WASHINGTON — Senate Democrats branded Supreme Court nominee Amy Coney Barrett a threat to Americans’ health care during the coronavirus pandemic Monday at the start of a fast-tracked hearing that Republicans are confident will end with Barrett’s confirmation to replace the late Justice Ruth Bader Ginsburg before Election Day.
In a competing effort to approvingly define the 48-year-old Barrett, who sat silent and wearing a face mask, Republican senators called President Donald Trump’s pick a thoughtful judge with impeccable credentials.
Barring a dramatic development, Republicans appear to have the votes to confirm Barrett to a lifetime seat on the Supreme Court. If she is confirmed quickly she could be on the Supreme Court when it hears the latest challenge to the Affordable Care Act, a week after the election.
One after another, Democrats sought to tie her nomination to the upcoming court case.
“Health care coverage for millions of Americans is at stake with this nomination,” said Sen. Dianne Feinstein of California, the committee’s senior Democrat.
Sen. Sheldon Whitehouse, D-R.I., said the nomination is a “judicial torpedo aimed” at the law’s protection for people with pre-existing health conditions among its provisions. The Trump administration wants the court to strike down the entire law popularly known as “Obamacare” on Nov. 10. Barrett has criticized the court’s two earlier major rulings supporting the law.
Among Republicans, Sen. Chuck Grassley, R-Iowa, dismissed warnings Barrett will undo the Obama-era healthcare law as “outrageous.”
Trump himself seemed to be watching, tweeting several times about the hearing. In one message, he tweeted that he’d have a “FAR BETTER” health care plan, with lower costs and protections for pre-existing conditions. But he has not, as yet, discussed an actual health care plan.
Republicans also warned against making Barrett’s Catholicism an issue in the confirmation debate, especially in regard to her stance on abortion, with Sen. Josh Hawley of Missouri lambasting what he called a “pattern and practice of religious bigotry” by Democrats. However, Democratic senators made clear in advance of the hearing that they didn’t plan to question the judge on the specifics of her religious faith.
Democratic presidential nominee Joe Biden, also a practicing Catholic, told reporters ahead of a campaign trip to Ohio that he doesn’t think “there’s any question about her faith.”
The Senate Judiciary Committee, meeting on a federal holiday, kicked off four days of statements and testimony in an environment that has been altered by the coronavirus pandemic. Some senators were taking part remotely, and the hearing room itself was arranged with health concerns in mind.
Sen. Lindsey Graham, R-S.C., opened the hearing acknowledging “the COVID problem in America is real.” But he said, “We do have a country that needs to move forward safely.”
Graham acknowledged the obvious: “This is going to be a long, contentious week.”
Protesters rallied outside the Senate buildings with the hearing room largely closed to the public. Capitol Police said 22 people were arrested and charged on suspicion of crowding, obstructing or other violations.
Barrett, a federal appeals court judge, was to tell senators that she is “forever grateful” for Ginsburg’s trailblazing path as a woman. But she is resolved to maintain the perspective of her own mentor, the late conservative Justice Antonin Scalia and “apply the law as written,” according to her prepared opening remarks for the hearings.
“Courts are not designed to solve every problem or right every wrong in our public life,” Barrett says in the remarks, which The Associated Press obtained.
Republicans are moving at a breakneck pace to seat Barrett before the Nov. 3 election to secure Trump’s pick, which would put her on the bench for any election-related challenges.
Democrats are trying in vain to delay the fast-track confirmation by raising fresh concerns about the safety of meeting during the pandemic after two GOP senators on the panel tested positive for the novel coronavirus.
Sen. Mike Lee, R-Utah, one of those who tested positive, was in the hearing room Monday after his spokesman said he was symptom-free. The other affected senator, Thom Tillis of North Carolina, was participating remotely, though he too is symptom-free, his spokesman said. Both tested positive 10 days ago.
Among senators who will not set foot in the hearing room because of coronavirus concerns is Democratic vice presidential nominee Kamala Harris.
“We are 22 days away from an election and people are voting right now. And that’s the focus given that they’re trying to push through, ram through a Supreme Court justice for a lifetime appointment while almost seven million people have already voted,” Harris said as she arrived at her Senate office.
Trump chose Barrett after the death last month of Ginsburg, a liberal icon. It’s the opportunity to entrench a conservative majority on the court for years to come with his third justice.
Outside groups are pushing Democrats to make a strong case against what they call an illegitimate confirmation, when people are already voting in some states, saying the winner of the presidency should make the pick. No Supreme Court justice has ever been confirmed so close to a presidential contest.
The country will get an extended look at Barrett over the next three days in hearings like none other during the heated election environment and the pandemic limiting public access.
Faith and family punctuate her testimony, and she said would bring “a few new perspectives” as the first mother of school-age children on the nine-member court.
Barrett says she uses her children as a test when deciding cases, asking herself how she would view the decision if one of her children were the party she was ruling against.
“Even though I would not like the result, would I understand that the decision was fairly reasoned and grounded in the law?” she says in the prepared remarks.
A Roman Catholic, she says she believes in the “power of prayer.” Barrett’s religious views and past leadership role in a Catholic faith community pose a challenge for Democrats as they try to probe her judicial approach to abortion, gay marriage and other social issues without veering into inappropriate questions of her faith.
Ordinarily, Barrett would get to show off her family and seven children. But the White House event announcing her nomination, in which most of the audience did not wear masks, has been labeled a “superspreader” for the coronavirus.
More than two dozen people linked to the Sept. 26 Rose Garden event, including the two GOP senators, have contracted COVID-19 since then. Barrett and her family went maskless at the event. She and her husband, Jesse, tested positive for the virus earlier this year and recovered, two administration officials have said.
Democrats already were enraged that Republicans are moving so quickly having refused to consider President Barack Obama nominee in February 2016, well before that year’s election.
Barrett is the most openly anti-abortion Supreme Court nominee in decades and her vote could provide a majority to restrict if not overturn abortion rights.
We analyzed a conservative foundation’s catalog of absentee ballot fraud. It’s not a 2020 election threat
Leila and Gary Blake didn’t want to miss elk hunting season.
It was 2000, and the election conflicted with their plans, so the Wyoming couple requested absentee ballots.
But the Blakes had moved from 372 Curtis Street five miles down the road to 1372 Curtis Street, crossing a town line. When they mailed their votes using the old address, they were criminally charged. The misdemeanor case was settled with $700 in fines and a few months’ probation, but two decades later, the Blakes are still listed as absentee ballot fraudsters in the Heritage Foundation’s Election Fraud Database.
Far from being proof of organized, large-scale vote-by-mail fraud, the Heritage database presents misleading and incomplete information that overstates the number of alleged fraud instances and includes cases where no crime was committed, an investigation by USA TODAY, Columbia Journalism Investigations and the PBS series, FRONTLINE found.
Although the list has been used to warn against a major threat of fraud, a deep look at the cases in the list shows that the vast majority put just a few votes at stake.
The database is the result of a years-long passion project by Hans von Spakovsky, a former member of the U.S. Department of Justice during the George W. Bush administration and a senior legal fellow with the Heritage Foundation, a conservative think tank. The entire Election Fraud Database contains 1,298 entries of what the think tank describes as “proven instances of voter fraud.” It has been amplified by conservative media stars and was submitted to the White House document archives as part of a failed effort to prove that voter fraud ran rampant during the 2016 election.
But the Blakes’ address violation is typical of the kind of absentee ballot cases in the database. It appears along with widows and widowers who voted for a deceased loved one, voters confused by recent changes to the law and people never convicted of a crime.
The Heritage database does not include a single example of a concerted effort to use absentee ballot fraud to steal a major election, much less a presidential election, as President Donald Trump has suggested could happen this year. Though Trump has repeatedly claimed that absentee ballot fraud is widespread, only 207 of the entries in the Heritage database are listed under the fraudulent absentee ballot category. Not only is that a small slice of the overall Heritage database, it represents an even smaller portion of the number of local, state and national elections held since 1979, which is as far back as the database goes.
To examine the facts behind the rhetoric, reporters looked at each case in Heritage’s online category of “Fraudulent use of absentee ballots,” comparing them with state investigations, court documents and news clips. Roughly one in 10 cases involves a civil penalty and no criminal charge. Some of the cases, such as the one involving the Blakes, do not match the online definition of absentee fraud as stated by the Heritage Foundation itself. Four cases did not involve absentee ballots at all, including a 1996 murder-for-hire case that included a person persuaded to illegally vote using a wrong address.
In recent months, von Spakovsky has cited the database to warn about the dangers of voting by mail, including during podcast interviews with U.S. Rep. Dan Crenshaw and former U.S. House Speaker Newt Gingrich.
In a written response for this story, von Spakovsky — the manager of the Heritage Foundation’s Election Law Reform Initiative — called the database “factual, backed up by proof of convictions or findings by courts or government bodies in the form of reports from reputable news sources and/or court records.”
He acknowledges that the database is elastic enough to pull in civil cases, as well as criminal cases closed with no conviction. “Some suffered civil sanctions. Others suffered administrative rebukes,” von Spakovsky said. In the case of criminal convictions, the database “does not discriminate between serious and minor cases.” Charges listed in the description “add the necessary context,” he wrote.
Even with such a broad definition, the Brennan Center for Justice in its 2017 examination of the full database found scant evidence supporting claims of significant, proven fraud. It did conclude the cases added up to “a molecular fraction” of votes cast nationwide. Von Spakovsky has countered that the database is a sampling of cases that have publicly surfaced.
“We simply report cases of which we become aware,” he said.
But if the Heritage database is a sample, it points to a larger universe of cases that are just as underwhelming.
“It illustrates that almost all of the voting fraud allegations tend to be small scale, individual acts that are not calculated to change election outcomes,” said Rick Hasen, election law author and professor of law and political science at the University of California, Irvine.
To be sure, there are exceptions. In North Carolina, a Republican political consultant was indicted and the results of a 2018 congressional race overturned based on an absentee ballot operation.
“But by and large the allegations are penny-ante,” Hasen said. “Some are not crimes at all.”
