foot, $40 million yacht.
He was also revealed to own a 11,108-square-foot mansion in Dallas, valued at more than $7 million.
Protests took place against Steward’s former CEO Ralph de la Torre and hospital closures in Massachusetts last summer
Ralph de la Torre’s 190-foot $40 million yacht. The former cardiac doctor is said to have received vast sums of money for his role as CEO of Steward
Prospect Medical Holdings filed for bankruptcy in January (Pictured: CEO Von Crockett)
Taylor Hospital in Pennsylvania closed as Prospect filed for bankruptcy in January
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How a healthcare CEO made $250M and flashed his lifestyle while his hospital chain collapsed
Steward is now alleging that de la Torre and his team of executives defrauded the company of $262 million and wasted a further $1.1 billion on buying up overpriced hospitals in Florida.
The complaint filed last month claims that the catastrophic investments were made to fulfil de la Torre’s ‘personal desire to build a hospital empire,’ a reckless move that involved overpaying about $200 million for the properties.
The most recent filings also claim that de la Torre and other executives paid themselves a $111 million dividend in 2021, despite knowing that Steward was in trouble as early as 2016.
Prospect meanwhile paid out $654 million in dividends and share sales between 2012 and 2018.
This directly led to the company running out of cash, a report by a bipartisan congressional committee found.
After Prospect-owned hospitals Crozer-Chester Medical Center and Taylor Hospital were closed earlier this year, residents have been forced to lean on 911 services for non-emergency care, the Journal reported.
‘A lot of people are calling emergency medical services for things for which you’d go to your family physicians,’ Shane Wheeler, chief of staff for the Volunteer Medical Services Corps of Lansdale, told the publication.
‘We’re seeing a high level of uncompensated care.’
Others are seeing more than one-year wait times for doctor’s appointments.
The Daily Mail reached out to Prospect Medical Holdings, Steward Health Care, Leonard Green & Partners and Cerberus Capital Management for comment.