The collapse of Prospect Medical, a for-profit hospital chain plundered by private equity and the company’s management, has generated a painful litany of woes.

Amid a debt-fueled acquisition spree that saw the small California company grow to 17 hospitals in six states, Prospect was repeatedly cited for dangerous medical care, poor infection control and unsanitary facilities. The company stiffed state and local governments on more than $135 million in taxes and didn’t pay vendors for equipment, services and supplies. It shuttered four safety-net hospitals in a Philadelphia suburb that it had promised to keep open, laying off thousands.

Now, more than a year after the company filed for bankruptcy in January 2025, a new layer of harm has emerged: Prospect had promised to provide malpractice coverage for its hospitals and many of its doctors, but court filings show it set aside no money to pay those costs — or to compensate injured patients.

As a result, hundreds of people with pending malpractice cases against the company may never have a shot at meaningful redress.

One of them is Pamela Dorn. The lawsuit she filed against Prospect in 2024 has stalled, and it’s now doubtful she’ll ever be able to hold the company accountable for the negligent care she says it provided her husband.

Bob Dorn, 75, suffered from such severe dementia that he couldn’t chew and was on a liquid diet. But when he became aggressive in March 2022 and was taken to Prospect’s emergency room in Waterbury, Connecticut, the medical staff sedated him, then left him unattended with a meal of macaroni and cheese and broccoli, according to Dorn’s lawsuit and an interview with her. Hospital staff later found her husband choking and struggling to breathe. He was intubated and taken to the intensive care unit but never regained consciousness. His death certificate said he died from asphyxia due to food blocking his airway.

“I didn’t want the same thing to happen to somebody else,” Dorn said, explaining why she filed the case. “How a hospital system operates without malpractice insurance is beyond me. It’s irresponsible.” (In court filings, attorneys for Prospect and the ER doctors have denied the negligence allegations.)

Compounding the shock for plaintiffs like Dorn, as well as former Prospect doctors and their lawyers, is that Prospect wasn’t legally obligated to prove it could actually pay its malpractice costs.

Like a growing number of health care companies, Prospect had saved money by “self-insuring” against these claims. Instead of paying premiums to a commercial insurer, the company pledged to pay directly for the legal defense of its facilities and doctors and to cover negotiated settlements or trial awards up to certain amounts — for many cases, up to $7.5 million.

States typically require commercial insurers to file audited statements showing they’ve set aside sufficient funds for malpractice obligations and to contribute to a guaranty fund that pays a portion of claims if an insurer goes belly-up.

But there’s little oversight — and no safety-net fund to tap — when companies self-insure. The problem has also surfaced in the bankruptcies of two other private-equity-backed health care companies, the Steward hospital chain and Genesis HealthCare, once the nation’s largest nursing home company. (Genesis agreed to at least 155 malpractice settlements totalling $58 million but filed for bankruptcy before paying most plaintiffs, KFF Health News reported. The company denied wrongdoing.)

“It seems like a gaping hole,” said Connecticut Rep. Cristin McCarthy Vahey, who co-chairs the state legislature’s public health committee. She called Prospect’s lack of coverage “awful, devastating and infuriating. … What has happened with Prospect is like peeling an onion. The more we peel, the more we cry.”

In emailed responses to questions from ProPublica, insurance regulators in Connecticut, Rhode Island and Pennsylvania said they are troubled by the harm caused by Prospect’s failure to fund malpractice coverage, a problem they hadn’t encountered before. All said they have limited authority to regulate companies that self-insure.

In Connecticut, where Prospect owned three hospitals, a spokesperson for the insurance department wrote that state law allows health systems “to meet malpractice obligations through self-insured options” and the agency has no responsibility for “solvency oversight.” Prospect also owned insurance subsidiaries that provided some coverage for its hospitals. But they were headquartered in Vermont and offshore, in the Cayman Islands — which is legal but puts them beyond Pennsylvania’s reach, a spokesperson for the state’s insurance department said.

Rhode Island requires hospital companies to receive formal approval to self-insure and to submit........

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