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January 10, 2025

CT officials respond to threat of Prospect Medical Holdings bankruptcy

PHOTO | SHAHRZAD RASEKH/CT MIRROR Waterbury Hospital is among the care providers owned by Prospect Medical Holdings.
By Katy Golvala, CT Mirror

Prospect Medical Holdings, the owner of three struggling Connecticut hospitals in Waterbury, Manchester, and Vernon, is working with restructuring advisors to explore ways to address the company’s financial challenges, according to a report in The Wall Street Journal. 

The hospitals, which Prospect acquired in 2016, have faced worsening financial and operational problems in recent years. In 2022, Connecticut-based Yale New Haven Health System reached a tentative agreement to purchase the three facilities for $435 million, but the deal has run into numerous delays — not least of which was a debilitating cyberattack in August 2023.

Representatives from Prospect Medical Holdings and its Connecticut hospitals did not respond to requests for comment regarding the reports about bankruptcy. The company hasn’t filed for bankruptcy, according to court records.

A representative for Yale New Haven Health did not provide comment in time for publication. 

Gov. Ned Lamont has worked with both health systems’ leaders to help facilitate the deal. In an emailed statement Thursday, Julia Bergman, a spokesperson for the governor said, “Our office has been in touch with Prospect Medical Holdings regarding these reports and is prepared to protect the people served by these hospitals no matter what develops.”

Bergman added the “administration has been on the ground actively monitoring the situation in all three hospitals, including the recent hiring of an independent health care monitor at Waterbury Hospital.” 

State Attorney General William Tong, whose office has been conducting an investigation into Prospect’s financial practices, said in an emailed statement, “Bankruptcy changes nothing with regards to their obligations to patient care and safety.” Tong added, “We are watching this closely.”

According to The Wall Street Journal’s report, Prospect, which also owns hospitals in Rhode Island and Pennsylvania, is working with law firm Sidley Austin and consulting firm Alvarez & Marsal to explore options, including a possible restructuring. Representatives from Sidley Austin and Alvarez & Marsal did not immediately respond to requests for comment Thursday evening.

Since acquiring the three Connecticut hospitals in 2016, Prospect has garnered a reputation for draining resources from the facilities it owns around the country while extracting profits for executives and investors, according to news reports. 

The Prospect-owned facilities in Connecticut — Waterbury, Rockville General, and Manchester Memorial Hospitals — have suffered financially and operationally over the last several years. In August 2023, Prospect Medical Holdings was hit with a debilitating cyberattack that crippled many of its facilities around the country. The following month, the presidents of Prospect’s Connecticut hospitals warned the governor that the financial situation at all three hospitals was dire.

It’s unclear what impact a bankruptcy filing might have on the long-awaited pending sale of Connecticut’s Prospect facilities to Yale New Haven Health. The deal has been seen by many in the General Assembly and the hospital’s surrounding communities as the only path to stabilizing the hospitals. But the deal is mired in legal disputes — the parties have sued and countersued over the true value of the three hospitals.

As the deal drags on, the barrage of reports detailing deteriorating conditions at the facilities has not let up.

In October, the Connecticut Office of Health Strategy launched an investigation into service cuts at Rockville General Hospital in Vernon that may have violated state law. Prospect was hit with federal liens for failure to pay into the pension plan for its Connecticut employees. State inspectors have also documented rusting equipment in operating rooms at Waterbury Hospital. Payments to physicians at Manchester Memorial Hospital have reportedly been delayed. 

Sen. Saud Anwar, D-South Windsor, co-chair of the Public Health Committee and a physician who is affiliated with Manchester Memorial Hospital, said he would work with the governor and other legislators to protect Connecticut residents. 

“There are about half a million patients in our state who depend on their care at these facilities, and there are thousands of amazing, hard working, committed healthcare workers who are providing care to our community members,” Anwar said. “To see a profit driven, greedy organization take away such important assets of the community is painful.”

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