Relatively small number of votes at stake
Following unsubstantiated claims that “millions and millions” of fraudulent votes cast in the 2016 election had cost him the popular vote, Trump in 2017 created the Presidential Advisory Commission on Election Integrity to investigate stories of voter fraud.
Joining the panel was von Spakovsky, whose appointment was considered controversial. In an email obtained by the Campaign Legal Center, he urged that Democrats should be barred from the task force, arguing they would obstruct the panel’s work. He also wrote, of moderate Republicans: “There aren’t any that know anything about this or who have paid attention to the issue over the years.” He submitted the Heritage database almost immediately into the commission’s official documents.
The task force disbanded seven months after its first meeting with no report substantiating fraud. The White House blamed the potential cost of lawsuits and uncooperative states for the failure to produce evidence of widespread voter fraud.
A review of the absentee cases in the Heritage Foundation database helps explain why the panel came up short, and why such fraud is not a reasonable threat to undermine the 2020 general election.
In multiple instances, only one or two votes were involved. In other cases, no fraudulent votes were involved but are still included in the database because people ran afoul of rules on helping others fill out ballots or ballot requests. For example, a nursing home worker was civilly fined $100 because she did not sign her name and address as an “assistor” on ballots she helped four elderly patients fill out. In another case, a mother was fined $200 because she signed her sons’ requests for absentee ballots.
Events in the database also can be older than they seem because Heritage frequently categorizes entries by dates of an indictment, report or conviction, which may come years after the fraud. Using the year of the incident, 137 of 207 cases occurred before 2012.
Overall, the total number of absentee cases in the Heritage Foundation database is 153, with 207 entries in the category because multiple people are sometimes listed for the same case. Of those cases, 39 of them — involving 66 people — represent cases in which there seemed to be an organized attempt to tip an election, based on reporting and the group’s own description.
Further, the database describes “cases,” not individuals charged. However, the total number of cases became inflated after Heritage began counting every person involved in a criminal ring as a separate case.
“Each individual is a separate case and involved different … acts of voter fraud,” even if the parties conspired, von Spakovsky said. The Heritage Foundation may reconsider how groups of defendants are counted, but if anything, he said, the number of cases is undercounted, not overcounted.
But the details of the cases compiled in the database undermine the claim that voter fraud is a threat to election integrity.
In Seattle, an elderly widow and a widower appeared in court the same day, having voted for their recently deceased spouses — two of 15 in the database where an individual cast the ballot of a recently deceased parent, wife or husband. “The motivation in these cases was not to throw an election,” the prosecutor of the Seattle case told the Seattle Post-Intelligencer. “The defendants are good and honorable people.”
Lorraine Minnite, a Rutgers University political science professor who has written extensively on voter behavior, said of the Heritage Foundation database: “They slapped it together.
“They must have thought people would not think about it in a deep way,” Minnite said. “They can just slam it on the desk, say some number. The context and accuracy goes out the window.”
Andrea “Andy” Bierstedt was accused of taking one ballot belonging to another voter to the post office in a 2010 Texas sheriff’s race. Campos said prosecutors allowed her to donate $3,500 to the county food bank as part of a plea. She wrote the check and she has no conviction. Yet she’s in the database.
“This database is really saying that I’m guilty when even the courts say I’m not guilty,” said Bierstedt, who did not know her name was on a compilation of voter fraud cases. “It’s slander.”
Others captured in the database stumbled on changes in law. Providing assistance, such as the delivery of an absentee ballot, had been legal in 2003 in Texas, and in 2004, that’s what Hardeman County Commission candidate Johnny Akers did. “I didn’t understand you couldn’t mail some little old lady’s ballot,” Akers told the Wichita Falls Times Record News.
After Brandon Dean won the Brighton, Alabama, 2016 mayor’s race, a losing candidate sued over absentee ballots.
“This isn’t about voting fraud,” the judge in the civil trial said. Ballots rejected by the judge for apparent voter mistakes triggered a runoff, and Dean declined to run.
Dean’s case, however, appears in the Heritage database.
Percy Gill’s re-election to the Wetumpka, Alabama town council the same year also prompted a rival to sue, and a civil judge also overturned the election because of defective absentee ballots. Gill died last year.
“I don’t know why they put him on the [Heritage] database,” said his friend Michael Jackson, the District Attorney for Alabama’s Fourth Judicial District. “He was a very honest man, an upstanding official.”
‘It wasn’t anything big to begin with’
The Heritage voter fraud database correctly notes that Miguel Hernandez was arrested as part of a larger voting fraud investigation in the Dallas area.
Hernandez, who pleaded guilty to improperly returning a marked ballot in a city council election, had knocked on voters’ doors, volunteered to request absentee ballots on their behalf, signed the requests under a forged name and then collected ballots for mailing.
But Heritage did not include the fact that the investigation went nowhere. Voters told prosecutors their mailed votes were accurately recorded.
“It did not materialize into anything bigger simply because it wasn’t anything big to begin with,” said Andy Chatham, a former Dallas County assistant district attorney who helped prosecute Hernandez. “This was not a voter fraud case.”
Yet according to the Heritage Foundation’s fraud database, Hernandez’s scheme involved up to 700 ballots.
“Absolutely hilarious,” said Bruce Anton, Hernandez’s defense attorney. “There is no indication that anything like that was ever, ever considered.”
The legend of Hernandez’s activities grew even more when U.S. Attorney General William Barr recently held Hernandez out as an example of fraud, boosting the number of ballots. “We indicted someone in Texas, 1,700 ballots collected, he — from people who could vote, he made them out and voted for the person he wanted to.”
The Department of Justice had not indicted Hernandez. A spokeswoman told reporters Barr had been given inaccurate information.
Fraud exists, and the system to catch it works
While fewer and farther between, legitimate absentee fraud is also reflected in the database. Ben Cooper and 13 other individuals faced 243 felony charges in 2006 in what was described as Virginia’s worst election fraud in half a century. The mayor of tiny Appalachia, Cooper and his associates stole absentee ballots and bribed voters with booze, cigarettes and pork rinds so that they could repeatedly vote for themselves.
But the case is an example of just how difficult it is to organize and execute absentee fraud on a scale significant enough to swing an election while also avoiding detection. Heritage’s compilation of known absentee cases show the schemes repeatedly occurred in local races, frequently in smaller towns where political infighting can be fierce and fraudsters easily identified. Just one voter who told her story to The Roanoke Times unraveled Cooper’s ring.
The idea that absentee fraud frequently involves few votes and is easily caught is “laughable,” von Spakovsky said. He cited as an example the 1997 Miami mayoral race, which was riddled with absentee fraud.
However, that fraud scheme also quickly collapsed: The election took place in November, the Miami Herald began exposing the fraud in December, a civil trial started in February and a judge overturned the election in March.
“There have been some ham-handed attempts in small scale fraud, but I would be very surprised to see large scale efforts that go undetected,” Hasen said. “It is very hard to fly under the radar.”
The Heritage database also illustrates an aggressive system capable of catching and harshly punishing violators. When a Washington state woman registered her dog and put his paw print on an absentee ballot, she risked felony charges. Forging his ex-wife’s name on her ballot earned the former head of the Colorado Republican Party four years on probation.
“The mechanisms to safeguard the integrity of the vote are in place in every jurisdiction in the country,” said Chatham, the former Texas prosecutor. “Anybody who says differently hasn’t done the research that I have. They haven’t done the research at all and they just want to believe in conspiracy theories.”
USA TODAY Network reporters Zac Anderson, Joey Garrison, Jimmie Gates, Frank Gluck, Eric Litke, Brian Lyman, Will Peebles and Katie Sobko contributed to this report
EDITOR’S NOTE: This story is part of an ongoing investigation by Columbia Journalism Investigations, the PBS series FRONTLINE and USA TODAY NETWORK reporters that examines allegations of voter disenfranchisement and how the pandemic could impact turnout. It includes the film Whose Vote Counts, premiering on PBS and online Oct. 20 at 10 p.m. EST/9 p.m. CST.
This article originally appeared on USA TODAY: Trump’s absentee ballot fraud claims not supported by evidence
Investors Extracted $400 Million From a Hospital Chain That Sometimes Couldn’t Pay for Medical Supplies or Gas for Ambulances
In the decade since Leonard Green & Partners, a private equity firm based in Los Angeles, bought control of a hospital company named Prospect Medical Holdings for $205 million, the owners have done handsomely.
Leonard Green extracted $400 million in dividends and fees for itself and investors in its fund — not from profits, but by loading up the company with debt. Prospect CEO Sam Lee, who owns about 20% of the chain, made $128 million while expanding the company from five hospitals in California to 17 across the country. A second executive with an ownership stake took home $94 million.
The deal hasn’t worked out quite as well for Prospect’s patients, many of whom have low incomes. (The company says it receives 80% of its revenues from Medicare and Medicaid reimbursements.) At the company’s flagship Los Angeles hospital, persistent elevator breakdowns sometimes require emergency room nurses to wheel patients on gurneys across a public street as a security guard attempts to halt traffic. Paramedics for Prospect’s hospital near Philadelphia told ProPublica that they’ve repeatedly gone to fuel up their ambulances only to come away empty at the pump: Their hospital-supplied gas cards were rejected because Prospect hadn’t paid its bill. A similar penury afflicts medical supplies. “Say we need 4×4 sponges, dressing for a patient, IV fluids,” said Leslie Heygood, a veteran registered nurse at one of Prospect’s Pennsylvania hospitals, “we might not have it on the shelf because it’s on ‘credit hold’ because they haven’t paid their creditors.”
In March, Prospect’s New Jersey hospital made national headlines as the chief workplace of the first U.S. emergency room doctor to die of COVID-19. Before his death, the physician told a friend he’d become sick after being forced to reuse a single mask for four days. At a Prospect hospital in Rhode Island, a locked ward for elderly psychiatric patients had to be evacuated and sanitized after poor infection control spread COVID-19 to 19 of its 21 residents; six of them died. The virus sickened a half-dozen members of the hospital’s housekeeping staff, which had been given limited personal protective equipment. The head of the department died.
