Tax Deals and Auction Strategy
Quejada told the court that Prospect’s recent deal with Pennsylvania tax authorities mirrors an earlier summer agreement tied to two other closed hospitals. These accords allow the state to retain unsecured claims, a move that clears a smoother path for sales and could attract stronger bids. “We think we’ll be able to get those deals consummated because of this deal,” Quejada said, crediting the Yale settlement as a catalyst for renewed momentum.
Financial Turmoil and the Road Out of Chapter 11
Once a multi-state hospital operator, Prospect Medical, based in California, filed for bankruptcy in January, reporting more than $1 billion in liabilities. The company blamed its downfall on a brutal mix of pandemic pressures, surging operational costs, shrinking government reimbursements, and a crippling cyberattack that disrupted operations.
At the time of filing, Prospect managed 16 hospitals across California, Connecticut, Rhode Island, and Pennsylvania. The court will reconvene in early November to consider confirming a Chapter 11 plan that would wind down the company and distribute sale proceeds to creditors.
