Home Care In Prospect, CT

WATERBURY — A question frequently posed to Deborah Weymouth, and one that she evens asks herself, is how long will Waterbury Hospital remain in a legal limbo while owner Prospect Medical Holdings pursues bankruptcy protection in a federal court in Texas.

Weymouth, president and CEO of Prospect Connecticut, asked Gov. Ned Lamont for his thoughts on this conundrum Tuesday morning when the governor took some questions following a keynote address to the Waterbury Regional Chamber's annual legislative breakfast.

The question is literally one of survival for Waterbury Hospital and the two other Prospect-owned hospitals in Manchester and Vernon.

A $435 million package deal that California-based Prospect negotiated to sell the three hospitals to Yale New Haven Health in 2022 had long been teetering on collapse when Prospect filed for Chapter 11 bankruptcy. The filing halted a state lawsuit Yale had filed last May to get out of the sale and a countersuit from Prospect to compel its completion as negotiated. The consolidated case was set to go to trial in April.

The bankruptcy proceeding is casting further uncertainty on the proposed sale, and seeding more doubts about the futures of Waterbury Hospital, Manchester Memorial Hospital and Rockville General Hospital.

When Weymouth asked Lamont if he had any insights to offer on how long the bankruptcy proceeding might last, the governor replied, “I think it is going to be months, and not years.”

Lamont also again raised the possibility that the three Prospect hospitals will be sold to some buyer other than Yale as a result of the bankruptcy proceeding.

He restated his preference that Yale purchase them, but also had a blunt message: “Yale New Haven, you want to come to table, you want to be lead horse on this, and, if you don't, lead, follow, or get out of the way.”

In addition to Yale, two other unnamed Connecticut-based health systems submitted proposals to buy the three Prospect-owned hospitals when Prospect issued a request for proposals from potential buyers in 2021.

The proposed sale of the Prospect-owned hospitals was announced in February 2022, a purchase agreement was signed in October 2022, and an application for a required certificate of need for the sale was filed in November 2022.

But state regulators took until last March 27 to approve a CON with 46 conditions, and only after Lamont had intervened in October 2023 to get the state Office of Health Strategy, Yale and Prospect to open negotiations on an agreed settlement to permit the sale to proceed.

Weymouth said in an interview later that the lengthy CON review had contributed to unraveling of the Yale deal. She was far from alone in that opinion.

“I think people realize that long delay did nothing to really close the deal and move us forward,” she said.

State Rep. William Pizzuto, R-Middlebury, a member of the advisory boards of Waterbury Hospital, said the proposed sale would have been helped if the CON review had been handled more expeditiously.

Yale sued Prospect last May to get out of the purchase agreement after Prospect rejected a Yale proposal to lower the sales price to $150 million.

“I don't blame them for trying to get a lower price,” Pizzuto said. “I think Prospect did a terrible job.”

In state court filings, Yale has alleged Prospect violated the purchase agreement due to its irresponsible financial practices, severe neglect and general mismanagement that has left the three hospitals a shell of what they were when Yale agreed to acquire them.

Yale has cited a costly cyberattack that crippled operations of the three Prospect-owned hospitals, their continued financial losses and Yale's own financial challenges, the ongoing deterioration of the hospital properties and infrastructure, and investigations and findings of state and federal health care violations.

The state Department of Public Health late last year ordered Prospect to contract an independent monitor to keep watch at Waterbury Hospital and two other-Prospect owned hospitals amid concerns about the quality of patient care and safety after five unannounced inspections found violations of state law, including the death of a patient, allegations of abuse of a patient and failure to maintain privacy of protected health information.

All of the mounting troubles and uncertainty have created an image problem for Waterbury Hospital that is difficult to overcome, said Michael DiGiovancarlo, the president of the Waterbury Board of Aldermen and a state representative.

“I can say all day long that Waterbury Hospital is safe. People are losing faith in Waterbury Hospital unfortunately. They've got a great crew there, great workers, but the bad press, the bad news day after day I think is hurting the image of Waterbury Hospital,” he said.

Weymouth also sought to provide assurances that the Prospect hospitals remain open and providing care.

“I want people to know that we are open. It is business as usual,” she said.

Lamont said all three Prospect hospitals are viable hospital operations and remain attractive buys. It was Prospect's management and business practices that caused problems, including an agreement to sell the hospital properties to Medical Properties Trust and lease them back from the Alabama-based real estate investment trust that drained tens of millions from the bottom lines of the Prospect hospitals.

