Private Equity Took Over a Hospital. Then It Shuttered.

Summary

The Journal. — “Private Equity Took Over a Hospital. Then It Shuttered.”
Release Date: September 4, 2025
Hosts: Jessica Mendoza & Ryan Knutson
Podcast by: The Wall Street Journal & Spotify Studios

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Episode Overview

This episode investigates the collapse of Chester, Pennsylvania’s last hospital after years under private equity ownership. Through interviews with local emergency workers, journalists, and community members, the hosts explore how private equity’s business model—focused on profit extraction—can devastate vulnerable communities. Special emphasis is placed on the real-life consequences for Chester’s residents, now left facing a critical healthcare shortage, unemployment, and higher taxes.

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Key Discussion Points and Insights

1. The State of Chester Before the Hospital Closure

[01:08–02:01]

• Chester, PA, is already deeply disadvantaged: 50% of its population lives at or below the poverty line, and ~38% depend on Medicaid.
• Quote:
  • Shane Wheeler: “The disease rate there is insane. You know, it's just, it's a rough, it's a really, really bad place with regards to health care.” (01:22)
• The closure of the last hospital has worsened access to care, eliminating not only emergency services but also all primary and preventative care.

2. The Private Equity Acquisition and Its Methods

[04:03–05:21]

• In 2016, Prospect Medical Holdings (owned by Leonard Green and Partners, a private equity firm) bought Chester’s hospital and others, promising stabilization and investment.
• Quote:
  • Soma Biswas: “They saw the opportunity to buy some hospitals in certain areas…these were nonprofit hospitals that were not doing well, and they promised to make investments.” (04:45)
• Prospect borrowed heavily to build a hospital chain, ultimately making it easier for the PE firm to extract dividends.

Extracting Profits Over Care

• From 2012–2018, Leonard Green’s shareholders made $654 million through dividends and share sales, while the hospitals themselves became increasingly insolvent.
• Severe neglect: basic upkeep suffered (mold infestation, unpaid providers). To raise quick cash, the land under the hospital was sold to a real estate company—leading to long-term, high-cost leases for the hospital itself.

3. Downward Spiral: Debt, Dividends, and Bankruptcy

[06:41–08:52]

• Facilities became locked in expensive leases. Leonard Green sold its controlling stake in 2021, claiming that COVID-19’s shutdown of elective procedures, not their management, was the cause of the ensuing financial crisis.
• Court records show continuing unpaid bills and pension contributions.
• By 2024, the Pennsylvania Attorney General sued Prospect over hospital conditions.
• January 2025: Prospect filed for bankruptcy. No buyers could be found for Chester’s hospital.

Community Costs

• Local governments inherited millions in unpaid taxes, forcing property tax hikes for homeowners and businesses.
• Quote:
  • Soma Biswas: “Prospect Medical holdings, they owe the county…$20 million.…the county and one particular school district had to raise taxes on all property owners.…It was particularly sharp increase for one of the school districts in the county.” (08:52)

4. The Fallout: Health Emergency for Chester

[10:13–12:29]

• All health infrastructure collapsed:
  • Emergency departments in nearby cities flooded with new patients.
  • Affiliated doctors’ offices shut down.
  • Wait times for routine care stretched to a year or more.
• Quote:
  • Shane Wheeler: “I did not have Chester City on our bingo card.…there was this gap with Prospect holdings bankruptcy, and they needed to care and we wanted to.” (11:00)
• Quote:
  • Jessica Mendoza: “Wow.” — Reacting to one-year primary care wait (12:02)

Emergency Services Under Strain

• 45% of VSMC EMS responses do not lead to transports, meaning they’re providing uncompensated care:
  • Quote:
    • Shane Wheeler: “Over 45% of our responses are resulting in no transports, which means it’s uncompensated care…very few insurances will pay for treatment in place.…if we don’t load the patient and transport them, we don’t get compensated.” (13:10)
• Paramedics now field basic health questions—they are not trained for chronic, primary-care situations.
  • Quote:
    • Shane Wheeler: “We're not physicians.…We stop the bleeding, you know, we start the heart again, we breathe for the patient kind of things.” (12:29)

5. Policy Response and Ongoing Uncertainty

[13:54–15:06]

