Healthcare Justice

NVP’s healthcare justice work has focused on the impact to Naugatuck Valley communities by the sale of Waterbury Hospital in 2016 to the for-profit company Prospect Medical Holdings (PMH) and its parent organization, Leonard Green & Partners (LG&P), a $5.2 billion private equity fund based in Los Angeles.

 

Unfortunately, for-profit hospitals in Connecticut are not subject to many of the same regulations with which non-profit hospitals must comply.  The Connecticut Office of Health Care Access did pro-actively establish 21 conditions that PMH had to meet for 3 years when it approved the sale of Waterbury Hospital to Prospect Medical Holdings in 2016. 

The need for increased pastoral care staffing at the hospital, an improved patient discharge process, and a decrease in the number of re-admissions overall, but particularly in the Valley’s neighborhoods (zip codes) of color, were the three biggest concerns lifted up by NVP members during house meetings in 2018.  NVP’s Hospital Committee heard the concerns, researched how other hospitals handled the issues, then coordinated months of action designed to persuade PMH administrators to change their ways.

 

By the summer of 2019, in response to NVP prodding, PMH had more than doubled the amount of pastoral staffing at the hospital, had added an African-American representative to their Local Advisory Board, had improved the discharge process on paper and in person, and had created three new full-time discharge nurse positions in order to improve patient home-from-the-hospital recovery and decrease Waterbury Hospital's rate of re-admissions.  

Despite the positive changes happening in response to NVP action, many lapses in proper hospital practices and procedures were coming to the forefront in news reports and inspection records from monitoring agencies during the spring of 2019, including:

 

• A suicide in March 2019 clouded by questionable circumstances;

• A downgrade in the hospital’s credit rating by Moody’s Investor Service in March 2019, due to “…very high financial leverage, shareholder-friendly financial policies, and a history of failing to meet projections";

• A Joint Commission on Hospital Accreditation denial of accreditation to PMH that included 43 outstanding violations of best hospital practices, following an unannounced visit to Waterbury Hospital by the agency in early April 2019;

• A Center for Medicare and Medicaid Systems (CMS) unannounced visit that resulted in citations for conditions serious enough to put patients in “immediate  jeopardy”;

 

At the same time, the date for the expiration of state oversight of PMH operation at Waterbury Hospital was looming. To protect patient health and safety, NVP’s Hospital Accountability Committee requested the Connecticut Department of Public Health (CT DPH) extend its oversight of PMH and its parent organization, LG&P, at Waterbury Hospital beyond the expiration date of October 1, 2019. Workers at Manchester Hospital and Rockville Hospital, both Connecticut for-profit hospitals that are also owned by Prospect and Leonard Green, joined NVP in publicly calling for the extension of state oversight during a rally in Waterbury on June 3, 2019.

 

Many months and many NVP actions later, on November 28, 2019, Barbara Cass, Chief of the Healthcare Quality & Safety Branch at the CT DPH, announced an 18-month extension of state oversight of PMH and its majority owner, LG&P, at Waterbury, Manchester, and Rockville Hospitals! NVP members were relieved to know that Prospect’s for-profit hospitals in Connecticut would continue to be held accountable.

 

Another concern popped up in July 2019.  NVP’s Hospital Accountability Committee discovered that PMH had sold its real estate properties, including Waterbury Hospital properties, in a sale-leaseback deal to an Alabama Real Estate Investment Trust company, Medical Properties Trust, for $1.55 billion. The deal provided PMH with badly needed cash in the short term, but ultimately more debt in the future.  Warning bells went off in our heads! Where had all the money gone that Prospect and Leonard Green promised to invest in the hospital and the city?

 

As we tried to find answers to our questions about the financial condition of PMH and its majority owner, LG&P, we were able to develop a collaborative relationship with Private Equity Stakeholders Project, (PESP), a non-profit organization in Washington, DC, specializing in the development of research about private equity companies for use by community organizations and unions.  PESP’s research report about  LG&P and PMH, “Raiding the Safety Net…Leonard Green & Partners Seeks To Walk Away From Prospect Medical Holdings….”, (access report PDF file here) provided confirmation that NVP’s concerns about the financial condition of Waterbury Hospital, as well as the two other PMH-owned hospitals in Connecticut, had merit.  There was reason to be concerned.  Enormous amounts of money had been extracted from PMH hospital systems over the years, including:

 