The litany goes on. Various Prospect facilities in California have had bedbugs in patient rooms, rampant water leaks from the ceilings and what one hospital manager acknowledged to a state inspector “looks like feces” on the wall. A company consultant in one of its Rhode Island hospitals discovered dirty, corroded and cracked surgical instruments in the operating room.
These aren’t mere anecdotes or anomalies. All but one of Prospect’s hospitals rank below average in the federal government’s annual quality-of-care assessments, with just one or two stars out of five, placing them in the bottom 17% of all U.S. hospitals. The concerns are dire enough that on 14 occasions since 2010, Prospect facilities have been deemed by government inspectors to pose “immediate jeopardy” to their patients, a situation the U.S. Department of Health and Human Services defines as having caused, or is likely to cause, “serious injury, harm, impairment or death.”
Prospect has a long history of breaking its word: It has closed hospitals it promised to preserve, failed to keep contractual commitments to invest millions in its facilities and paid its owners nine-figure dividends after saying it wouldn’t. Three lawsuits assert that Prospect committed Medicare fraud at one of its facilities. And ProPublica has learned of a multiyear scheme at a key Prospect operation that resulted in millions of dollars in improper claims being submitted to the government.
Leonard Green and Prospect, which have operated hand-in-glove throughout this period, both declined requests for interviews. (Near the end of the reporting for this article, Prospect’s CEO, Lee, spoke to ProPublica on the condition that he not be quoted.) Leonard Green and Prospect responded to ProPublica’s questions in written statements through Sitrick and Company, a crisis PR firm jointly retained on their behalf. They maintain that they’ve kept their commitments, abided by the law, provided good patient care and invested hundreds of millions of dollars, saving many failing hospitals and preserving thousands of jobs. “Prospect Medical Holdings is a healthcare system that provides compassionate, accessible, quality healthcare and physician services,” the statement asserted.
The question of whether profits and good medical care can coexist is not a new one in the United States. But that tension is particularly acute in the case of Leonard Green and Prospect, where private equity has extracted hefty profits from a business that acquires struggling hospitals and relies on Medicaid and other government programs to pay the bills for its impoverished patients.
“It’s such a brutal case of unabashed greed,” said Rosemary Batt, a professor at Cornell University’s School of Industrial and Labor Relations, who has studied private equity’s involvement in health care. “We’re talking here about safety-net hospitals that are serving the poor, the unemployed, disproportionately people of color. They’re just doing this immoral sucking out of resources. That is beyond the pale.”
Prospect’s story is also a bleak omen for the future of America’s health care system — and a particularly telling one because the company is effectively on its second tour through the private equity system. The business model for private equity firms like Leonard Green involves stripping cash out of the organization, loading down operations with debt and reducing every conceivable expense. After that is accomplished, firms then usually resell the operation to another buyer within five years.
The saga of Leonard Green and Prospect embodies a broader trend. Starting around 2010, giant private equity firms like Cerberus Capital Management and Apollo Global Management rushed into the hospital business, buying up facilities and assembling chains. Their moves intensified a shift to for-profit ownership among the nation’s 5,200 general hospitals: from about 15% for-profit in 2000 to 25% for-profit in 2018, the most recent year for which data is available. The biggest corporations still own more hospitals than private equity firms: HCA, for example, owns about 180; Apollo claims 89 and Cerberus had 37 at its peak, before selling this year.
Almost as quickly as it rose, private equity firms’ ardor for hospitals has “substantially cooled” in the past few years, said Lisa Phillips, editor of HealthCareMandA.com, which tracks private equity health care deals. “I’ve seen the whole M&A market for hospitals dry up.”
Making quick profits from operating hospitals proved daunting. “There’s so many other places to put their money in health care that they can flip faster,” Phillips said. (The firms have lately turned their sights to outpatient clinics or staffing emergency rooms.) “Private equity really wants to see growth fast and get out,” Phillips said. “They’ve squeezed it as dry as they can.”
Those actions have made it hard for the firms to sell hospitals, according to Eileen Appelbaum, senior economist at the Center for Economic and Policy Research, who studies private equity. “They’re loaded with debt and anybody sensible is not prepared to buy them.”
Indeed, Leonard Green is now on its third attempt to sell Prospect. Other firms, facing growing losses, have placed some hospitals into bankruptcy and closed others, offering up their real estate while seeking to sell the rest of their medical operations at bargain-basement prices.
The exodus isn’t necessarily good news, according to Batt and other experts. As they see it, this is merely the latest stage in a slow descent to the bottom. Given the cash and assets that private equity owners have already taken out of hospitals, their new owners will be left with heavy debt and limited resources — as the saga of Leonard Green and Prospect demonstrates. Faced with that financial plight, these hospitals will be compelled to cut costs even further, making it ever harder to deliver quality care.
Just over two decades ago, Sam Lee and the private equity firm where he then worked were among the first such firms to invest in hospitals — and it started almost by accident. In 1998, most private equity firms avoided health care. The industry was complicated and highly regulated, both anathema to private equity. Kline Hawkes, the young Los Angeles firm where Lee worked, had made only one previous health care investment, in a medical instruments company. The founder of Kline Hawkes was an investor named Frank Kline, who told ProPublica that no person named Hawkes was ever involved with the firm. Kline picked a British-sounding name to add a dash of gravitas.
In 1998, Kline Hawkes was approached by David Topper, a veteran hospital marketing executive who was seeking funding to buy eight struggling little hospitals in the LA area (one would be immediately sold) and assemble them into a company called Alta Healthcare Systems. Then 49, Topper started Alta after recovering from a fire at his home that left him on a respirator, with third-degree burns over 70% of his body.
Kline was skeptical. He relented only after a bit of salesmanship: Topper surprised him by turning up at a dinner meeting with 15 doctors who promised to send patients to Alta’s hospitals. It convinced Kline that Topper could deliver growing revenues. He decided to invest, putting up $3 million in equity toward the $34 million purchase price. Alta borrowed the rest.
Kline assigned Lee, then 32, to oversee the investment. Lee’s experience was in finance, not medicine. Born in South Korea and raised in Tampa, Florida, he was an industrial engineering graduate of Georgia Tech. Lee had worked for Andersen Consulting (“as a grunt,” he later explained in a deposition) and a Florida software company before getting an MBA at Harvard and joining Kline Hawkes.
Lee was whip smart, could be charming when he wanted to and preferred to operate behind the scenes. He hasn’t been quoted in the press in more than 20 years. (In recent years, his wife’s Facebook account has shown him celebrating holidays with her and their three college-age sons; family vacations in Maui, Aspen and Las Vegas; and pilgrimages to the Super Bowl and the American Music Awards.)
Lee became “super-involved” in overseeing Alta even as Kline Hawkes quickly found an exit, according to Kline. Just three years after investing $3 million, the firm cashed out in 2001 with $5.3 million, a 73% profit. Already deeply indebted, Alta had to borrow more to pay the $5.3 million.
For his part, Lee decided to stay. He sensed a major opportunity, according to a corporate history his spokesman provided: “While the cost of healthcare was growing at three times the rate of the US GDP, hospitals as a group were inefficient in delivering quality care.” Lee quit the private equity firm in 2000 and joined Alta full time, becoming its co-president and a 50-50 partner with Topper. Lee became the primary decision-maker. Topper’s main role was to be Alta’s salesman, schmoozing doctors and nursing home administrators to feed Medicaid and Medicare patients into their small community hospitals, located in low-income neighborhoods.
From the beginning, Lee and Topper brought the cost-slashing philosophy of private equity firms to Alta and its hospitals, according to interviews with former executives and multiple lawsuits. The effects were felt almost immediately.
Critical medical equipment and supplies, including drugs and tracheotomy kits, were “routinely unavailable” at Alta’s hospitals because bills hadn’t been paid, according to a breach of contract suit later filed by a former Alta chief operating officer named Michael White. According to the suit, the company regularly “changed vendors to avoid payment” and “bounced checks as part of its regular cash management process.” (White’s suit was later settled.) The portrait offered by White was affirmed by other executives, including Paul Smith, a former vice president for finance at Alta, who told ProPublica he recalled “having to switch vendors sometimes because we would get cut off.” Emergency room staff in at least one Alta hospital lacked chemical reagents needed to perform critical enzyme tests on heart attack patients, according to another former Alta executive who sued the company. Employees sometimes had to spend their own money to buy toilet paper for patients.
The stringent penny-pinching wasn’t enough to generate profits at first. Some of Alta’s hospitals, according to company filings with the California health department, were averaging 30% occupancy. According to White’s lawsuit, Alta lost a cumulative total of $35 million through the end of 2002. In April 2003, Lee and Topper abruptly shut down two of their hospitals, placing them into bankruptcy (and eventually liquidation), while selling a third. Lee disputed some of White’s claims, but acknowledged in the company’s written responses that this was “a difficult time,” resulting in “some bounced checks and some payables being missed.” He insisted that “ultimately, all the vendors were paid.”
Shedding those money-hemorrhaging operations helped Alta turn a financial corner. By cutting costs and maximizing government reimbursements at its remaining facilities, Alta started to eke out profits from its four remaining hospitals. “Their model was really about just bare minimum,” said Mike Heather, who later helped Prospect acquire Alta and served as Prospect’s CFO from 2004 through 2013. Alta’s facilities “were sort of war-zone hospitals. They were very, very dirt cheap in every respect.”
Things began looking up for the business. Occupancy climbed, and individual hospitals began reporting growing profits — though perhaps not as much as Alta’s financial reports suggested. “When you looked on paper, it was a beautiful turnaround,” said Jack Lahidjani, who was Alta’s CFO from 2003 to 2006. The reality, he said, was that Lee was “putting out aggressive financial statements.”
Lee “fought tooth and nail” to hike Alta’s reported profits in 2006 by booking inflated estimates for forthcoming Medicaid revenues, according to Michael Bogert, who prepared Alta’s audited financial statements for Moss Adams LLP, the company’s accounting firm. “He had our partners convinced I was being too conservative,” said Bogert, now executive vice president for corporate finance at Prime Healthcare, a Prospect rival. Lee convinced a Moss Adams senior partner to overrule him — something that had never happened, Bogert said, during more than 300 previous hospital audits. (Moss Adams declined to comment.)