• State intervention: Pennsylvania is proposing new laws for added scrutiny on private equity healthcare investments; hospitals could only be acquired if a community impact review allows.
  • Soma Biswas: “Governor Shapiro had made a big effort to pass a law that would make it harder for private equity firms to buy hospitals…” (14:06)
• No immediate solution for Chester:
  • Quote:
    • Shane Wheeler: “Yeah, we’re worried. Everybody’s worried. I think our staff is worried. I think the community is worried. Right. They were just let down by a health system. Right. And you know that the unthinkable happened. So, yeah, we’re worried.…But you know, there’s a lot of things on the…that are threatening that.” (15:06)

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Notable Quotes & Memorable Moments

• “The disease rate there is insane. You know, it's just, it's a rough, it's a really, really bad place with regards to health care.”
  — Shane Wheeler (01:22)
• “Between 2012 and 2018, Leonard Green’s shareholders made $654 million in dividends and share sales from hospitals under Prospect Medical. But none of that money was making it to the hospitals themselves.”
  — Jessica Mendoza (05:21)
• “All these non emergency calls also means the team gets tied up and it makes it harder to respond quickly to actual emergencies.”
  — Jessica Mendoza (12:53)
• “What do you need to keep this going? Are you in any way worried that you won't be able to continue to provide the services that you provide? Is this going to stretch you too thin?...Yeah, we’re worried. Everybody’s worried…”
  — Jessica Mendoza & Shane Wheeler (15:06)

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Key Timestamps

• 01:08 — Chester’s economic and health challenges, with insights from Shane Wheeler
• 02:01–02:29 — Introduction of the private equity story
• 04:03–05:21 — How Prospect Medical Holdings assembled and managed the hospital chain
• 05:21–06:41 — Dividends extraction, facility neglect, and real estate sale
• 07:10–08:17 — PE exit, the pandemic’s impact, and the path to bankruptcy
• 08:52–09:25 — Unpaid taxes and community tax hikes
• 10:13–13:38 — Aftermath for healthcare, EMS overload, financial strain on emergency services
• 13:54–14:43 — State response: pushing for stronger oversight on future PE deals
• 15:06 — “Yeah, we’re worried…”, the uncertainty facing Chester

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Tone and Style

The episode is sober, factual, and driven by real-life voices—delivering a sense of urgency and empathy for Chester’s residents and healthcare workers. The reporting leans heavily on first-hand testimonies and straightforward discussion of financial maneuvers, highlighting both systemic failure and its human consequences.

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Summary:
This episode of The Journal illustrates how private equity’s profit-focused approach to healthcare can decimate community hospital systems, leaving vulnerable communities without basic medical services and burdened with new debts. Through personal stories and investigative reporting, it calls attention to the need for regulatory scrutiny and reforms.

Transcript

[Ryan]

Hey, it's Ryan and Jess. Before we get into today's show, we have something exciting to announce.

[Jessica Mendoza]

We are hosting our first ever live show in New York City. We'll be at the Gramercy theater on Tuesday, October 7th, and we want you to be there.

[Ryan]

We'll have special guests and I can promise you it'll be a fun night full of lively conversations about money, business and power. And Jess and I will hang out after the show to mingle and meet people. It's going to be a great time.

[Jessica Mendoza]

Tickets go on sale this Friday, September 5th at 10am Eastern at Bit Ly JournalLive 25. You can find the link in our show notes.

[Ryan]

Again, we'll be at the Gramercy Theatre in New York City on Tuesday, October 7, and tickets go on sale this Friday, September 5.

[Jessica Mendoza]

Go to Bit Ly Journallive25 to get your tickets. We hope to see you there. The city of Chester, Pennsylvania is the oldest city in the state. It's nestled on the Delaware river, about half an hour from Philadelphia. And for years, the community there has struggled with socioeconomic issues.

[Shane Wheeler]

Half the population lives at or below the poverty line. An incredible number, I think 38% or so of people are on Medicaid.

[Jessica Mendoza]

That's Shane Wheeler, who runs VSMC Emergency Medical Services, a nonprofit in the area.

[Shane Wheeler]

The disease rate there is insane. You know, it's just, it's a rough, it's a really, really bad place with regards to health care.

[Jessica Mendoza]

Things got even worse in May when the last local hospital shut its doors. The closure set off a series of events that made it even harder for Chester residents to get access to health care.

[Shane Wheeler]

They lost their hospital, but they also lost their doctors. There's a total collapse of preventative care. They've lost their primary care physicians, their asthma doctors. They were really invested in the health system that collapsed.

