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for the last eight months CBS News has been investigating the collapse of hospitals serving some of the nation's most vulnerable communities CBS News chief medical correspondent Dr John lapuke takes a look at how investors are making millions while patients are being stripped of their needs just an elderly person trouble breathing is all I have so far when Delaware County Memorial Hospital in Suburban Philadelphia closed last November veteran paramedic Jim McCann says it was a blow to the community of 85 000 residents the hospital once served let's put pressure on the entire Health Care System the EMS system everybody's feeling this this really hit hard in 2016 Los angeles-based Prospect medical Holdings purchased Delaware County Memorial by 2018 with the help of private Equity investors the company had acquired 20 hospitals in Six States in Pennsylvania Prospect medical promised to dramatically increase service to the community but last November the hospital shut down 28 year old Cecilia viswete was turned away from the ER she was having trouble feeding her one-year-old daughter because of a breast infection they said I should look on Google Maps for another hospital inside the hospital was empty except for a few nurses charged with cleaning the place out Angela Napolitano worked there for 41 years until the day it closed it was sad day sorry it was a very sad day the closure hasn't hurt everyone a CBS News investigation has learned that in 2018 before the hospital closed the company took out a 1.12 billion dollar loan and then paid themselves a 457 million dollar dividend Sam Lee the CEO of prospect medical took home about 90 million he found a way to navigate you making money and leaving those people in the lurch that's what they did in a statement Prospect medical said it hadn't been notified of a significant increase in EMS response times but McCann's told us his team of 16 Medics now spends more time taking patients to hospitals farther away he said his call volume is up 25 percent because he's covering more territory where does this end up leaving the people of this community they're stranded for Health Care it did hurt them it's going to continue to hurt them it's going to cost some of them their lives Sam Lee the CEO of prospect medical declined an interview and to provide detailed answers to many of our questions we found that of those 20 hospitals acquired by Prospect medical with the help of private Equity five has since closed John so how does this something like this happen in the first place John I think there's a couple of things going on I mean first of all big picture I think this is a Health Equity story so one of the uh the the local officials in in Delaware County said to me this would never have happened in an affluent community of course in an affluent Community you've got good private insurance you've got reimbursement a lot of other forces going on and in a place like that Delaware County Memorial there were a lot of you know people who were it was who were underinsured there were pressures on the hospital so these these they're kind of teetering to start off with and in fact Delaware County Memorial was on the verge of failure when it was bought and so the company could could say well we came in and you saw in the piece you know a bunch of things that happened we come in come in and we need cash so we're going to sell off the buildings and we're going to sell off the land and we're going to take that money and we're going to put it back into the hospital and we're going to try to make it right and if it doesn't make it right it's not our fault we tried our best we we did we did everything we could to save the hospital except that in this case uh Peter narona who is the attorney general in Rhode Island who I think is is you know was key to us figuring out what was going on um because there was a proposed transaction in Rhode Island it triggered an unusual law that allowed him to open the books of this private company Prospect medical and lo and behold we find out that they paid themselves a 457 million dollar dividends so just to recap because I think it's hard to go over all of that well let me ask you a question that helps you with your recapping let's go back to this question of equity so your point is there are systemic inequalities that make certain hospitals vulnerable certain areas vulnerable and they're they're ripe for this kind of movement so that's the one that's the one part do I have that right yes you have that absolutely right and then the other part that's transparency is just this happened to be a case where you at a state where the D.A could go look in and see what's normally hidden is that that's exactly right and and then in order to make this happen so this was so complicated we spent and so I have to say Michael Kaplan and Sheena Samo who did were amazing producers here just in the weeds just relentlessly the three of us trying to figure out what was going on here and to make it very simple um what Prospect medical did was they came in and their private Equity Equity backers um they took out a 1.12 Billion Dollar Loan in 2016. um inside they bought they bought the company they bought the hospital 26 in 2018 they bought they took out a 1.12 billion dollar um loan and then they paid themselves this 457 million dollar dividend um and then after that they sold off the land and the uh and the and the built the buildings and the land in order to help and then they paid back that loan with that but meanwhile instead of putting all that money this was this involved not just Prospect not just not just a Delaware County moral but a bunch of other hospitals that that they had owned uh instead of putting the money back into the hospital at least 457 million dollars of it was in their pocket that is called a leveraged dividend recapitalization which I looked up it involves the issuing of new debt by a private company that is later used to pay a special dividend to shareholders and you as a doctor have never performed a leveraged dividend capitalization John that they taught that in medical school I happen to be out and I I think there's this isn't you know we're kind of kidding about it but it's an important Point sure right exactly the important point is that we did this investigation for like eight months we read everything we could uh because Peter narona uh was able to look at the books and also have two independent outside Consultants sort of account type people look at the books and digest it for us and and give us sort of a digested version of it we were able to understand it but who could understand this stuff unless you do that and I think the public even with our peace trying to lay it out Simply you know we wrote it rewrote it rewrote it it I think it still can be hard to understand and that I think is one thing that protects these the private Equity companies from sort of you know a Day of Reckoning because it's kind of hard to figure out what's going on right the hospital becomes a carcass in them in the profit actions of the company you went to another hospital as well yeah we went to Texas Vista uh in in uh in Texas and um we'll talk talk to you about that tomorrow morning we have a whole follow-up because because Gail King said uh you know is this a one-off kind of thing is this an anomaly and so we said you know we're going to take you up on this so we we went to San Antonio um and it's not as clear there and this is where an important Point comes up this this is a place you'll find out tomorrow where there's a lot of underinsured or and and uninsured there's legitimate pressures as there was in in Delaware County Memorial and then um they end up closing the hospital and because again it's a private company there's no transparency so we could go in and like we did in with Prospect medical where Peter narona opened up the books we don't have that same visibility in in Texas we don't know exactly what happened and and maybe as we're as we're winding down here I think the the punch line is the theme that Peter narona told us was he has this very unusual law that is in Rhode Island that allows when there's a transaction that's proposed involving a hospital sale it ships this law and then he gets to look into the books he said all across the country people legislators people who were you know in government need these tools they need these tools to when this kind of stuff happens uh to be able to look behind the scenes because it leaves you with this question at least it has for me over eight months this is my thing that I've been left with what happens when private Equity brushes up against Health Equity there you go you've teed it up for tomorrow's piece and it's always nice when Gail King is your assignment editor she said Gail King gives me an assignment I'm not I got to bring it home can't say the dog ate my homework thanks for being with us