One of the short-term benefits of the Chapter 11 filing is that money that the three Connecticut hospitals had been funneling to Prospect in California is now available to support each hospital's local operation, Lamont and DiGiovancarlo said.

“Fortunately, the bankruptcy process stops that dead in its tracks, and that money now goes back into the hospitals. Everybody has been current since that bankruptcy was filed,” Lamont said.

Connecticut officials gathered at the state Capitol Thursday to announce a proposal backed by Gov. Ned Lamont enhancing state oversight of major mergers, acquisitions and asset transfers in the health care sector.

The proposal aims to “modernize” state regulation of health care deals. It would broaden the scope of transactions that require Attorney General review, establish a review process for both the Office of Health Strategy and the Attorney General’s Office and allow the Attorney General to impose conditions to prevent harm to the state’s health care system.

Health care operators would have to notify the state 60 days in advance of any “material changes” — things like changes in ownership, transfers of assets and merging of practices. Such transactions can, in some cases, erode the quality of care, state leaders said. The approval process for major hospital transactions currently led by the Office of Health Strategy, and known as “certificate of need,” would also remain in place.

The announcement comes just over a week after California-based Prospect Medical Holdings, the owner of three struggling Connecticut hospitals in Waterbury, Manchester and Vernon, filed for bankruptcy protection.

“We’re not going to be taken by surprise ever again — if this bill is passed — by some of the financial shenanigans that impacted Prospect,” Lamont said.

The hospitals, which Prospect acquired in 2016, have faced worsening financial and operational problems in recent years, including a debilitating cyberattack, as well as reports of rusting equipment in operating rooms and delayed payments to physicians.

In 2018, Prospect took out a $1.1 billion loan, but it used those funds to pay its executives and shareholders a $457 million dividend, CBS News reported. Prospect CEO Sam Lee reportedly took home roughly $90 million from the transaction.

To repay the loan, Prospect entered into what’s known as a “sale-leaseback” agreement, selling the land and buildings from the hospitals it owned in Connecticut, California and Pennsylvania to a real estate investment trust for $1.4 billion, then leasing the property back from the trust. The transactions saddled the hospitals with a new expense: rent payments.

A spokesperson with Prospect Medical Holdings did not immediately respond to a request for comment.

Had the oversight measures proposed Thursday been in place sooner, the state would have been able to review both the dividend payment and the sale-leaseback agreement, Attorney General William Tong said. He also noted that the proposed legislation allows for his office to bring penalties against health care owners when they fail to notify the state of material changes.

“Health care is complicated, but at the end of the day, this is pretty simple. This is about patients. It’s about quality. It’s about access. It’s about affordability,” Tong said.

In an emailed statement, a spokesperson with the Connecticut Hospital Association said the group had not yet reviewed the proposal in detail but intends to work “in partnership” with state leaders. “We all have a shared goal of ensuring a stable healthcare system, addressing the financial challenges that strain hospitals, and protecting access to care for every patient and community,” Nicole Rall of CHA wrote.

The proposal also aims to address the increasing role of business owners in other sectors of health care beyond hospitals, such as autism services and hospice providers, Office of Health Strategy Commissioner Deidre Gifford said.

“There are lots and lots of transactions that have the potential to cause harm to patients and workers and communities that the state does not have the ability to review,” Gifford said. “This bill would allow a much broader range of transactions to be noticed to the Attorney General’s office than are currently required.”

The governor’s proposal is one of several this session seeking to address the stability of the state’s health care system.

Sen. Saud Anwar, D-South Windsor, co-chair of the Public Health Committee, has introduced a bill that would allow hospital receivership and empower state control of troubled hospitals through eminent domain. Several other proposals concerning private equity in health care have also been introduced.

Officials are also continuing to keep close tabs on the Prospect bankruptcy filing and its impact on Prospect’s agreement to sell its three Connecticut Hospitals to Yale New Haven Health.

Lamont said the state is looking to hire a bankruptcy attorney, and he said conversations with both Yale and Prospect about the pending purchase agreement are ongoing. He reiterated that he would like to see that deal go through, but he is also open to other buyers.

“Whether Yale is the ongoing operator, or there is going to be a new, accelerated process, we’re going to have a new operator,” Lamont said.

Katy Golvala is CT Mirror's health reporter. Originally from New Jersey, Katy earned a bachelor’s degree in English and Mathematics from Williams College and received a master’s degree in Business and Economic Journalism from the Columbia Graduate School of Journalism in August 2021. Her work experience includes roles as a Business Analyst at A.T. Kearney, a Reporter and Researcher at Investment Wires, and a Reporter at Inframation, covering infrastructure in Latin America and the Caribbean.

