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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 FIRST QUARTER RESULTS

Revenues Up 28.7% to $33.3 Million
Operating Income Up 4.6% to $1.9 Million; Net Income of $1.1 Million, or $0.13 Per Diluted Share

Culver City, CA— April 7, 2005— Prospect Medical Holdings, Inc. (PMHX.PK), ("Prospect Medical"), a managed care management company serving 10 affiliated Independent Physician Associations ("IPAs") in Southern California, in conjunction with filing an amended Form 10 Registration Statement with the Securities and Exchange Commission, today announced financial results for its fiscal 2005 first quarter ended December 31, 2004 (see attached tables).

Revenues for the first quarter increased to $33.3 million from $25.9 million in the same period last year, due primarily to the acquisition of three IPAs effective February 1, 2004. The number of HMO enrollees in California has been declining in recent years. Similarly, the number of HMO enrollees using the Company's provider networks has declined in recent periods, which decline offsets the increased revenue from acquisitions. During the first quarter of fiscal 2005, Prospect Medical's number of enrollees decreased from approximately 198,400 to approximately 191,300. Approximately 97% of revenues in each period were generated from monthly capitation payments made by contracted HMOs to the Company's affiliated IPAs.

Cost of revenues increased to $24.8 million from $18.9 million in the same period last year. This increase was due primarily to the February 2004 acquisitions and an increase in the Company's medical loss ratio. Cost of revenues, as a percent of revenues, increased to approximately 74.5% in the first quarter of fiscal 2005, from approximately 73% in the first quarter of fiscal 2004.

General and administrative expenses, as a percentage of revenues, decreased slightly, from 20% in the prior year period to 19.7% in the current year period.

Depreciation and amortization expense increased from $116,000 in the prior year period to $233,000 in the current year period.

Net interest expense increased from $16,000 in the prior year period to $100,000 in the current year period, primarily as a result of the $15 million debt facility entered into with GMAC­RFC in September 2004. The Company anticipates using a portion of the proceeds from this facility to fund future acquisitions.

Net income for the first quarter of fiscal 2005 was $1.1 million, or $0.13 per diluted share, on approximately 8.6 million weighted average common and common dilutive shares outstanding ("Shares Outstanding"), as compared to net income of $1.1 million, or $0.21 per diluted share, on approximately 5.4 million Shares Outstanding in the first quarter of fiscal 2004.

The increase in diluted shares outstanding for the fiscal 2005 three-month period 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.

The Company did not meet the "senior debt to EBITDA ratio" required by its credit facility with Residential Funding Corporation (RFC) as of September 30, 2004 and December 31, 2004. Effective April 7, 2005, RFC granted the Company a waiver of these covenant violations, and agreed to exclude certain items from the covenant computations for a twelve-month period, which enabled the Company to meet the minimum fixed charge coverage ratio at December 31, 2004.

Dr. Jack Terner, Chairman and Chief Executive Officer of Prospect Medical, commented, "We are pleased with our results for the first quarter and enthusiastic about our prospects for 2005. We must, however, continue our disciplined approach to operations and acquisitions. The Southern California market continues to present us with significant consolidation opportunities. We are focusing on several acquisition candidates in this region that meet our criteria and anticipate closing at least one acquisition in calendar 2005."

FORM 10 FILING UPDATE

On April 7, 2005, Prospect Medical filed an Amended Form 10 Registration Statement with the Securities and Exchange Commission ("SEC") to register its common stock under the Securities Exchange Act of 1934. A copy of the Form 10 filing is available at www.prospectmedicalholdings.com and at www.sec.gov. The Form 10 will not become effective until the SEC completes its review of the filing and any amendments to the Form 10.

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.

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 Statements of Income
(Unaudited)

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