  • LG&P has pocketed $570.44 million in fees and dividends from Prospect since they took over PMH in 2010;

  • PMH has paid LG&P a $1 million management fee each year and reimburses LG&P up to $50,000 annually for expenses;

  • Millions more have been paid by PMH to LG&P for services, such as corporate restructuring;

  • In early 2018, PMH paid a $457 million dividend to shareholders;

  • In March 2019, Moody’s Investor Service downgraded PMH' credit rating by Moody’s Investor Service, citing Prospect’s “…very high financial leverage, shareholder-friendly financial policies, and a history of failing to meet projections”;

  • In July 2019, PMH sold its Waterbury Hospital, Manchester Memorial Hospital, and Rockville General properties to Medical Properties Trust of Alabama in a $1.55 billion sale/leaseback deal that included hospital properties in Pennsylvania and California also.

 

Most distressing of all, we discovered that PMH had filed papers with the CT DPH in November 2019 to report that LP&G intended to sell its stake in PMH for $12 million.  There are 18 hospitals in 5 states in the PMH hospital system. PESP estimates that Prospect paid at least $857 million for the hospitals it owns in just three states - in Connecticut, Pennsylvania, and Rhode Island. Now, they were about to sell all 18 of their hospitals for $12 million. Something didn’t seem to add up.

 

NVP united with our allies, SEIU District 1199NE, AFT Connecticut, and CHCA District 1199 NUHHNE representing workers at Waterbury, Manchester, and Rockville Hospitals, to request a meeting with CT’s Attorney General about our concerns. “Reports in the media indicate that LG&P is selling its stake in PMH to Samuel Lee, the current President of PMH, and a family trust held by David Topper, current PMH CEO for just $12 million,” said Richard Natale, President of the Naugatuck Valley Project in front of the Attorney General’s office on March 10, 2020.  “This is most disconcerting to many of us living in the Naugatuck Valley. Something is not right about the proposed sale. We are concerned that Waterbury Hospital in 2020 will become just a hollowed-out shell of what it was before being bought by PMH and LG&P in 2016, if the proposed sale is permitted to proceed.”

Attorney General William Tong met with all four of our organizations on March 19, 2020. We presented him with two requests: 1) that his office halt the proposed change in ownership between PMH and LG&P during the current COVID-19 health care crisis, and 2) that his office fully investigate the financial relationship between PMH and LG&P and take appropriate action to assure the future viability of Waterbury Hospital, Manchester Hospital, and Rockville Hospital.

 

Tong was respectful to our delegation, agreeing to an investigation of the financial machinations of PMH and LG&P regarding their 3 for-profit Connecticut hospitals.

 

We expect to hear from his office about the investigation during the week of April 13, 2020. 

 

Meanwhile, PESP assisted NVP leaders in identifying investors in Leonard Green & Partners’ Green Equity Investors Fund V, the fund that owns PMH. Most of the investors are public pension systems. Public pension governance varies, but investments are generally managed by investment staff and approved by a Board of Directors. Boards are typically made up of a mix of political appointees, investment professionals, and retirees or pension participants. At some funds, these include union officials. Boards meet on a regular basis, typically in public meetings. Members of the public have opportunities to give public comment at these meetings; however, the meetings are held in the state where the invested funds originated.  NVP did not have funds for airplane tickets for leaders to travel to the different state meetings across the country in order to testify at investor board meetings. How could we interact with investor boards? We wanted to alert investor board members about LP&G’ money management practices and their negative effects on hospital care in Connecticut.

 

Along came COVID-19. States imposed stay-at-home restrictions and nonessential business shutdowns in March 2020. Investor board meetings were not cancelled though. They were moved to teleconferencing and videoconferencing platforms.  Access to the investor meetings became very easy. We were now able to attend from our own homes! We were able to speak at the investor meetings also during public comment sections on the agendas.

On March 31, 2020, we submitted testimony at the quarterly meeting of the Florida State Board of Administration, along with our ally the Private Equity Stakeholders Project.  (Access testimonies PDF file here).  We expect NVP leaders to be testifying at the board meetings of several other LG&P Green Equity Investors Fund V during April 2020.  We intend to bring our concerns about LG&P’ financial actions in the hospital business directly to board members of the public pension funds around the country that trust Leonard Green with their money. 

Naugatuck Valley Project

Naugatuck Valley Project

16 Church Street

Waterbury, CT 06702

Phone: 203-574-2410

Email: nvpofficemanager@gmail.com