While the state entered into an agreement with Waterbury Hospital to implement independent monitors, there is no such agreement with Manchester or Rockville hospitals and the state will continue to rely on its own surveyors to monitor care following Prospect Medical Holding's bankruptcy filing.

State officials, including Gov. Ned Lamont, have vowed that all three of Prospect's hospitals in Connecticut will remain open and provide quality care throughout bankruptcy proceedings.

When discussing Prospect's bankruptcy earlier this month, Department of Public Health Commissioner Dr. Manisha Juthani noted that there are independent monitors at Waterbury Hospital under a consent order agreed to by the state and the hospital.

However, there are currently no agreements with Manchester or Rockville hospitals, which are owned by Prospect but operated by Eastern Connecticut Health Network, according to DPH spokesman Christopher Boyle.

An independent monitor has been in place at Waterbury hospital since late last year following a consent order issued on Nov. 21.

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"No consent orders for an independent monitor at Manchester and/or Rockville hospital have been issued," Boyle said.

Nonetheless, the state is closely monitoring conditions at both ECHN hospitals and will continue to do so throughout Prospect's bankruptcy proceedings, he said.

As part of DPH's investigatory authority, the agency may inspect hospitals with its staff or hire a monitor to supplement staff, Boyle said.

Under bankruptcy law, the court will approve a health care ombudsman to monitor and report to the court care provided by the hospitals, he said.

"DPH will work cooperatively with the ombudsman when appointed," Boyle said.

"We are going through a process where we will identify a protocol to monitor each of the facilities more in depth than they have been to date," Juthani said earlier this month.

She said at the time that she anticipated DPH monitors on site to compliment routine inspections that are either scheduled or come in response to specific complaints.

"As with any other Connecticut hospital, DPH will continue to conduct routine inspections and investigate any complaints involving patient care and safety at all three Prospect hospitals," Boyle said.

"Every day, we have monitors there on the ground at these hospitals, floor by floor, doing everything they can to make sure that quality of care is not compromised in any way, shape, or form," Lamont said earlier this month when discussing Prospect's bankruptcy. "Every day we're working to make sure that these hospital maintain top quality health care."

Jan 21, 2025

Staff Writer

Eric Bedner is a reporter with the Journal Inquirer. He has been with Hearst Connecticut Media Group since 2023. When not working, he enjoys listening to music, watching movies, and rooting for the New York Giants.

This story is part of CT Mirror Explains, an ongoing effort to distill our wide-ranging reporting into a "what you need to know" format and provide practical information to our readers.

Support trusted journalism in Connecticut. Join CT Mirror’s members today and make an impact.

Original reporting by Dave Altimari, Jenna Carlesso and Katy Golvala. Compiled by Gabby DeBenedictis.

Prospect Medical Holdings, the owner of three Connecticut hospitals, filed for bankruptcy on Jan. 11 amid ongoing complications related to the sale of the hospitals to Yale New Haven Health.

Prospect owns Manchester Memorial, Waterbury and Rockville General hospitals — all of which suffered a debilitating cyberattack in August 2023 — as well as facilities in Rhode Island, Pennsylvania and California.

Bankruptcy could complicate efforts to resolve longstanding financial and operations problems at the hospitals, though Connecticut officials have vowed they won’t close.

Here’s what to know.

In a statement, representatives for the company said the bankruptcy filing would allow it to “proceed on a strategic pathway to realign its organizational focus outside of California.”

The state of Connecticut is listed as one of the top 30 creditors in the bankruptcy filing. Prospect owes the state more than $100 million in health provider taxes, according to records from the Department of Revenue Services. Every hospital, as well as nursing homes and other health care providers, must pay health provider taxes, also known as a hospital user fee, to the state every year based on their revenues.

Prospect had not paid health provider taxes to the state dating back to March 2022, according to three liens filed by the Department of Revenue Services against Prospect Medical last January.

In September 2023, the presidents of Waterbury Hospital and Eastern Connecticut Health Network, the health system that includes Manchester Memorial and Rockville General hospitals, warned Gov. Ned Lamont that their financial situations were dire and that they were struggling to pay bills.

In 2022, Prospect signed an agreement to sell its three Connecticut hospitals to Yale New Haven Health for $435 million. The state’s Office of Health Strategy approved the sale after 16 months of consideration, but the deal still hasn’t been finalized and is currently mired in legal disputes.

