For more information, please contact either listing below:

Prospect Medical Holdings, Inc.
Linda Hodges,
Executive Vice President
(714) 796.4271
linda.hodges@prospectmedical.com

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

FOR IMMEDIATE RELEASE

PROSPECT MEDICAL HOLDINGS REPORTS FISCAL 2008 FIRST QUARTER RESULTS

Q1 FY 2008 Highlights Compared to Q1 FY 2007

  • Revenues rose 136% to $82.3 million from $34.8 million
  • Operating income up 599% to $4.1 million from $587,000
  • After a $1.9 million non-cash dividend to preferred stockholders, net loss attributable to common stockholders was $2.4 million, or $0.20 per share, compared to net income attributable to common stockholders of $334,000, or $0.04 per share

Los Angeles, CA— June 9, 2008 — Prospect Medical Holdings, Inc. (AMEX: PZZ), ("Prospect"), which manages the medical care of approximately 237,000 HMO enrollees and operates four community hospitals in southern California, today announced financial results for its fiscal 2008 first quarter ended December 31, 2007. These results include the operations of the two acquired entities since their respective dates of acquisition; specifically the ProMed Entities (“ProMed”), which Prospect acquired on June 1, 2007, and Alta Hospitals System, LLC (f/k/a Alta Healthcare System, Inc.) (“Alta”), which Prospect acquired on August 8, 2007.

CONSOLIDATED RESULTS OVERVIEW

Consolidated revenues for the first quarter of fiscal 2008 rose 136% to $82.3 million from $34.8 million in the same period last year. Higher revenues primarily reflected a $27.3 million contribution from Alta and a $22.6 million contribution from ProMed. Operating income for the first quarter of fiscal 2008 rose to $4.1 million from $587,000 in the first quarter of fiscal 2007, due primarily to the operations of Alta and ProMed. Interest expense and amortization of deferred financing costs rose to $4.3 million in the fiscal 2008 first quarter from $267,000 in the first quarter of fiscal 2007, due to debt associated with the acquisitions of ProMed and Alta. Following a non-cash dividend to preferred stockholders of $1.9 million, as compared to no such dividend in the same period last year, the net loss attributable to common stockholders for the fiscal 2008 first quarter was $2.4 million, or $0.20 per share, compared to net income of $334,000, or $0.04 per share, in the comparable period one year ago.

SEGMENT RESULTS

IPA Management

($ in 000s) (unaudited) Three Months Ended
December 31,
2007 2006
Total managed care revenues  $54,975  $34,828
Total managed care cost of revenues    44,389    26,036
Gross margin    10,586    8,792
       
General and Administrative    11,690    8,077
Depreciation and Amortization    1,202    392
Total non-medical expenses    12,892    8,469
       
Income from unconsolidated joint venture    475    264
       
Operating (loss) income    $(1,831)    $587

Higher revenues for the first quarter of fiscal 2008 were due primarily to a $22.6 million revenue contribution from ProMed as compared to no such contribution in the first quarter of fiscal 2007, a $1.2 million increase due to the reassignment of revenues under the CalOptima contract from the AMVI/Prospect Joint Venture directly to Prospect Medical Group and slightly higher hospital risk pool revenue, offset by decreased enrollment.

Higher managed care cost of revenue for the fiscal 2008 first quarter was primarily the result of the ProMed acquisition, as well as higher physician salaries, offset by lower enrollment in Prospect’s legacy IPA business. Higher general and administrative (“G&A”) expenses for the fiscal 2008 first quarter was primarily due to the inclusion of ProMed in the current period, which added approximately $1.7 million, as well as increases in staffing, and increased costs related to audit, legal and Sarbanes-Oxley Act compliance associated with the larger enterprise in 2008.

Depreciation and amortization increased primarily as a result of increased amortization of intangible assets related to the acquisition of ProMed.

Income from unconsolidated joint venture increased as a result of higher profitability from the participation in the CalOptima OneCare program for Medicare/MediCal eligible beneficiaries.

Hospital Services

Prospect‘s “Hospital Services” segment consists of Alta’s four community based hospitals in southern California. Prospect acquired Alta in August 2007. Prospect did not have a Hospital Services segment during the first quarter of fiscal 2007.

($ in 000s) (unaudited) Three Months Ended
December 31, 2007
Net patient revenues    $27,286
Operating expenses:    
      Hospital operating expenses    18,001
      General and administrative    2,624
      Depreciation and amortization    725
Total operating expenses    21,350
Operating income    $5,936

SEC FILINGS UPDATE

Prospect expects to file its Form 10-Q for the three months ended March 31, 2008 by June 16, 2008.

