Private equity is already deeply embedded in ASC ownership, with physician-investor platforms, national chains and health-system joint ventures relying on PE capital to fund growth and buyouts.
A new Georgetown University Center on Health Insurance Reforms report on one firm’s hospital holdings is a case study in what that ownership model can produce when financial engineering outpaces investment in the underlying business, and it’s especially worth ASC operators’ attention because the report’s own outpatient-care section shows facility-level outpatient services were the one part of the collapsing system that stayed profitable throughout.
Private equity firm Leonard Green & Partners took an estimated $658 million in dividends and fees out of a chain of safety-net hospitals across three states over its 11-year ownership of Prospect Medical Holdings, funded substantially through debt rather than operating profits, and left several facilities in bankruptcy or shuttered.
Here are seven things ASC leaders should know.
1. The tactics are the same ones used in ASC platform roll-ups. The report’s glossary of “private equity playbook” strategies — debt loading, dividend recapitalization, sale-leasebacks, asset stripping, revenue sweeping, management fees and add-on acquisitions — describes standard tools in PE-backed ASC consolidation, not just hospital deals. Roll-ups in particular are flagged as a way to build market power while individual deals often fall below the size that triggers antitrust review.
2. How the $658 million moved. LGP acquired 66% of Prospect in 2010 through a $363 million leveraged buyout that left Prospect $158 million in debt from day one. In 2018, Prospect took out a $1.2 billion loan and funneled $457 million of it to LGP and Prospect’s top two executives combined, versus just $40 million contributed to the company’s underfunded employee pension plan from the same loan. Over Prospect’s full ownership period, LGP collected an estimated $658 million in dividends and fees, while CEO Sam Lee and executive David Topper made $128 million and $94 million, respectively.
3. Outpatient facilities were the one part of the business that stayed profitable. When Prospect’s Crozer Health system collapsed into hospital closures, its five outpatient facilities in Pennsylvania ran operating margins of 23% to 57% in 2021, even as the inpatient hospitals around them failed financially. In bankruptcy, those five outpatient properties drew a “highly competitive” multi-bidder auction and sold for $50.3 million to ChristianaCare.
4. Facility fees kept climbing even as volume fell. At Prospect’s Waterbury Hospital in Connecticut, outpatient facility fee revenue grew to nearly $15 million by 2024 even though the volume of visits generating those fees dropped 42% over the same period. The report frames this as evidence that hospital-based outpatient billing remains a reliable revenue lever regardless of ownership.
5. Leonard Green exited for a fraction of what it took out.. LGP sold its majority stake back to two Prospect executives in 2021 for $12 million, walking away after collecting hundreds of millions in dividends and fees while leaving $1.3 billion in obligations behind. The report notes PE investors typically target a three- to seven-year hold and a 20% to 30% return.
6. Regulators are writing rules that could reach ASC ownership structures directly, not just hospitals. Connecticut has banned hospital sale-leaseback transactions outright and now requires annual attestations that a private equity investor doesn’t hold governance or clinical-decision control. Rhode Island’s expanded Attorney General oversight explicitly names “private equity investors and management service organizations” as a defined target of transaction review. Pennsylvania is weighing a ban on private equity, hedge funds and investment banks owning hospitals and health systems in the state, plus new Attorney General authority over leaseback deals specifically.
7. The fallout shows how expensive it is to unwind a bad deal once it’s done. Prospect filed Chapter 11 in January 2025. Rescuing the Rhode Island hospitals alone required an $18 million emergency state funding backstop and a new nonprofit buyer financed entirely through bonds projected to cost more than $408 million in principal and interest over 30 years — a reminder that once a PE-owned facility destabilizes, the cost of stabilizing it typically lands on the community and taxpayers, not the original investors.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.