For more information, please contact either listing below:

Prospect Medical Holdings, Inc.
Linda Hodges,
Executive Vice President
(310) 337.4170
linda.hodges@prospectmedical.com

Investor Relations Counsel:
The Equity Group Inc.
Devin Sullivan
(212) 836-9608
dsullivan@equityny.com

FOR IMMEDIATE RELEASE

PROSPECT MEDICAL HOLDINGS REPORTS FISCAL 2005 SECOND QUARTER AND SIX MONTH RESULTS

Culver City, CA— May 16, 2005— Prospect Medical Holdings, Inc. (AMEX: PZZ) ("Prospect Medical"), a managed care management company serving 10 affiliated Independent Physician Associations ("IPAs") in Southern California, today announced financial results for its fiscal 2005-second quarter and six months ended March 31, 2005 (see attached tables).

Revenues for the second quarter of fiscal 2005 were $32.3 million compared to $33.0 million in the second quarter of fiscal 2004. Approximately 97% of revenues in each period were generated from monthly capitation payments made by contracted HMOs to the Company's affiliated IPAs. Capitation revenue decreased slightly during the 2005 second quarter as a combined result of the additional revenue from the February 1, 2004 acquisitions being included for the entire 2005 period, offset by lower revenues as a result of the decrease in enrollees from approximately 214,000 at the end of the second quarter of 2004 to approximately 182,000 at the end of the second quarter of 2005. Revenues for the second quarter of fiscal 2004 also included fee-for-service revenue of approximately $430,000 generated by the three medical clinics acquired in connection with the February 2004 acquisition of the Gateway entities. No such revenue was recorded in the second quarter of fiscal 2005, as these medical clinics were sold effective April 1, 2004.

Gross margin declined to 26.8% in the second quarter of 2005 from 29.2% in the same period last year, due primarily to higher medical claims expense, offset by a decline in physician salaries following the sale of the Gateway clinics in April 2004. Medical claims expense in the second quarter of 2005 rose due to several factors, mostly related to the consolidation of recently acquired companies and the loss of a disproportionately high number of our more profitable senior lives during this consolidation process. Management believes that the consolidation process is largely complete, and is focused on steps to increase senior enrollment and competitively contract for high quality care for our existing and newly acquired members. However, no assurance can be given that similar or different problems might arise that could affect our ability to keep our medical loss ratio at traditional levels.

General and administrative expenses, as a percentage of revenues, decreased to approximately 20% from approximately 21% in the prior year period, due primarily to lower office expenses following the sale of the Gateway clinics. Interest expense increased to $271,400 from $21,000 in the prior year period, due to borrowings under the Company's $15 million credit facility with GMAC–RFC.

Net income for the second quarter of fiscal 2005 was $922,000, or $0.11 per diluted share, on approximately 8.8 million weighted average common and common dilutive shares outstanding ("shares outstanding"), as compared to net income of $1.5 million, or $0.21 per diluted share, on approximately 7.1 million shares outstanding in the second quarter of fiscal 2004. The increase in diluted shares outstanding was due primarily to the inclusion of convertible preferred shares and warrants issued in connection with the successful completion of private placement transactions on March 31, 2004.

Dr. Jack Terner, Chairman and Chief Executive Officer of Prospect Medical, commented, "Substantially all of Prospect Medical's increase in enrollees, revenues, operating leverage and income is driven by acquisitions. Consistent with our deliberate and disciplined acquisition strategy, we are currently focusing on several acquisition candidates in our target market of Southern California that meet our criteria. We anticipate closing at least one acquisition in calendar 2005."

Dr. Terner continued, "We were most pleased to recently announce that Prospect's common stock commenced trading on the American Stock Exchange on May 11, 2005. We believe that this listing will elevate Prospect Medical's profile in the investor community, provide enhanced liquidity for investors and strengthen our competitive position."

FISCAL 2005 SIX-MONTH RESULTS

Revenues for the fiscal 2005 six month period rose 11% to $65.6 million from $58.8 million in the comparable prior year period, due to the acquisition of three IPAs effective February 1, 2004 being included for the entire 2005 period, offset by the decline in enrollees as described above.

Gross margin declined to 26.1% from 28.2% in the same period last year, due primarily to the reasons cited above. General and administrative expenses, as a percentage of revenues, remained stable at approximately 20% during the fiscal 2005 six-month period when compared to the comparable prior year period. Interest expense increased to $449,000 from 55,000 in the fiscal 2005 first half, primarily as a result of the use of the GMAC–RFC facility.

Net income for the first six months of fiscal 2005 was $2.0 million, or $0.23 per diluted share, on approximately 8.7 million shares outstanding, as compared to net income of $2.6 million, or $0.42 per diluted share, on approximately 6.2 million shares outstanding in the same period one year ago.

ABOUT THE COMPANY

Prospect Medical Holdings, Inc. is a health care management services organization that provides management services primarily to affiliated IPAs. IPAs are professional corporations that contract with independent physicians and other health care providers to create a medical panel of primary care and specialist physicians, and other health care service providers, capable of providing the full range of medical services to individuals enrolled in health maintenance organization ("HMO") managed care health plans. Prospect's 10 IPAs are comprised of over 4,000 primary care and specialist physicians serving approximately 182,000 HMO enrollees at March 31, 2005.

This press release contains forward-looking statements. Additional written or oral forward-looking statements may be made by the Company from time to time, in filings with the Securities and Exchange Commission or otherwise. Statements contained herein that are not historical facts are forward-looking statements. Investors are cautioned that forward-looking statements, including the statements regarding anticipated or expected results and the future introduction of new products, involve risks and uncertainties which may affect the Company's business and prospects, including those outlined in the Company's Form 10 and subsequently filed reports. Any forward-looking statements contained in this press release represent our estimates only as of the date hereof, or as of such earlier dates as are indicated, and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

Prospect Medical Holdings, Inc.
Condensed Consolidated Income Statements
(Unaudited)

Prospect Medical Holdings, Inc.
Condensed Consolidated Balance Sheets
($ in thousands)