[Jessica Mendoza]

The healthcare crisis in Chester is the latest development in a years long saga. A private equity firm had bought up a string of struggling local hospitals in an effort to make them profitable. It's a strategy that private equity firms have employed across the country. And it's one that's left hospitals and the communities they serve short of crucial medical services and deep in deb, private equity investors are siphoning millions of dollars away from community hospitals.

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When the private equity backed network filed for bankruptcy last year, it devastated providers and patients.

[Jessica Mendoza]

And for Chester City, the impact has been monumental. Welcome to the Journal, our show about money, business and power. I'm Jessica Mendoza. It's Thursday, September four. Coming up on the show Private equity's lucrative venture into healthcare and the dire consequences for one community.

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[Jessica Mendoza]

There the events that led to the healthcare Crisis in Chester, Pennsylvania began in 2016. That year, the local hospital was acquired by a company called Prospect Medical Holdings.

[Soma Biswas]

Prospect Medical is a chain of hospitals, 16 hospitals that was put together by Leonard Green and Partners, private equity firm in Los Angeles.

[Jessica Mendoza]

That's our colleague Soma Biswas, who covers bankruptcies. She says that private equity firms like Leonard Green try to get the hospitals running more efficiently and make them more profitable.

[Soma Biswas]

What private equity did here, and it's pretty typical, is that they saw the opportunity to buy some hospitals in certain areas. These were nonprofit hospitals that were not doing well and they promised to make investments. And then what they do, which is also typical of private equity, is they went and they borrowed money in the debt markets to buy more hospitals and they strung them together into this chain and that became Prospect Medical.

[Jessica Mendoza]

With all the hospitals under one holding company, Leonard Green was able to start taking dividends for investors, and those dividends paid out. Between 2012 and 2018, Leonard Green's shareholders made $654 million in dividends and share sales from hospitals under Prospect Medical. But none of that money was making it to the hospitals themselves. A bipartisan congressional committee would find that, far from the turnaround the firm promised, the hospitals were practically insolvent. At the hospital in Chester, Soma talked to nurses who said basic upkeep had become a challenge. At one point, parts of the facility were shut down because of a mold infestation, and the hospital stopped paying for some supplies and service providers that made it hard to keep up with patient care. To make ends meet, Prospect sold the land. The hospital was built on.

[Soma Biswas]

What they did is they reached a deal with a publicly traded real estate company. And these are fairly common for a lot of different kinds of companies, where the real estate company comes in and they buy your building, all the land that your facilities sit on.

[Jessica Mendoza]

The real estate deal, which took place in 2019, gave Prospect the cash it desperately needed. But the deal meant that hospitals like the one in Chester were suddenly on the hook for millions of dollars in annual rent payments to the new landowners. And they were locked into those leases for more than a decade. Meanwhile, having made millions, Leonard Green decided to move on. In 2021, the private equity firm sold its controlling stake in Prospect Medical Holdings.

[Soma Biswas]

What Leonard Green will say is that, and they've said this, that everything was great until the COVID 19 pandemic hit. And the pandemic meant that basically hospitals couldn't have surgeries. They could only take patients that were in emergency situations. So all of the elective stuff was shut down. And that that was the reason why they got into financial distress.

[Jessica Mendoza]

Representatives for Leonard Green also said that their buyout of Prospect helped save hospitals that otherwise would have closed. Over the next five years, Prospect continued to struggle. It fell behind on bills and pension contributions, according to court records. In 2024, the Pennsylvania Attorney general sued Prospect over conditions at its hospitals in the state. The company has disputed the allegations. Near the end of the year, Prospect's finances were so bad, the hospital in Chester couldn't make its rent payment. And this past January, Prospect filed for Chapter 11 bankruptcy.

[Soma Biswas]

The goal of any bankruptcy, including this one, is to figure out a way to pay all the creditors. You know, when a company files for bankruptcy, typically they don't have enough money to pay all of their bills. Typically, companies looked to find buyers. They spent weeks looking for buyers, and they couldn't find anyone.

[Jessica Mendoza]

Without a buyer, there was no one to pay Prospects debts, including back taxes. And that was a big problem for the county where Chester city is located, which had to raise taxes to cover the loss.

[Soma Biswas]

Prospect Medical holdings, they owe the county and some of the school districts in the county $20 million. And these are back taxes that they haven't paid for a couple of years. So as a result, the county and one particular school district had to raise taxes on all property owners. So that means homeowners, business owners. It was particularly sharp increase for one of the school districts in the county.