The rosy numbers helped attract a buyer for Alta in 2007: Prospect Medical Holdings, a small, publicly traded company that managed 10 physician groups. The deal paid off Alta’s debt and netted Lee and Topper $50 million each in cash and Prospect stock. Those shares were enough to give Lee and Topper control of Prospect. Their ambitions were only growing.
The merger nearly wrecked Prospect. Just weeks after the deal closed, Prospect’s audit firm, Ernst & Young, discovered inflated revenues and profits on Alta’s books. (The E&Y senior manager assigned to examine Alta’s financials told ProPublica the misstatement was “very easy” to find.) As a result, Prospect was unable to complete its Securities and Exchange Commission filings, forced to cancel its annual shareholder meeting, delisted from the American Stock Exchange and defaulted on its loans, triggering millions in lender penalties. In April 2008, Alta restated its 2006 revenues, lowering them by about $4 million. In the restatement, filed with the SEC, Moss Adams explained that Alta had misused and ignored “factual information that existed” at the time it compiled the inflated financial statements. (Prospect told the SEC the company’s investigation had found no “intentional wrongdoing.” Lee, in his statement to ProPublica, dismissed the significance of the Alta restatement and said the bigger problem at the time was that Prospect was in far worse shape than he’d been led to believe.)
Despite the turmoil, Lee became CEO of Prospect and consolidated power. He acquired a moldering flagship hospital, the 420-bed Brotman Medical Center, in Culver City, California, out of bankruptcy; replaced Ernst & Young; fired and sued the company’s outside law firm; and ousted Prospect’s 74-year-old founder, Dr. Jacob Terner. A year later, Lee halted payment on Terner’s exit package. (Terner, who has since died, sued and won the full $1 million he was due, plus legal fees, in court.)
Michael Terner worked as an executive vice president at Prospect for five years and departed around the same time as his father. He says his dad covered for Lee after the merger by soft-pedaling Alta’s accounting problems only to have Lee turn on him. “You’ll find,” Terner said, “if you go through the history of Sam Lee, there’s a lot of corpses.”
Indeed, the trail of litigation, unpaid bills and accusations was already lengthy. Two former senior executives at Alta claimed that Lee and his longtime partner had cheated them out of a promised equity stake. Minority investors in Brotman accused Lee of cooking its books to defraud them. Dozens of lenders, executives, doctors, staffing agencies and hospital vendors filed lawsuits and court claims over unpaid debts and broken agreements. Three law firms hired by Alta later sued for unpaid bills. Lee professed his innocence and fought the actions, typically settling for discounted amounts. The pattern would continue at Prospect.
Lee was demanding and unrelenting, according to people who worked for him. “One day you’re like a superstar and the future of the company,” said Steve Aleman, who became Prospect’s CFO in 2013. “The next day you’re absolutely in the doghouse.”
(Last fall, Lee abruptly terminated Aleman, who then filed suit claiming he is owed for unpaid compensation and canceled company stock options. Aleman is now CFO of Prime Healthcare. In its responses for this story, Prospect made an array of unsubstantiated allegations about Aleman’s workplace conduct during his 12 years at the company. A Prospect lawyer also wrote Aleman, accusing him of making “false and defamatory” statements to ProPublica. In a letter responding to the company, Aleman’s lawyer denied that his client made any defamatory statements. Aleman confirmed to ProPublica the accuracy of his comments in this article. In addition, Prospect made accusations about the conduct or character of seven other former executives and employees critical of the company, including two other former CFOs of Prospect or Alta. Aleman called the charges an “offensive smear campaign that Prospect is attempting against myself and others who are no more than victims of Lee’s broader plan to enrich a few and hurt many.”)
Lee churned through executives and could turn brutal, screaming at subordinates or grilling them over a tiny issue. “He’d go through three hours of literally just peeling the skin off somebody,” Aleman said. Lee would make executives cry, recalled former Alta CFO Lahidjani, who counted himself in that category.
Meanwhile, the CEO whittled costs to the bone by finding cheap sources for medical supplies; through “real-time” monitoring of hospital staffing; and slow-walking every vendor payment. “He was very proud of making it impossible to get a dollar out,” former CFO Heather said. “He would just not pay people as a way to negotiate. He would shut off things you’d say it was crazy to shut off.”
Through its spokesman, Prospect said “we do not have a slow-pay policy at Sam Lee’s or anyone else’s direction.” It said the company’s implementation of a new financial system over the past 12 months has caused a number of vendor payment delays and “credit holds.”
Prospect was far less obsessive about patient care issues, according to former company executives. “That quality component was always lax in my GFN,” one said. “It’s always the bottom line.” In public testimony a few years ago, Prospect executives acknowledged the point. “As an organization, we had delegated the role of the quality program to a local level,” Senior Vice President Von Crockett testified, “without the proper oversight at a corporate level.”
By 2010, the investing trends had changed. Big private equity firms were flooding into the hospital business. Leonard Green, a firm known for its investments in marquee consumer brands like Whole Food Markets and Neiman Marcus, joined the rush.
Prospect’s business, which involved spending as little as possible and squeezing profits out of Medicare and Medicaid reimbursements, while using Prospect’s physician groups to generate patients, didn’t fit the pattern. But Leonard Green viewed Prospect’s approach as one that could be applied widely and used to acquire more hospitals and reap more profit. Lee was eager to expand, too, confident that his business model could be applied to many more struggling hospitals, multiplying the company’s revenues from about $470 million in 2010 to several billion.
Leonard Green struck a deal that aligned Lee’s financial interests with its own. In addition to more than $2 million a year in salary and bonus, he would get 20.2% of Prospect’s shares (and dividends). Topper received a 14.9% stake, while Leonard Green got 61.3%. The rest was distributed in the form of stock options to Prospect’s top executives, to whom Lee dangled the possibility of a big future payoff.
Leonard Green’s point man for the Prospect stake was a former investment banker named John Baumer, a graduate of Wharton and Notre Dame, where his father had worked as the university’s comptroller. At Notre Dame, Baumer and his wife have endowed the lacrosse team’s head coaching position ($3 million) and funded a new men’s dormitory ($20 million). The Baumers live about 30 minutes from the firm’s Santa Monica offices in a large oceanfront property on Manhattan Beach, purchased, through a corporate entity he set up, for $18.4 million.
Baumer and two Leonard Green colleagues, who together made up a majority of Prospect’s five-member board, left day-to-day health care operations to Lee. The private equity board members focused on profits — and wasted little time in beginning to reap returns.
In 2012, Prospect paid Leonard Green and its investors a total of $188 million in two rounds of dividends. Prospect raised the money by issuing junk bonds. Only two years in, the private equity fund had made back most of its $205 million investment.
As Prospect cranked up its ambitious expansion plans, it consistently told the targets of its acquisitions and the government regulators who needed to approve them that it was in the business of saving troubled hospitals. “We haven’t closed hospitals, and we don’t close services,” Dr. Mitchell Lew, Prospect’s president, said at a Connecticut public hearing in March 2016. “We’re in this for the long term, OK?”
Lee’s first out-of-state acquisition would erase that claim. In 2012, Prospect paid $48 million for San Antonio’s Nix Health System. Nix included a 208-bed downtown hospital, an inpatient psychiatric center and multiple outpatient clinics.
Nix was an unusual acquisition for Prospect. It was profitable and had a higher federal quality rating, with four out of five stars, than any other Prospect hospital. Yet Prospect claimed the role of savior. In a press release announcing the deal, Lee said the company “will help ensure the long-term success of Nix.”
That success didn’t last long. Prospect removed Nix’s longtime CEO in 2015 and established control from headquarters in LA, while cycling through four more CEOs in the next four years. Doctors who had long relationships with Nix stopped referring patients. After decades of profits, Nix began losing money.
In 2019, after repeatedly promising to keep at least part of the system open, Prospect shut it all, laying off nearly 1,000 employees. The company sold Nix’s downtown building to a hotel chain and exited with a big loss. “It was mismanaged at the corporate level,” Aleman said. “It went from making about $20 million to losing money. It was an absolute disaster.”
In its responses to ProPublica, Prospect blamed the failure on a “catastrophic” broken water pipe in 2016 that flooded “the entire hospital infrastructure,” forcing doctors and patients to go elsewhere for months. “Volume and physicians,” the company said, “never returned to pre-flood levels.”
Prospect is now poised to shutter another acquisition it eagerly pursued: East Orange General, outside Newark, New Jersey. In late 2015, Prospect outbid two other companies with a $44 million offer for the 196-bed hospital, then in bankruptcy and losing more than $2 million a month.
Prospect vowed to spend $52 million on capital improvements and keep the hospital open for “no less than five years.” Three years into that vow, with losses still running about $1 million a month, Prospect’s warnings that it wanted to sell or close the hospital spurred state lawmakers to hand the company an “emergency” $15 million grant.
Lee couldn’t find a buyer, Aleman said: “They would have just given East Orange away — literally handed over the keys. They wanted to get rid of it at all costs.” In its statement, Prospect said it will keep East Orange open into 2021 while it continues to seek a buyer and thus “will surpass our five-year commitment of operating the hospital.” The company also said it has met its $52 million capital-spending promise under provisions of its purchase agreement that allow it to count debt payments and routine maintenance costs toward that total.
In Rhode Island, Prospect was welcomed as a savior in 2013 when it agreed to pay $45 million for controlling ownership of two money-losing Providence-area hospitals: 220-bed Roger Williams and 359-bed Our Lady of Fatima. Eager to save jobs, Fatima’s powerful United Nurses & Allied Professionals union endorsed Prospect’s bid.
State regulators, who had to approve the sale, had two big concerns. The first was the $188 million in dividend payouts previously made to Leonard Green and other investors. Those payments raised fears that Prospect wouldn’t fulfill its pledge to spend $90 million on capital improvements over four years. No problem, Prospect responded; it wouldn’t pay out any more dividends. “Prospect’s management and representatives have given assurances that this was a one-time event and that there are no plans to make a similar distribution in the foreseeable future,” the Rhode Island attorney general noted in his written findings on the hospitals’ sale in 2014.
