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 2006 THIRD QUARTER RESULTS

EPS Rises 33.3% to $0.16 Per Diluted Share
Revenues Up 7.5% to $34.8 Million

Culver City, CA— August 14, 2006— Prospect Medical Holdings, Inc. (AMEX: PZZ), ("Prospect"), which manages the medical care of approximately 175,000 HMO enrollees in Southern California, today announced financial results for its fiscal 2006 third quarter ended June 30, 2006 (see attached tables).

Dr. Jack Terner, Chairman and Chief Executive Officer of Prospect, commented, "We are very pleased with our earnings growth during the third quarter of fiscal 2006, on both a year-over-year quarterly basis and sequentially when compared to the second quarter of fiscal 2006. The third quarter of fiscal 2006 was the sixth consecutive quarter of EPS increases.

"We continued to leverage Prospect's strong position in the Southern California marketplace, through our 11 affiliated Independent Physician Associations ("IPAs"), our network of 9,000 primary care and specialist physicians, our favorable HMO contracts, and our hospital partnerships that include Brotman Medical Center's exclusive full-risk Medicare offering in the large West Los Angeles market. Much of our earnings growth during the fiscal 2006 third quarter was focused on organic growth in our senior market, where we continue to devote considerable attention and resources. We also benefited from the ongoing integration of Genesis Healthcare of Southern California ("Genesis"), acquired in November 2005. We expect to fully integrate Genesis by the end of 2006, further increasing its contribution to earnings. Acquisitions remain an integral part of our overall growth strategy and we hope to commit to one accretive transaction during calendar year 2006."

Revenues for the third quarter of fiscal 2006 increased 7.5% to $34.8 million from $32.4 million in the same period last year. The third quarter of fiscal 2006 included the positive impact of the Genesis acquisition, a significant rise in Hospital Risk Pool revenue, and increased capitation rates on Prospect's core business, including a higher proportion of more profitable senior members, as a result of Prospect's participation in Orange County's OneCare program, a managed care program for the approximately 50,000 individuals who qualify for both Medicare and Medi-Cal benefits ("Medi-Medis"). Prospect began participating in the OneCare program in 2006 and, as of June 30, 2006, had approximately 2,000 Medi-Medi seniors assigned to its affiliated IPAs.

Gross margin for the third quarter of fiscal 2006 was 27.0% of total revenue as compared to 29.5% of total revenue in the same period last year. Slightly over 1.0% of this decrease related to the timing and increased amount of physician bonuses set aside in the third quarter of 2006. During 2005, physician bonuses were largely determined in the fourth quarter. The remaining 1.5% decrease resulted from a somewhat higher claims expense in the 2006 quarter than in the 2005 quarter, primarily because this expense in the prior year quarter was lower than usual. In management's view this is within the expected quarter-to-quarter variation in that metric.

Prospect set aside $600,000 in discretionary physician bonuses during the third quarter of fiscal 2006, as part of its increasing emphasis on rewarding those physicians who provide exceptional care to Prospect's members.

Total operating expenses declined to 21.9% of total revenues from 24.3% of total revenues in the same period last year. This decrease in 2006 expenses was largely the result of unusually high 2005 costs associated with the Brotman transaction, which did not recur in 2006.

Operating income increased 11.2% to $2.1 million from $1.9 million in the same period last year. Net income for the third quarter of fiscal 2006 rose 28.5% to $1.3 million, or $0.16 per diluted share, on approximately 8.1 million diluted shares outstanding ("shares outstanding"), from net income of $1.0 million, or $0.12 per diluted share, in the third quarter of fiscal 2005, on approximately 8.4 million shares outstanding.

FINANCIAL POSITION

Prospect's balance sheet at June 30, 2006 included cash and investments of $15.7 million and shareholders' equity of $32 million, or $3.93 per diluted share. Prospect had $10.2 million outstanding on its term loan facilities, and had not utilized its $5.0 million revolving credit facility.

CONFERENCE CALL

Dr. Jack Terner, Chairman and Chief Executive Officer, Catherine Dickson, President and Chief Operating Officer and Mike Heather, Chief Financial Officer, will host a conference call on August 14, 2006 at 4:30 p.m. ET to discuss this news release. Interested parties may participate in the call by dialing (866) 820-1713 (Domestic) or (706) 643-3137 (International) approximately 10 minutes before the call is scheduled to begin and ask to be connected to the Prospect Medical conference call. A recorded replay of the call will be available until 11:59 pm Eastern Time on Thursday, August 31, 2006. Listeners may dial (800) 642-1687 (Domestic) or (706) 645-9291 (International) and use the code 4177825 for the replay. In addition, the conference call will be broadcast live over the Internet at http://audioevent.mshow.com/306025/. To listen to the live call on the Internet, go to the web site at least 15 minutes early to register, download and install any necessary audio software. If you are unable to participate in the live call, the conference call will be archived and can be accessed for approximately 90 days.

ABOUT THE COMPANY

Prospect Medical Holdings manages the medical care of individuals enrolled in HMO plans in Southern California. The Company, through its Independent Physician Associations ("IPAs"), contracts with health care professionals to provide a full range of services to HMO enrollees. Prospect does not acquire bricks and mortar, but rather the medical management of the lives serviced by the acquired IPAs. Services provided by Prospect include contract negotiations, physician recruiting and credentialing, HR, claims administration, financial services, provider relations, case management, quality assurance, data collection and MIS. Prospect's 11 affiliated IPAs at June 30, 2006 were comprised of approximately 9,000 primary care and specialist physicians serving approximately 175,000 HMO members.

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-K filed on December 27, 2005 and in the Form 10-Q filed on August 14, 2006. 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 Statements of Income
(unaudited)

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