YNHH sued Prospect in May 2024, seeking to be let out of its contract to buy the hospitals. It charged 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.”

Prospect then countersued, claiming YNHH breached its contract with the company by “failing to deliver the agreed-upon purchase price” for the three hospitals and failing to make “reasonable best efforts” to complete the acquisition.

It’s unclear. Lamont said in a press conference on Monday that the hospitals would stay open, and officials would hold Prospect accountable to providing high-quality care.

“Some people think bankruptcy means the lights go out and the party’s over. That’s not true at all. These hospitals are very successful,” Lamont said, reiterating that the hospitals will “stay open, stay managed.”

Early on at Monday’s press conference, Lamont made comments suggesting the sale process had failed but walked them back when asked for clarification.

“We’ve worked our hearts out over the last two years trying to get this arrangement done between Prospect and Yale New Haven, just couldn’t get there,” Lamont said during opening comments. He added that his administration would be focused on quality of care while “trying to figure out who the next owner and operator of these [three] amazing hospitals is going to be.”

Later, when asked whether the deal had fallen through, he said there was still a possibility it could happen. “I’d like to see the deal get done,” Lamont said. “Yale New Haven has an agreement to purchase these hospitals. We’ll see whether that goes forward.”

In October 2023, YNHH health executives asked the state to provide $80 million — $16 million annually across five years — to help it acquire the three hospitals.

Lamont was — and remains — opposed to that request. On Monday, he said he still doesn’t see a need for the state to provide funds to help the hospitals remain open.

“Closures aren’t imminent,” Lamont said, adding that the hospitals are “doing very well” under the leadership of Deborah Weymouth, the CEO of Prospect’s Connecticut hospitals.

“I don’t see the need for taxpayer subsidies here,” he said.

The Chapter 11 bankruptcy proceedings of private equity-funded Prospect Medical Holdings (PMH), the parent company of three Connecticut community hospitals, kicked off Tuesday in the U.S. Bankruptcy Court for the Northern District of Texas.

Deborah Weymouth, president and CEO of Manchester Memorial Hospital, Rockville General Hospital, and Waterbury Hospital, is expected to tap into the hospitals’ own funds to finance their functioning during the bankruptcy process.

Until now, local management did not have direct access to those funds.

“We do generate a significant amount of cash that historically we have not had direct access to utilize in our local market,” Weymouth said. “First and foremost, I believe we’ll be dedicating that cash and that revenue to our operating expenses.”

A different picture was painted at the national level.

During the bankruptcy hearing in Texas Tuesday, a lawyer for Prospect said the California-headquartered company got “dangerously close” to running out of money last week.

The lawyer also said Prospect is in ongoing talks with Yale New Haven Health over the stalled $435 million sale of its Connecticut hospitals to Yale, and the talks now were at a different price point.

Prospect’s lawyers plan to transfer the lawsuit Yale filed to back out of the deal, from state court to the bankruptcy court.

In legal speak, the Texas court is what’s known as a court of equity, where the presiding judge Stacey Jernigan — who incidentally writes mystery novels involving bankruptcy judges — has the leeway when it comes to the order of distribution.

Connecticut Attorney General William Tong said his office would fight for equitable distribution.

“Our hope is that the court will focus not on creditors and all the stuff, right, but focus on the patients and focus on what’s best for the patients and these institutions to keep them open, and the employees,” Tong said.

In its declaration filed Monday, Prospect said the pandemic drove the California company into bankruptcy. But a recent U.S. Senate committee report blasted Prospect for draining local hospitals of money and saddling them with debt.

Meanwhile, Waterbury Hospital, Manchester Memorial, and Rockville General continue to see patients.

“We are open, and as always, our top priority remains to provide safe, high quality care to every patient who comes in,” Weymouth said.

The Connecticut Department of Public Health will continue to inspect the hospitals, and “those relationships continue,” Weymouth said. “Waterbury [Hospital] actually is working with an independent expert who is there on a regular basis.”

Weymouth said she expected the hospitals to remain open in the long term, in part because they would be hard to replace.

“These hospitals have significant value for far more than just their bed count,” Weymouth said. “We have a team of dedicated nurses, hospitalists, other physicians and staff who are ready and able to provide care. That adds value to our organization.”

The cost of closing or replacing the hospitals would amount to $1 million per bed, according to Weymouth.

Prospect currently owns and operates 16 hospitals in California, Connecticut, Rhode Island and Pennsylvania, and plans to shift its focus entirely to its 7 hospitals in California post bankruptcy.

This story was first published Jan. 14, 2025 by Connecticut Public.