Employee pensions was the other issue. The retirement plan for Our Lady of Fatima, which 2,700 past and current hospital employees were counting on, had been woefully underfunded since 2008. The problem had escaped federal ERISA oversight because of the hospital’s affiliation with the Catholic Diocese of Providence, making its pension system a legally exempt “church plan.”
The size of the problem was a secret. During negotiations over the sale, Prospect was repeatedly briefed on actuarial studies showing that even after a $14 million contribution that Prospect agreed to make, the plan would run out of money by 2036, while still owing about $98 million in retirement benefits.
After learning this, Prospect negotiated contract language freeing it from any future pension liability. The retirement system, and its massive funding deficit, would become the responsibility of a nonprofit community board, which had no reliable source of income.
Prospect officials never disclosed the plan’s dire straits during the state approval process. Instead, retirees nervous about Prospect’s purchase were shown a PowerPoint presentation stating that Prospect’s one-time contribution would “stabilize plan assets.” Lee attested in writing that the payment would “assure that the pensions and retirement of many former employees, who reside in the community, are protected.” Prospect told the attorney general that any necessary future payments would “be made based on recommended annual contribution amounts as provided by the Plan’s actuarial advisors.” Remarkably, no one addressed who would actually make such payments. Rhode Island approved the purchase in 2014.
Over the three years that followed, neither Prospect nor anyone else paid a penny into the pension plan. In 2017, the system was declared insolvent and placed in receivership. The court-appointed receiver has filed multiple lawsuits accusing Prospect and the diocese of “omissions and half-truths actionable as fraud,” demanding that they help make the pension whole. The cases are all pending.
In its statement, Prospect noted that its purchase agreements for the hospitals “clearly spell out” that the company had “no responsibility” for funding the pension plan. It also said it would have been “economically impossible” for Prospect to take over liability for the retirement system and called the receiver’s allegations about the company’s actions “false and unsubstantiated.” Both Prospect and the diocese deny concealing the pension system’s condition.
Meanwhile Prospect sought to cut costs by reducing the workforce, trimming benefits and tightly monitoring each hospital’s patient count throughout the day from its LA headquarters, sending nurses and aides home whenever possible in mid-shift.
After hearing about a consultant’s 2017 report describing dirty and damaged operating room instruments, the union at Fatima requested documents about this and other problems revealed by various inspections. Prospect refused, and failed to turn over any of the materials, despite an order to do so from the National Labor Relations Board in April 2019, affirmed by the 1st U.S. Circuit Court of Appeals in March 2020.
Prospect asserts that it promptly addressed the consultant’s concerns about dirty and damaged surgical instruments, but that it viewed the report as “proprietary” and thus “availed itself of the court system.” The company added: “As we recently received a ruling from the Federal Court to produce the document, we have complied with the order.”
Prospect has yet to hand over any documents, according to the union. “Prospect is lying in claiming that they’ve complied with the order,” union general counsel Chris Callaci said. Dealing with the company, he added, has been “a parade of horribles.”
Many of these problems had yet to emerge by 2015, as Prospect struck rapid-fire deals to double the company’s size. That’s when it reached agreements to spend more than $500 million to buy hospital systems in three states: East Orange General, in New Jersey; three community hospitals in Connecticut; and a four-hospital system in suburban Delaware County, Pennsylvania, west of Philadelphia. Prospect promised to spend hundreds of millions more on pension and capital improvements.
Prospect was reporting revenues of about $1 billion in 2015, with operating profits of $108 million. After digesting the acquisitions in the pipeline, the company projected, revenues and profits would surely soar.
Leonard Green was now ready to fully cash in and exit its investment. In October 2015, the firm hired Morgan Stanley to find a new private equity buyer for Prospect. The company’s 92-page “confidential information memorandum,” prepared for prospective acquirers and obtained by ProPublica, promoted the company’s “cost-effective care” model, including daily “flex” management of hospital staffing, use of low-cost sources for medical supplies and a focus on high-profit programs for treating the seriously mentally ill.
Bain Capital and CVC Capital Partners were the two final bidders. Both made offers around $1.2 billion, according to sources familiar with the talks. Then, in early 2016, U.S. capital markets tightened amid fears of a recession, dashing the company’s hopes to get even more. Lee decided to hold off on a sale. Aleman said the discussed reasoning was that Prospect could bring a far richer price after mining its pending acquisitions for bigger profits.
But a new problem had emerged behind the scenes during this period: improper Medicare billing. The issue, described in internal documents obtained by ProPublica and interviews, involved “unsupported” reimbursement codes submitted by Prospect’s physician-management business, whose dramatically increased profits the company had promoted to potential buyers. The problem was discovered in August 2015 during a routine compliance audit by nurses with Inter Valley Health Plan, a California HMO that sent Medicare Advantage patients to Prospect doctors and, as a result, had shared in the improper windfall (unknowingly, according to Inter Valley).
Inter Valley promptly notified Prospect, which expressed skepticism that anything was wrong, according to Inter Valley chief operating officer Susan Tenorio. “They really didn’t take us seriously,” she said. “The response was: ‘We do this all the time. Nobody has questioned it.’ That’s when I went back to our CEO and said, ‘There’s a problem here.’”
Inter Valley began investigating, with help from a law firm and outside consultant. It found that Prospect had submitted an estimated $22.6 million in potentially improper charges, which the federal government had already paid. Several million dollars more in improper claims, not yet processed, had to be canceled, according to Inter Valley. Inter Valley’s CEO and its chief compliance officer then sent a letter detailing their findings to the Centers for Medicare and Medicaid Services in August 2016.
The letter, obtained by ProPublica, reported that Prospect had submitted thousands of claims dating back to 2013 that were “not supported by audited medical charts.” It added: “In many instances, diagnosis codes were submitted for dates of service for which there was no evidence in a medical chart confirming that the [Prospect physician] had a face-to-face visit with the beneficiary.” Most of this “upcoding” involved claims that individual patients had made two visits to Prospect doctors on the same day. “We reported everything,” Inter Valley CEO Mike Nelson said. Everyone on Inter Valley’s board, he added, accepted that its organization had been reimbursed for false charges. “Making it right is what we should do,” Nelson said.
Prospect, Inter Valley and a hospital used by the plan’s patients had to repay the federal government for the improper income they’d received. Nelson said the three parties set aside a combined $22 million to cover the reimbursements while CMS completed its still-unfinished audit of how much is due. (CMS did not respond to requests for comment.)
Prospect’s own consultant, Alvarez & Marsal, largely confirmed Inter Valley’s findings in September 2016 in a confidential draft document reviewed by ProPublica. Alvarez & Marsal was also concerned the problem extended far beyond what Inter Valley had discovered: that Prospect had submitted bogus claims for more than 20 other Medicare Advantage plans, including United Healthcare and Blue Shield.
Another of the Medicare Advantage plans that received payments because of Prospect’s improper claims, CalOptima, said in a statement that Prospect first informed it in March 2016 of an “inadvertent and isolated” billing error from a single month in 2015. Months later, Prospect acknowledged the problem was far more widespread. It eventually turned out there were 3,847 “erroneous” claims over four years, requiring $2.8 million in repayments to CMS, including $1.7 million from Prospect. Because the improper claims were eventually self-reported, the government has taken no action against Prospect.
The ultimate total cost to Prospect from the improper billing episode, including expected income the company lost as a result, was in the tens of millions, Aleman estimated.
Prospect asserted that its cost was actually $8.5 million and that “management was unaware” of any inappropriate billing until after the fact. The company blamed the episode on the vice president who had presided over all reimbursement submissions, who was fired. In an interview, the woman, who asked not to be identified, told ProPublica, “They blamed me for something I didn’t do.” Inter Valley’s Tenorio called her “a scapegoat.”
Meanwhile, three lawsuits have charged Prospect with different allegations of billing fraud at its flagship hospital in Culver City. According to a pending suit filed by Charles Harper, a 28-year employee who served as director of cardiopulmonary therapy, the hospital fraudulently billed Medicare for individual respiratory therapy while regularly requiring its staff to treat two patients at the same time, a practice known as “stacking.” Harper claims he was fired for complaining about the wrongdoing. (Prospect denies any improper billing and says Harper’s job was eliminated because of diminished demand for respiratory services.)
A second lawsuit filed in federal court claimed the hospital inflated Medicaid revenues at its Miracles detox center by admitting financially needy or homeless patients with “no medical reason for being hospitalized for chemical dependency.” The plaintiff, a former nurse there who sought whistleblower status for the suit, alleged that some patients were admitted so often, without undergoing standard addiction screenings, that the staff referred to them as “frequent fliers.” Federal prosecutors ultimately declined to join the case but allowed it to proceed as a private action against Prospect and the hospital under the False Claims Act. Prospect settled in 2017, agreeing to pay $275,000 while asserting that the claims were “wholly without merit.”
The third suit alleged an “illegal patient procurement scheme” to generate fraudulent Medicare and Medicaid claims. Christina DeMauro, an emergency room nurse at Culver City for six years, asserted that a special team of hospital “marketers” generated a stream of about 20 elderly patients a day, most suffering from chronic dementia, who were admitted through the ER despite having no problems that required hospitalization.
According to her suit, these patients were brought from nursing homes and other senior facilities, “many well over 100 miles away,” when their Medicare benefits there, capped at 100 days, were about to expire. After an unnecessary hospital admission requalified them for Medicare benefits, the patients were then returned to their facilities, according to the suit, boosting government billings for both Prospect and the senior facilities. Filed in 2018, the case remains pending in Los Angeles. DeMauro alleges that “unlawful retaliatory conduct” she faced after complaints about these practices forced her to resign.
Don Andrews, a seasoned administrator who worked as emergency department director during part of this period, backed these claims in an interview with ProPublica. Andrews said Prospect marketers insisted that elderly mental health patients “from nowhere near Culver City” be admitted through the emergency room even when no psychiatric beds were available in the hospital. He says this routinely resulted in a handful of patients being held for days in a crowded ER “overflow” area with no beds or privacy — just chairs and a single bathroom — serving as a sort of “bootleg inpatient psychiatric unit.” A few years before Andrews got there, one 79-year-old man suffering from dementia disappeared after being left unattended in the overflow area, according to a state inspection report and a lawsuit by his family. His body was later found on a beach 7 miles away; the man had drowned. The “overflow” area remained in use until about 2018, when it was permanently locked, hospital employees said.
