Los Angeles-based Prospect Medical Holdings has filed for Chapter 11 protection as it works to sell 10 of its 16 hospitals.
Prospect said it initiated voluntary Chapter 11 proceedings to facilitate the timely completion of its planned hospital transactions, according to a Jan. 11 news release. All facilities will remain open and patient care will be uninterrupted throughout the Chapter 11 process. Prospect said it will prioritize operating community hospitals in California and is realigning its focus outside of the state.
The for-profit system operates seven hospitals in California, four in Pennsylvania, three in Connecticut and two in Rhode Island.
"Today’s actions represent an important step forward in our longstanding commitment to best serve the interests of our patients, physicians, employees, and communities," Prospect CEO Von Crockett said in the release. "Divesting our operations outside of California will ensure that they receive necessary financial support so that the communities that rely on those facilities will maintain continued access to highly coordinated, personalized, and critical healthcare services long into the future."
Prospect is also pursuing an agreement to sell two Rhode Island hospitals — Our Lady of Fatima Hospital in North Providence and Roger Williams Medical Center in Providence — to Atlanta-based Centurion Foundation. "We continue to work closely with all parties to advance the sale closure in the very near future," Centurion Foundation said in a Jan. 10 statement shared with Becker's.
In Pennsylvania, Prospect is working with state officials to finalize terms for the sale of Crozer-Chester Medical Center in Upland, Pa., according to the release. In August, Prospect and CHA Partners signed a letter of intent for CHA to acquire the four-hospital Crozer Health system.
In Connecticut, Yale New Haven (Conn.) Health had planned to buy Prospect's three hospitals for $435 million but filed a lawsuit in May seeking to exit the deal, citing facility mismanagement.
Prospect's PHP Holdings and its subsidiaries — Prospect Health Plan, Prospect Medical Systems and Foothill Regional Medical Center in Tustin, Calif. — are not part of the Chapter 11 proceedings. These entities are expected to be sold to Alhambra, Calif.-based Astrana Health in mid-2025.
Prospect expects to receive bankruptcy court approval for motions supporting continued operations, including uninterrupted payment of employee wages and benefits. The system also plans to pay vendors in full under normal terms after the filing date.
Law firm Sidley Austin is serving as legal counsel, and management consulting firm Alvarez & Marsal is advising on financial matters, the release added.