ABOUT THE COMPANY

Prospect Medical Holdings operates four community-based hospitals in the greater Los Angeles area and manages the medical care of individuals enrolled in HMO plans in Southern California, through a network of approximately 14,000 specialist and primary care physicians.

This press release contains forward-looking statements. Additional written or oral forward-looking statements may be made by Prospect 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, involve risks and uncertainties which may affect the Company's business and prospects, including those outlined in Prospect's Form 10-K filed on June 2, 2008 and its Form 10-Q filed on June 9, 2008, as well as risks and uncertainties arising from Prospect's acquisition of Alta and ProMed, the debt incurred by Prospect in connection with those acquisitions, and the ability of the Company to regain compliance with the AMEX’s continued listing requirements. 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 Operations
($ in 000s, except per share data)
(unaudited)

Three Months Ended
December 31,
2007 2006
Revenues:
      Managed Care Revenues  $54,975  $34,828
      Hospital Operating Revenues  27,286            —
Total Revenues    82,261    34,828
Operating expenses:
      Managed Care Cost of Revenue    44,389    26,036
      Hospital Operating Expenses    18,001                —
      General and Administrative    14,314    8,077
      Depreciation and Amortization   1,927    392
Total Operating Expenses    78,631    34,505
       
Operating Income from Unconsolidated Joint Venture    475    264
Operating Income    4,105    587
Other income (expense):
      Investment income    294   242
      Interest Expense and Amortization
      of deferred financing costs		    (4,296)    (267)
      Loss on Interest Rate Swaps    (877)           —
Total expense, net    (4,879)    (25)
       
Income (loss) before income taxes    (774)    562
Provision (benefit) for income taxes    (282)    226
Net Income (loss) before minority interest    (492)    336
Minority Interest    5    2
Net Income (loss)    ($497)    $334
Dividend to preferred stockholders    (1,882)              —
   
Net income (loss) attributable to common stockholders    (2,379)    334
   
Net income per common share:
      Basic    ($0.20)    $0.05
      Diluted    ($0.20)    $0.04
Weighted Average Shares Outstanding:
      Basic    11,714    7,273
      Diluted    11,714    8,420


Prospect Medical Holdings, Inc.
Consolidated Balance Sheets
($ in 000s)

  December 31,
2007
(Unaudited)		 September 30,
2007
 
ASSETS
Current Assets:
      Cash and Cash Equivalents    $21,349    $21,599
      Investments, Primarily Restricted
      Certificates Of Deposit		    637   637
      Patient accounts receivable, net of
      allowance for doubtful accounts
      of $4,780 and $4,447 at December 31
       and September 30, 2007		    15,985    15,840
      Government Program Receivables    1,404    4,274
      Risk Pool Receivables    —    179
      Other Receivables, Net of Allowances of
      $735 and $632 at December 31
       and September 30, 2007		   3,652    2,559
      Notes Receivable, Current Portion    60    59
      Refundable Income Taxes    5,111    5,041
      Deferred Income Taxes, Net    3,395   3,395
      Prepaid Expenses and Other Current Assets        4,125    3,816
Total Current Assets    55,718    57,399
     
Property, Improvements and Equipment:     
      Land and Land Improvements    18,499   18,493
      Buildings   22,310    22,233
      Leasehold Improvements    2,185    2,013
      Equipment    9,995    9,652
      Furniture and fixtures    998    998
     53,987    53,389
Less Accumulated Depreciation and Amortization    (5,959)    (5,094)
Property, Improvements and Equipment, Net    48,028    48,295
Notes Receivables, Less Current Portion    429    490
Deposits and Other Assets   932    914
Deferred Financing Costs, net    6,570    7,430
Goodwill    129,137    129,122
Other Intangible Assets, net    50,927    51,989
Total Assets    $291,741    $295,639
   
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
      Accrued Medical Claims and
      Other Health Care Costs Payable		    $21,438    $22,639
      Accounts Payable And Other Accrued Liabilities    11,306    14,972
      Third-Party Settlements    360    1,034
      Accrued Salaries, Wages And Benefits    6,048    6,898
      Current Portion of Capital Leases   339    356
      Current Portion of Long-Term Debt    10,000   8,000
      Other Current Liabilities   4,395       1,251
Total Current Liabilities    53,886    55,150
Long-Term Debt, Less Current Portion    137,500    138,750
Deferred Income Taxes    26,813    28,669
Malpractice Reserve    645    645
Capital Leases, Net Of Current Portion    577    644
Interest Rate Swap Liability    5,821    1,934
Other Long-Term Liabilities    231    232
Total Liabilities    225,473    226,024
Minority interest    85    79
Total Shareholders' Equity    66,183    69,536
Total Liabilities and Shareholders' Equity    $291,741    $295,639

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