Prospect’s spokesman denied DeMauro’s allegations but declined to address specifics because her litigation is pending.
This same hospital, the company’s largest, is also the most visible monument to Prospect’s neglect. Long called Brotman Medical Center, it is best known for its burn center, which treated Michael Jackson in 1984 after his hair and jacket caught fire during the filming of a Pepsi commercial.
In 2013, four years after buying the hospital, Prospect grouped Brotman with two of its other hospitals, renaming it Southern California Hospital at Culver City. The move, made to qualify for extra government subsidies for treating low-income patients, helped Brotman generate profits.
But Brotman has continued to deteriorate. In 2015, inspectors shut down all elective surgery at the hospital for eight days, citing a “widespread pattern” of poor infection control and sterility; the problems resulted from inadequate heating and cooling systems. That episode, as well as the death of the ER-overflow patient whose body was found on the beach, resulted in immediate jeopardy findings.
That same year, state health inspectors cited the hospital after a broken refrigeration system in its morgue caused a woman’s corpse to decompose so badly it produced a “noticeable stench,” making it impossible for her family to have an open-casket funeral. Meanwhile, one of the hospital’s elevators has been out of order for 10 months. Patients needing MRI scans must be taken outdoors and down an alley, past dumpsters and into a hospital parking lot, where the scan is done in a rented trailer.
Prospect said it quickly resolved all immediate jeopardy findings, something a hospital is required to do to remain eligible for federal reimbursements. It said it is “working with state and local officials to expedite” the broken elevator’s replacement. And it said it is “not uncommon for hospitals to utilize a mobile MRI,” but plans are underway to relocate the MRI inside a nearby building.
When it rains in Culver City, water drips from ceilings throughout the hospital’s two buildings, forcing staff to relocate patients and plant orange buckets in the hallways. In 2014, a patient’s wife filed suit after soaked ceiling tiles fell and struck her in the head while she was sitting in the hospital lobby. This January, a giant brown mold formation burst through the wall near a fourth-floor nurses’ station. Noted the resulting complaint to the California health department: “There are mushrooms growing out of the wall (which they cut off and patched back up). There is leakage from the ceiling when it rains you can taste the mold in the air.”
Employees told ProPublica the problem has persisted for years and provided photographs and videos documenting numerous leaks as well as the mold growth. Prospect asserted, by contrast, that “all leaks are identified and fixed as they occur.” The company said roof replacement has begun on the main patient building.
A 2018 state inspection found the pharmacy staff at the Culver City hospital had for months ignored findings of “fungal air growth,” “bacterial organisms” and mold in equipment used to mix patient medications in a sterile environment. According to the report, this resulted in the dispensing of about 21,000 doses of “adulterated dangerous drugs” to patients over a nine-month period. In September 2019, California’s attorney general formally charged Prospect executives, including Lee, the hospital and its supervising pharmacists, with “gross negligence,” initiating proceedings to revoke or suspend the hospital’s pharmacy permit. The matter remains pending. Prospect asserted that “no patient harm occurred” from the “error,” which has been corrected, and said the pharmacy is now “fully operational.”
Eventually, word of Prospect’s practices spread, causing alarm when the company sought to acquire new hospitals in other states. As Connecticut in 2016 weighed whether to approve Prospect’s purchase of three hospitals, the state sent a team to California to investigate five recent immediate jeopardy findings, which had placed one Prospect hospital license on a “termination track” for cutoff of Medicare and Medicaid funding.
Prospect executives tap danced, alternately denying problems and explaining away the repeated findings of imminent threat. SVP Crockett testified, for example, that “there was no specific patient harm” that occurred, while insisting Prospect acted aggressively to address the “allegations,” including by creating new posts for a “chief quality officer” and a “vice president of regulatory affairs and patient safety.”
The company claimed it would act differently in the new states it was entering. “What happened in California certainly is concerning,” Prospect’s president, Lew, acknowledged at the hearing. “… And so, we’re not bringing California’s quality program to Connecticut,” he said. “If you want to look at us as performing an ‘F’ on the test in California, that student is not coming here to tutor Connecticut on quality, OK?”
As it turns out, Prospect hasn’t earned stellar grades in Connecticut either. State officials approved the company’s acquisitions on a conditional basis in 2016, while imposing a three-year monitoring regime that health department officials describe as unprecedented. Before the monitoring period expired, two of Prospect’s newly acquired Connecticut hospitals were slapped with immediate jeopardy findings.
This time, two patient deaths triggered the jeopardy findings. In 2018, Manchester Memorial Hospital mishandled two high-risk pregnancies: One woman died after delivering a stillborn baby; a second gave birth to an infant with severe encephalopathy, a form of brain damage, after an emergency cesarean section was performed too late. Waterbury Hospital was found to have failed to properly monitor two suicidal patients on a single day in March 2019. In one case, staff returned a belt to an “actively suicidal” psychiatric patient who then used it to hang himself in his hospital bathroom. After his death, the hospital failed to notify police. A second patient attempted suicide by tying hospital socks around his neck after being left unwatched while a nurse went to lunch.
The Joint Commission on Hospital Accreditation responded by initially denying Waterbury’s accreditation, required to receive Medicare and Medicaid funding, after an inspection that found 42 quality standards “out of compliance.” In December 2019, Connecticut regulators extended the monitoring of the state’s three Prospect hospitals until May 2021.
More failures appeared in the company’s biggest purchase yet, agreed to in late 2015: the four-hospital Crozer-Keystone system in Pennsylvania. Prospect paid $300 million. It made other promises as part of the deal: to spend an additional $200 million in capital improvements within five years; to keep all the hospitals open for a decade; to fund $171 million in pension benefits within five years; and to endow a community health care foundation for $53 million.
Almost immediately, Prospect began contesting the agreement. Always eager to delay and reduce a big outlay, Prospect deferred $21.5 million of the foundation funding for 90 days — and then refused to make the payment altogether, challenging how much it owed.
The foundation sued, eventually extracting Prospect’s agreement to submit the matter to arbitration while putting the money into escrow. When Prospect then missed the escrow deadline, the foundation began garnishing the company’s accounts and sought to have a receiver appointed over all its financial transactions. Prospect finally paid, 18 months late, after the arbitrator awarded the foundation $23.7 million, including interest. (Prospect’s spokesman said the matter was “referred to the court” because efforts to resolve the amount of the payment were unsuccessful.)
At Crozer-Keystone, as elsewhere, Prospect has aggressively moved to lower costs. It sought, unsuccessfully, to reduce nurses’ accrued vacation time and to cut pension benefits for all employees who didn’t work full time. The company has also waged a four-year battle to halve the tax assessments on all its hospital properties. (Prospect says it believes the assessments are excessive and will pay “once a final ruling is given as to what is fair and proper.”)
In November 2018 came yet another immediate jeopardy finding. This one stemmed from patient-safety violations in a mental health ward at 300-bed Crozer-Chester Medical Center, the system’s largest hospital. According to state health department inspectors, video monitors at a nurses’ station for maintaining watch over suicidal patients were turned off or ignored; an activity room was left unattended as psychiatric patients milled about; patients were placed in restraints or in seclusion without proper documentation; and facilities in the locked unit treating elderly psychiatric patients, some of them suicidal, presented multiple hanging hazards.
Hospital workers have regularly reported staffing shortages, sometimes forcing delays of scheduled medical procedures. Two medical employees at Delaware County Memorial Hospital are lead plaintiffs in a national class action against Prospect, claiming insufficient staffing regularly forces hospital employees to work, unpaid, through meal breaks. The company denies the allegations, including that any of its hospitals suffer from staffing shortages.
As elsewhere, Prospect’s failure to pay bills on time has delayed repairs and resulted in supply shortages. At Delaware County Hospital, veteran nurse Angela Neopolitano said a call-bell system in one unit, which patients use to summon help from nurses, has been broken for more than two years. “Creditors would not come in to fix things because the hospital owed them money,” she said. “Then we suffer and the patients suffer.”
Paramedics have repeatedly gone to fuel up ambulances using a hospital credit card, only to have it rejected, according to Larry Worrilow, assistant chief for the Crozer-Keystone EMS system. “It’ll be fine for six or eight months. And then, all of a sudden, boom — you can’t get fuel,” said Worrilow, who has worked there since 1977. “After you rattle their chains, they pay part of the bill, get their credit hold lifted, and you can get fuel.” (Prospect said the card was rejected because it placed a charge limit on it as a security measure, and “when it was brought to our attention that the account was reaching the credit limit frequently, we increased the credit limit to ensure there was not disruption of services.”)
The system’s eight ambulances are so old — two have more than 275,000 miles on them — that they frequently break down, according to Worrilow. “There’s plenty of times when we went to go on an emergency call and the ambulance wouldn’t start,” he said. “You have to send the next closest ambulance. Or you get to the scene and the ambulance won’t run.”
COVID-19 caught many of America’s top medical centers by surprise. But Prospect’s penchant for scrimping on staff and medical supplies left its hospitals with little margin for error.
In Rhode Island, for a time in March, hospital employees at Our Lady of Fatima were threatened with discipline for wearing their own masks, even though the hospital didn’t have enough to give them. Nursing assistant Doreena Duphily, who worked in the geriatric mental-health ward, where 19 of 21 patients were infected, was out sick for three weeks with COVID-19 herself. Duphily blames the hospital’s frequent rotation of its limited staff to different floors for spreading infection. Six members of the environmental services staff, responsible for cleaning patient floors, also got sick. On May 1, department supervisor Jerald Ferreira, 63, died of COVID-19.
“We were probably about three weeks behind every other hospital in getting just the basics,” said Fatima RN Lynn Blais. “All of a sudden COVID comes in, everybody should have surgical masks, and we don’t have two days’ worth of surgical masks, much less two months of surgical masks. We were caught with our pants down. That germ was all over the floor.”
