CT Hospital Association sues Prospect Medical for unpaid dues, service fees

SHAHRZAD RASEKH / CT MIRROR Waterbury Hospital

Write a Comment

The Connecticut Hospital Association is suing Prospect Medical Holdings and the three hospitals it owns in the state claiming they have failed to pay more than $1.75 million in membership dues and for special services fees.

The lawsuit, filed Tuesday in Hartford Superior Court, names as defendants Prospect Medical Holdings Inc., Prospect Manchester Hospital (Manchester Memorial Hospital), Prospect Rockville Hospital (Rockville General Hospital in Vernon), Prospect Waterbury Inc. (Waterbury Hospital), and Prospect Chartercare SJHSRI LLC (St. Joseph Health Service based in Providence, Rhode Island).

CHA is a nonprofit organization founded in 1919 and has 90 member organizations, for which it advocates on public policy issues and provides research and educational services.

The civil suit accuses Prospect of two counts of breach of contract, four counts of violating the Connecticut Unfair Trade Practices Act, and one count of unjust enrichment.

In response to a request for comment, Prospect Medical Holdings said in an email that, "We do not comment on ongoing litigation."

CHA also emailed a statement to Hartford Business Journal, saying the lawsuit "is a matter between CHA and the owner of certain member hospitals related to payment of dues and payment for other services. For additional information, please refer to the complaint filed.”

According to the lawsuit, Prospect acquired the three Connecticut hospitals in 2016 and paid their membership dues in full from 2016 until September 2022.

“On September 1, 2022, CHA sent Prospect an invoice requiring payment of membership dues for the six-month period of October 1, 2022 to March 31, 2023,” the lawsuit states. “The invoice totaled $354,063.”

Prospect, however, paid just $35,000, leaving a balance of $319,063. The organization also ignored subsequent invoices for the six-month periods of April 1, 2023 to September 30, 2023; October 1, 2023 to March 31, 2024; and April 1, 2024 to September 30, 2024. Combined, the unpaid dues total more than $1.38 million.

“Defendants have repeatedly represented that they would pay the outstanding membership dues amounts owed to CHA, but have not done so,” the lawsuit states.

In addition, the lawsuit states, CHA offers its members “specialized services” that include ChimeData, which collects and analyzes data from member hospitals. The data can be used for “evaluating quality and safety of patient care, assessing financial health, tracking use of key hospital services, and complying with regulatory reporting requirements.”

CHA members pay a fee for the specialized services that is separate from membership dues, the association states.

The hospitals in Manchester, Vernon and Waterbury, as well as St. Joseph’s Medical Center in Rhode Island, have all “requested, been provided and paid for CHA’s specialized services,” including after they were acquired by Prospect, the suit states.

While Prospect “repeatedly paid for specialized services … on behalf of all defendants” until “approximately July 2021,” it has not paid for the most recent uses of them, the suit states. That includes:

From March 2023 to January 2024, when Prospect and Manchester Memorial Hospital were provided specialized services and failed to pay the fee totaling $100,660.86;
From April 2023 to January 2024, Prospect and Rockville General Hospital were provided specialized services and failed to pay the fee totaling $45,197.96;
From December 2021 to January 2024, Prospect and Waterbury Hospital were provided specialized services and failed to pay the fee totaling $212,330.25;
From July 2021 to March 2023, Prospect and St. Joseph Health Services were provided specialized services and failed to pay the fee totaling $18,734.

Combined, Prospect and the four hospitals failed to pay a total of $376,923.07.

“Defendants have materially breached their contracts with CHA by failing to pay membership dues and failing to pay for specialized services provided by CHA,” the lawsuit states.

The suit sets the combined financial loss and harm at approximately $1.75 million.

The lawsuit asks the court to award compensatory and monetary damages, punitive damages, costs and attorneys’ fees, as well as prejudgment and post-judgment interest.

The suit was filed on behalf of the CHA by attorneys Kevin M. Smith and John P. Foley of the New Haven law firm Wiggin and Dana LLP.

The plaintiffs also filed an application for a prejudgment remedy, which would allow CHA to place liens on defendants' assets. The lawsuit also filed a motion seeking full disclosure of Prospect Medical Holdings' assets. Judge Susan Quinn Cobb ordered a virtual hearing on the application for June 20.

The lawsuit comes several weeks after Yale New Haven Health filed a lawsuit against Prospect, from whom it is trying to purchase the three Connecticut hospitals, charging that Prospect breached its contract with Yale by defaulting on rent and tax liabilities, allowing its facilities to deteriorate, mismanaging assets, “driving away” physicians and vendors and engaging in “a pattern of irresponsible financial practices.”

In its lawsuit, Yale New Haven Health is asking the state Superior Court to be let out of its contract with Prospect Medical Holdings for the purchase of Manchester Memorial, Rockville General and Waterbury hospitals.