[Jessica Mendoza]

In other words, the community was left holding the bag. That's next.

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[Jessica Mendoza]

$15 per month equivalent required. New customer offer first three months only, then full price plan options available. Taxes and fees extra. See mintmobile.com Prospect's bankruptcy led to the closing of Chester's Hospital in May. And the biggest impact of the shutdown was on the local health system. Nearby emergency departments struggled to accommodate the new influx of patients. At the same time, many affiliated doctors offices shut their doors. Patients found themselves having to wait over a year for routine appointments. That's where Shane Wheeler comes in. He's the guy who runs vsmc, the nonprofit emergency medical service. How did you end up servicing the community In Chester City, I always tell.

[Shane Wheeler]

People I did not have Chester City on our bingo card. Right. And you know, it's a little bit out of the way from our Philadelphia operation, but there was this gap with Prospect holdings bankruptcy, and they needed to care and we wanted to. That's why we're there.

[Jessica Mendoza]

But the work is tough. One big issue is that a lot of the calls Shane's team gets aren't for emergencies. Instead, they're getting called in to respond to things like cuts and scrapes, coughs and colds. Sometimes Shane says his team responds to patients trying to get their prescriptions refilled.

[Shane Wheeler]

In most communities similar to Chester City, where there's a high dependency on a hospital er, they would get their preventative care at the emergency room. Well, without the emergency room in the hospital there, we're now starting to feel some of this stuff. So I'm having problems with my blood pressure, you know, or I can't get a doctor's appointment for a year.

[Jessica Mendoza]

Wow.

[Shane Wheeler]

Right? Literally, am I taking my medication correctly? You know?

[Jessica Mendoza]

Yeah.

[Shane Wheeler]

These kind of. These kind of conversations that they should be having with their primary care physician. They're now trying to have that conversation with our emergency medical technicians and paramedics.

[Jessica Mendoza]

And that's not really what Shane's team is supposed to be doing. VSMC is an emergency medical service, which means the staff is trained to respond to immediate medical crises and then take patients to an ER for further care.

[Shane Wheeler]

We're not physicians. Right. And we're not necessarily trained in a space of being experts in Family medicine or what primary care physicians and PAs and nurse practitioners do. Right. We, we stop the bleeding, you know, we start the heart again, we breathe for the patient kind of things. Right.

[Jessica Mendoza]

All these non emergency calls also means the team gets tied up and it makes it harder to respond quickly to actual emergencies. And because the team only makes money when they transport patients to a hospital, non emergency calls mean they don't get paid.

[Shane Wheeler]

Over 45% of our responses are resulting in no transports, which means it's uncompensated care because we don't transport the patients. And very few insurances will pay for treatment. In place, Medicaid and Medicare pay a base rate, which is the load fee, and then they pay a per mile rate as opposed to bill for like clinical services. So if we don't load the patient and transport them, we don't get compensated.

[Jessica Mendoza]

Shane's team is having to fill gaps that the hospital closure left behind. But there are other strains on Chester, too. With thousands of former hospital employees out of work and the whole community scrambling for health services, the state has decided to step in.

[Shane Wheeler]

I'm deeply concerned about this community. I'm deeply concerned about the rural communities that have suffered at the hands of private equity. And we're going to continue to do everything in our power to address it.

[Soma Biswas]

Governor Shapiro had made a big effort to pass a law that would make it harder for private equity firms to buy hospitals and other kinds of health care facilities and perhaps just have more scrutiny. So when a private equity firm comes in and wants to buy a hospital system or certain other types of healthcare businesses, it'll require the attorney general to take into account the impact on the community and patient care and not just look at the dollars and cents.

[Jessica Mendoza]

Pennsylvania is trying to come up with a long term solution for Chester and other communities in the state. Until then, Shane says he and his team will try to keep things afloat. What do you need to keep this going? Are you in any way worried that you won't be able to continue to provide the services that you provide? Is this going to stretch you too thin?

[Shane Wheeler]

Yeah, we're worried. Everybody's worried. I think our staff is worried. I think the community is worried. Right. They were just let down by a health system. Right. And you know that the unthinkable happened. So, yeah, we're worried. I think we have a really great relationship with the community and I'm confident that we're going to be able to sustain the operation. But you know, there's a lot of things on the that are threatening that.

[Jessica Mendoza]

That's all for today. Thursday, September 4th. The journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode by Alexander Gladstone. Thanks for list. See you tomorrow.