In Culver City, nurses unable to get proper protective gear for a time donned plastic garbage bags. ER secretary Chudi Long says she became infected after being denied a mask despite working in close quarters with COVID-19 patients. After her breathing grew weak while she was battling the virus at home, Long was rushed to another hospital’s ER, where she lost two front teeth during an emergency intubation, and spent seven days on a ventilator.
Prospect denied it ever lacked PPE at any of its hospitals.
Leonard Green may not have been involved in Prospect’s day-to-day management, but it has popped up periodically to make sure it gets a return on its investment. In 2018, less than four years after assuring a state attorney general that it had no plans to seek new dividends, Prospect attempted to do just that. It began preparing to issue a $600 million dividend. As always, the plan envisioned funding that payment through debt.
Moody’s, the ratings agency, was dismayed by Prospect’s soaring debt. It lowered the company’s credit rating in response. As a result, Prospect reduced the dividend to $457 million. In a letter to Rhode Island officials, Prospect insisted it didn’t violate the pledge it made back in 2014 because “in 2014, no dividends were planned.”
That $457 million raised the total in dividends extracted from Prospect since Leonard Green acquired it to $645 million. Roughly $386 million had gone to Leonard Green’s investors and the firm (which gets 20% of all fund profits); $128 million to Lee; $94 million to Topper; and the remaining $37 million was divided among other Prospect executives. (Another $14 million in fees went to the private equity fund.)
Having collected that cash, Leonard Green made a second attempt to exit the investment in June 2018. By this point, Prospect had grown to 20 hospitals. Detailed management presentations to the two 2015 finalists were followed by dinners in Beverly Hills, leading to informal discussions with CVC, which was contemplating a considerably richer offer this time, according to Aleman. (CVC declined to comment.)
But once again, the sale collapsed. As Prospect headed toward the September close of its 2018 fiscal year, its business began deteriorating rapidly, torpedoing the projections it had given potential buyers. Recognizing that the bad numbers would surely blow up the deal, Leonard Green and Lee decided to hold off again. (The statement from Green and Lee denies they tried to sell the company in 2018.)
The situation grew dire. By January 2019, Prospect had so little cash that it needed an emergency $41 million loan from Leonard Green, Lee and Topper to assuage auditor fears that the company might not remain “a going concern” and to avoid violating loan covenants, according to Aleman. In March, Moody’s downgraded Prospect’s debt a notch deeper into junk territory, citing the company’s “very high financial leverage, shareholder-friendly financial policies, and a history of failing to meet projections.”
Eager to raise capital, Prospect sold its land and buildings last fall in a sale-leaseback transaction that allowed the operations to remain in the facilities. The company raised $1.55 billion. Prospect used much of the cash to pay off its loans. It had effectively replaced its debt payments with rent payments.
The sale of the land and buildings brought in much needed cash and stabilized the company. But it also meant that Prospect had shed by far its biggest asset, sharply reducing the value of the company. When Leonard Green made its third attempt to exit, the nominal price was a pittance.
In October, the private equity firm agreed to sell the firm’s 60% stake to Lee and Topper for $12 million in cash plus the assumption of $1.3 billion in lease obligations. The $12 million was to be paid by Prospect, not the two executives. As Prospect and Lee put it in their statement for this article, “In effect, the company’s money is their money.”
To Lee’s management team, who dreamed of stock option riches, it was an outrage. The low cash price would value their shares and options at a pittance, dashing their expectations of a windfall. A “drag-along” provision of the agreement would force all shareholders to sell immediately, rather than wait and hope for a better price. In February, Aleman, who’d been stripped of his stock options when he was suddenly fired last fall, filed suit in California, seeking restoration of his shares and payment of his 2018 bonus. (Under agreements Prospect makes virtually all employees sign, the case is scheduled to go to arbitration.)
For Leonard Green, the exit made a certain sense. As of this year, when the firm hopes to close the sale, Green has retained its Prospect stake for 10 years; indeed, the $5.3 billion fund that holds that and other investments was launched in 2007, making it venerable in private equity years. That fund has doubled in value overall, according to data on its investors’ websites. All told, for all investments in the fund over 13 years, ProPublica estimates Leonard Green has made more than $1.5 billion for itself from fees and its share of the fund’s profits. (Through its spokesman, Leonard Green said this figure was wrong and that the firm would “not respond to inaccurate guesses.”)
It is leaving a mess behind at Prospect. The company has little cash, weighty pension debts and lease commitments, and uncertain future earnings.
Some current and former management shareholders, working with Aleman, contemplated trying to recruit another buyer who would pay a far higher price. But when an email exploring this effort was accidentally sent to Prospect, the company responded by dispatching a letter to Aleman’s attorney, accusing the former CFO of “colluding with others in an attempt to interfere with a Company transaction.” It demanded that he “immediately cease and desist.”
Leonard Green’s sale to Lee and Topper requires approval from state officials in Rhode Island, since it involves hospitals there. The officials have postponed their decision until November, saying there are missing documents and unanswered questions. And opponents there are making a stand. The Private Equity Stakeholder Project, a union-backed research group, has produced detailed reports criticizing Green’s history with Prospect. It has lobbied public-pension investors and members of Congress to press the firm to return its dividends to the company, saying its profiteering has put Prospect’s safety-net hospitals at risk. The Fatima union and the pension fund’s receiver have opposed the sale too. “I don’t know the answer, but I think there’s something wicked going on here,” Max Wistow, the receiver’s special counsel, told a public hearing. Citing Leonard Green’s history with the hospital company, the Rhode Island state treasurer has said he will block any future investments by his state, which sunk $20 million into the fund that owns Prospect, in the private equity firm’s funds.
Leonard Green defended the transaction to state officials and a Rhode Island congressman, writing that the sale price reflects Prospect’s “future obligations” and was agreed to by “sophisticated investors” who wanted “to not burden the company with additional debt.” The firm added: “We reject any implication that we have managed Prospect in a financially irresponsible fashion or that we have put our own financial interests ahead of the interests of the hospital system. Prospect today is at no risk of financial failure.”
Given Sam Lee’s prowess at squeezing cash out of ailing institutions, Prospect undoubtedly will find profits left to extract. What it will have to offer patients is less clear.
What are off-exchange health insurance plans and how are they regulated?
For the majority of exchange enrollees, rate increases are mostly offset by increasing premium subsidies. But off-exchange enrollees bear the full brunt of the rate hikes each year, as subsidies are not available off-exchange. (Many off-exchange enrollees wouldn’t be eligible for subsidies even if they enrolled in the exchange – but some would). On the other hand, off-exchange enrollees benefit directly when a state implements a reinsurance program that reduces premiums, while residents in the same state who receive premium subsidies can sometimes end up paying higher net premiums as a result of the overall rates decrease.
Off-exchange plans are not available in the District of Columbia. Regulators there determined that coverage would only be available through the exchange. In Vermont, off-exchange plans were not available in 2014 or 2015, but “full-cost individual direct enrollment” (ie, off-exchange) became available in Vermont starting in 2016.
Are off-exchange plans regulated like on-exchange plans?
The Affordable Care Act’s consumer protections apply to all individual major medical policies, regardless of whether the coverage is sold in the exchange. In addition to the basic requirements to which all policies must now adhere, plans that are sold in the exchanges must also be certified as qualified health plans (QHPs).
QHP certification is granted by the exchanges, and can vary from one state to another. The exchanges can set QHP requirements that exceed the basic guidelines of the ACA. (Pages 33-38 of this HHS brief are helpful in understanding this.)
Although all of the plans sold in the individual market – on or off the exchange – must meet the ACA’s requirements, QHPs can be required to comply with additional standards that vary from one state to another. QHPs in all states must offer at least one Gold plan, one Silver plan and one child-only plan. (As of 2018, this rule has been tightened up, requiring QHP issuers to offer at least one Gold plan and one Silver plan in each area where they offer exchange coverage. They are not allowed, for instance, to offer a Silver plan and a Gold plan in limited areas within a state, and then offer only Bronze plans in other areas of the state.)
QHPs can also be sold off-exchange. Some carriers are choosing to sell their certified QHPs both on and off-exchange (with all enrollees in the same pool for risk-sharing purposes) – but policies sold off-exchange do not have to be certified as QHPs.
They are still good quality plans though. The days of Swiss-cheese coverage are over, regardless of how policies are purchased. And off-exchange plans are guaranteed issue regardless of medical history, just like policies in the exchanges. The same open enrollment dates apply outside the exchange, and most of the special enrollment period rules also apply to plans purchased outside the exchange.
Can I get ACA’s subsidies with an off-exchange health plan?
The exchange is the best option for people who qualify for premium subsidies and cost-sharing subsidies, as subsidies are only available for plans purchased in the exchanges. In October 2016, HHS estimated that there were 2.5 million people with off-exchange coverage who would be eligible for subsidies if they switched to the exchange instead. Some of those people might be aware of the subsidies in the exchange but may have opted for off-exchange plans for reasons other than cost. But it’s also likely that a good number of those folks weren’t aware of how much less they could be paying in premiums if they switched to the exchange.
In some areas since 2018, people have found that they can get Bronze plans for free or nearly free, or Gold plans for less than the cost of a Silver plan. This is due to the way states and insurers are handling the loss of federal funding for cost-sharing reductions, and the resulting impact that’s had on premiums. These ultra-low-cost Bronze plans and low-cost Gold plans are still available in some areas in 2020, although it’s not as widespread as it was in 2019.)
To make a long story short, don’t assume you aren’t eligible for subsidies without actually going to the exchange website and checking. (A family of four qualifies for subsidies in 2021 with a modified adjusted gross income as high as $104,800.) Also, know that the subsidies might be far larger than you were expecting. But you can’t get them if you shop off-exchange.
‘Silver switch’ approach to CSR funding pushes some enrollees towards off-exchange plans
In the fall of 2017, the Trump Administration announced that the federal government would no longer fund the ACA’s cost-sharing reductions (CSR). States and insurers took varying approaches to address this, but the most common strategy was to add the cost of CSR to Silver plan premiums, since CSR benefits are only available on Silver plans. The resulting increase in Silver plan rates meant that premium subsidies grew significantly for 2018 in many states (since the premium subsidy amounts are based on the cost of Silver plans), and have remained disproportionately large ever since, making many subsidized enrollees better off than they would otherwise have been.
But what about people who don’t get premium subsidies? Regulators realized that if those enrollees wanted to buy Silver plans, they’d be stuck with the higher premiums. So some states and insurers opted to add the cost of CSR only to on-exchange Silver plan rates, and create slightly different off-exchange versions of those plans, without the cost of CSR added to the premiums. (In some states, the off-exchange plans are identical to the on-exchange versions, but the cost of CSR has only been added to the on-exchange version; CMS eliminated the “meaningful difference” rule altogether as of 2019.) The majority of the states use this “Silver switch” approach, and it will also continue to be used by most insurers in nearly all states in 2021. The result is lower-cost off-exchange Silver plan rates, compared with the on-exchange Silver plan rates, for people who don’t qualify for premium subsidies. This is considered the strategy that’s most protective for the greatest number of consumers.
But there was also a downside to this approach in 2018 and 2019, because consumers couldn’t switch from an off-exchange plan to an on-exchange plan in the middle of the year unless they had a qualifying event – and a change in income was not considered a qualifying event unless the person was already enrolled in a plan through the exchange. So in order to take advantage of the cost savings offered by purchasing a Silver plan outside the exchange (assuming the person was only interested in a Silver plan, and would not want to buy a non-Silver plan through the exchange), enrollees had to fully commit to the off-exchange plan for the whole year – even if their income dropped mid-year into a range that would have made them subsidy-eligible.
So HHS created a solution, allowing people with off-exchange coverage to switch to an on-exchange plan if they experience an income change that makes them eligible for subsidies. This was supposed to be available in most states by 2020. (The language in CFR 155.420(d)(6)(v) clarifies that the special enrollment period is available “at the option of the exchange,” which means state-run exchanges aren’t required to offer it.) However, we’ve had reports from brokers who say that it’s not particularly easy to access, even in states that use HealthCare.gov.
To utilize this special enrollment period, consumers have to provide proof of their off-exchange coverage (they must have been enrolled in it for at least one of the 60 days prior to the change in income) as well as proof of the income change that makes them newly eligible for premium subsidies. HHS estimated that about 4,700 people would use this special enrollment period on an annual basis.
With the new special enrollment period, people who opt for an off-exchange plan during open enrollment (because they don’t qualify for premium subsidies and either prefer an option that’s only offered off-exchange, or want to take advantage of lower-cost off-exchange Silver plans) have – at least theoretically – the option to switch to an on-exchange plan mid-year if their income makes them newly subsidy-eligible. It should be noted, however, that switching to a new plan mid-year means that you start over with your out-of-pocket costs for the year under the new plan. Depending on your circumstances, this may or may not be offset by the newly-available premium subsidies, but it’s something to keep in mind.
It should also be noted that if you’re in a state that has expanded Medicaid and you lose your job mid-year or have a very significant decrease in income, you may qualify for Medicaid based on your new monthly income (Medicaid eligibility is based on monthly income rather than annual income). If your income later increases, it may make you eligible for premium subsidies instead of Medicaid. You would report your new income to the exchange, and the resulting loss of Medicaid would trigger a special enrollment period that would allow you to sign up for a plan in the exchange. This is another potential way to go from off-exchange to on-exchange coverage mid-year, with Medicaid in the middle, and then a loss-of-coverage SEP when Medicaid ends.
What is Enhanced Direct Enrollment?
As of 2019, the “enhanced direct enrollment” (EDE) process allows consumers (in states that use HealthCare.gov) to enroll in an on-exchange plan via approved web brokers’ and insurers’ sites, without having to visit HealthCare.gov (additional information available here and here). This is an updated version of the “proxy direct enrollment pathway that was available in 2018. CMS has published a list of the entities that have been approved to use the EDE process as of 2020.
Enhanced direct enrollment is still considered “on-exchange” – even though the consumer doesn’t visit HealthCare.gov – as the information you provide on the insurer’s or web broker’s site will be transmitted to HealthCare.gov and you’ll be enrolled in an on-exchange plan. (The enhanced direct enrollment system that HHS has created is only applicable to the states that use HealthCare.gov; state-run exchanges that use their own enrollment platforms can establish their own direct enrollment pathways if they wish to do so.)
HHS prohibits web brokers from basing their plan display on compensation that the web broker receives from insurers. And if a web broker is offering non-QHPs in addition to QHPs, they have to be marketed in a way that minimizes consumer confusion and prevents people from inadvertently enrolling in a non-QHP when they’re trying to shop for a QHP.
If you’re working with a web broker and you’re not sure how your enrollment is being processed, ask questions. Web brokers certified with HealthCare.gov can enroll people on-exchange using the enhanced direct enrollment path, but they are generally also willing and able to enroll people in off-exchange plans if that’s what best fits the consumer’s needs.
So using a broker does not mean that you’re going off-exchange. Brokers can assist you with the process of enrolling directly via the exchange, or they can help you complete your exchange enrollment (in a HealthCare.gov state) using the enhanced direct enrollment pathway. If you call one of healthinsurance.org’s partners at 1-866-689-8675, you’ll be connected with a licensed, exchange-certified broker who can enroll you in an ACA-compliant plan, on or off-exchange.
Plan design, pricing may differ between on- and off-exchange plans
If an insurance carrier sells individual-market plans both on- and off-exchange, all of those plans are combined into one risk pool for rate-setting and risk adjustment purposes. So although the off-exchange population tends to be wealthier (generally not eligible for subsidies) and that correlates with healthier, the insurer still has to combine the total individual market experience into one pool to set rates.
The on- and off-exchange plan rates can be different, however, if the plan designs and/or provider networks are different. And as described above, insurers in some states are adding the cost of CSR only to on-exchange Silver plans, making their off-exchange Silver plans less expensive than their on-exchange Silver plans. If you’re not eligible for premium subsidies and you want a Silver plan, an off-exchange version might be a better option.
Some insurers only sell off-exchange plans, which allows them to better target wealthier – and thus generally healthier – enrollees. If you’re in a state where there are different carriers offering plans in the on- and off-exchange markets, you’ll need to compare both if you’re not eligible for a premium subsidy. If you are eligible for a premium subsidy, be aware that selecting an off-exchange plan means you’re forfeiting your subsidy, and you won’t have an option to claim it on your tax return after the year is over.
Brokers who are certified to sell exchange policies should be able to provide you with both on- and off-exchange options, all in one place. Be aware that the open enrollment window for individual health insurance applies both on- and off-exchange. For 2021 coverage, the open enrollment window runs from November 1, 2020 through December 15, 2020 in most states.
If you qualify for a subsidy, stick with the exchange. But if you don’t, take your time, compare all of the options, and then apply for the policy that makes the most sense for your situation. The ACA has improved the quality of coverage in the individual market and has also expanded the options that are available for many people, thanks to guaranteed issue coverage and subsidies. Even though the exchanges are a heavily publicized part of the ACA, the improvements from the law extend to off-exchange plans as well. Consumers can feel confident regardless of which option they choose.
Pediatric dental: You have to buy it if you go off-exchange
Pediatric dental – one of the ACA’s essential health benefits – could also play a role in your decision. In most states, you can purchase coverage in the exchange that does not include pediatric dental, as long as the exchange offers stand-alone dental plans.
There are some exceptions: some states require pediatric dental to be embedded in all health plans; in some cases, carriers have simply opted to embed pediatric dental; and in some states, pediatric dental is sold as stand-alone coverage but cannot be waived – the specifics vary considerably from one state to another).
But off-exchange, you cannot avoid purchasing pediatric dental (although you should be able to get a zero-premium pediatric dental plan if you don’t have children). For some enrollees, this might be a reason to shop in the exchange, if they’d rather not purchase pediatric dental coverage.
Plans that aren’t major medical coverage are not regulated by the ACA
Since some types of coverage are not regulated under the ACA, a caveat is necessary here.
All non-short-term major medical health insurance plans with effective dates of January 1, 2014 or later are required to be ACA-compliant. This is true whether they’re sold in the exchange or off-exchange.
But there are a variety of coverage types that are not regulated by the ACA. They include limited-benefit plans, short-term coverage (sometimes called short-term major medical), discount plans, critical illness plans, accident supplements, health care sharing ministry plans, and Farm Bureau plans in states that have agreed to allow such plans to operate as “non-insurance” plans.
These plans are sold outside the exchanges, but they’re not what we’re talking about when we say “off-exchange plans.” In most cases, they do not conform to the regulations laid out in the ACA. In general (with the exception of short-term health insurance to bridge a short gap in coverage, Farm Bureau plans, and possibly sharing ministry plans), they’re not designed to serve as stand-alone coverage. And in most cases, relying solely on them for your health coverage could leave you sorely underinsured.
US Election Remaining
Why 780 retired generals and former national security leaders spoke out against Trump
Twin Cities area youth sports coaches add COVID-19 protocols to daily routines
Skymovies 2020: Skymovies Illegal Bollywood, Hindi HD Movies Download Website, Skymovies Latest News – GFN
This Is Why Dark Academia Fashion Is Booming In 2020 (+ 30 Styles)
HD Movies Online for Free Movie123 the Most Visited Website for Online Movies
Latest3 months ago
Skymovies 2020: Skymovies Illegal Bollywood, Hindi HD Movies Download Website, Skymovies Latest News – GFN
Fashion2 months ago
This Is Why Dark Academia Fashion Is Booming In 2020 (+ 30 Styles)
Entertainment2 months ago
HD Movies Online for Free Movie123 the Most Visited Website for Online Movies
Entertainment2 months ago
Soap2day illegally leaks Harry Potter and the Half-Blood Prince
Entertainment2 months ago
Levidia 2021 The Most Popular Website for Illegal English Movies
Entertainment1 month ago
Vegamovies Illegal HD 300Mb Bollywood, 480p, 720p Movies Hindi Dubbed Movies Download Website, Latest Vega Movies News
Entertainment1 month ago
Moviemad Website Bollywood Movies illegal Download Hollywood Hindi Dubbed Movies from Movie Mad, Latest News
Entertainment2 months ago
Foumovies illegal Torrent Website leaked Hasee Toh Phasee movie