Home Care In Prospect, CT

HARTFORD — With Prospect Medical Holdings owing the state of Connecticut more than $100 million in delinquent taxes, a state senator is calling for Medicaid payments to the for-profit health care system to be halted until its taxes are paid.

Gov. Ned Lamont has said that Prospect owes the state more than $100 million, and payment is likely not coming any time soon as the California-based private equity firm filed for bankruptcy in January.

In order to recoup what is owed to the state, Sen. Saud Anwar, D-South Windsor, a pulmonologist and the senate chairman of the legislature's Public Health Committee, is recommending the state cut off Medicaid payments to Prospect.

"For Prospect to listen to the state of Connecticut and behave according to the moral principles that we live by in the state of Connecticut, I would be a proponent to stop the Medicaid payments for Prospect until they pay our taxes or they change their behavior," Anwar said.

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

Lamont spokesman Rob Blanchard said that issues such as payment of delinquent taxes, including to municipalities and other entities, are still being negotiated in bankruptcy court.

In the meantime, the state "will continue to hold Prospect accountable to ensure they provide quality care to the communities who rely on these institutions," Blanchard said. "Our number one priority remains maintaining safety and quality of care at Prospect's three Connecticut hospitals."

Attorney General William Tong said that the state has been "actively engaged at every step of the bankruptcy process to protect both the state's financial interests and patient care."

Prospect's bankruptcy, he said, is the result of "years of mismanagement and private equity plunder, enriching shareholders at the expense of patients, health care providers, and the state."

As noted in court filings, Tong said that the state is committed to transitioning Prospect's Connecticut hospitals "to a responsible operator" and that patients continue to receive the care they deserve.

"At the same time, those responsibly for the substantial harm to Connecticut must be held accountable," he said.

While Yale New Haven Health agreed to buy Waterbury, Manchester Memorial, and Rockville General hospitals from Prospect for $435 million, Yale officials said last month that any deal with Prospect is now "impossible" following Prospect's bankruptcy filing.

Lamont echoed Yale's comments earlier this month saying he believes the transaction is "over."

Anwar places the blame on Prospect for the deal falling through, particularly its for-profit business model, which led to Prospect "devaluing the asset" by bilking the hospitals for their own profit.

"This is a classic textbook case of how private equity works," he said. "That's their strategy — to maximize their profits at the cost of the wellbeing of the institutions."

State legislators are considering several proposals that would address private equity in Connecticut health care systems, including potentially prohibiting new entities coming into the state.

Rep. Cristin McCarthy Vahey, D-Bridgeport, house chairwoman of the Public Health Committee, agrees that private equity firms have no place in health care.

"In my perfect world, there would be no private equity in health care. Period," she said during a public hearing this week.

People have lost access to care "because of people's greed," and because "profits were very clearly put above patients," McCarthy Vahey said.

In written testimony to the Public Health Committee, Office of Health Strategy Commissioner Deidre Gifford said that the definition of a private equity company may be too broad as currently written in proposed legislation.

This, she said, could prevent groups such as doctors organized as a partnership or limited liability companies that collect revenue from its members from operating health care systems in the state.

Written testimony from the Connecticut State Medical Society also raised some concerns about a complete prohibition on private equity in health care in the state.

While saying that Prospect's ownership of its three hospitals in the state "has been nothing short of a disaster," not all private equity investments follow the same path, as they are capable of providing more capital to modernize systems, recruit staff, and expand access to care.

Department of Public Health Commissioner Manisha Juthani submitted written testimony noting that one proposal seeks to prohibit direct or indirect ownership by private equity or a real estate investment trust, such as Medical Properties Trust, Prospect's landlord.

However, as currently written, MPT or other real estate investment trusts, would be able to enter into lease-buyback transactions like the one in which Prospect mortgaged it's Connecticut hospitals for $1.12 billion.

Despite some objections from state agencies, Anwar is standing his ground.

"Nothing good has come out in the hospital arena with private equity, so why not just ban them?" he said during this week's public hearing. "They are profit-driven, they are only in it for money, they are not helping the community."

March 20, 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.

A last-minute deal was reached in Pennsylvania to keep two hospitals owned by Prospect Medical Holdings open, but the fate of the organization’s hospitals in Connecticut is still uncertain following the collapse of a deal with Yale New Haven Health in February.

Lawmakers in Pennsylvania at a public hearing this month discussed keeping the two Prospect hospitals running in that state. The hearing came after Prospect filed for bankruptcy in January.

A deal was reached Sunday that will allow the Pennsylvania hospitals to remain open while a restructuring of the health system is worked out.

The deal “is not a permanent fix,” said Mary Bugbee, health care director at Private Equity Stakeholder Project, a nonprofit tracking private equity investments in health care.

“But it brings a lot of relief to the health care workers and the patients and the community served by Crozier Health in Delaware County," she said. "Because those hospital closures would be absolutely devastating."

In Connecticut, Prospect-owned Waterbury Hospital, Manchester Memorial Hospital and Rockville General Hospital remain at risk of closure should a buyer fail to step in at bankruptcy court.

Bugbee remained cautious about any new buyer, saying it still could be driven to chase profits for its investors at the expense of local care.

“For example, Glenwood Regional Medical Center in Louisiana, that new operating company had ties to Medical Properties Trust,” she said. “There's a risk that a new operating company that's interested in these hospitals might not be a big improvement from Prospect itself,” she said.

In Connecticut, the real estate investment firm Medical Properties Trust owns land that once belonged to the three Prospect-owned hospitals. The hospitals now pay rent in a sale leaseback arrangement by Prospect.

Workers at the hospitals are also raising concerns about any future buyer.

“Any sale must include the adoption of our collective bargaining agreements, as well as those of SEIU 1199 and AFT, to protect workers and maintain stability in patient care,” said Edmund Gadomski, executive secretary of the Waterbury Hospital union. “Our priority is securing a responsible operator committed to both the workforce and long-term investment in these hospitals.”

Across the U.S., at least six hospitals owned or previously owned by private equity announced plans to close, or have closed since January, according to the Private Equity Stakeholder Project. The hospitals were funded by private-equity investors including Cerberus Capital, Patient Square Capital and Apollo Global Management in Pennsylvania, Florida and Colorado.

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Critical care nurse Katelyn Mchugh has been experiencing an “emotional roller coaster” for months with her colleagues at Prospect Medical Holdings’ Taylor Hospital in Ridley Park, Pennsylvania.

The hospital is on the verge of shutting down as Prospect seeks a buyer as part of its unfolding bankruptcy case, which also involves three Connecticut hospitals.

“We are desperate,” Mchugh told bankruptcy court Judge Stacey Jernigan in a letter filed this week. “I know you cannot keep us open and if you could you would. But please don't let Prospect just close our doors so easily.”

The struggle to find a buyer in Pennsylvania offers a potential preview of the fate awaiting Prospect’s Connecticut properties: Waterbury, Manchester Memorial and Rockville General hospitals. After Yale New Haven Health called its bid to buy the hospitals “impossible,” Prospect has proposed an auction to take place as soon as June 5.

But even with a motivated seller seeking to pay down at least $1 billion in debt, Prospect’s two Crozer Health System hospitals near Philadelphia have failed to attract a buyer. Repeated efforts to close a deal have failed in recent weeks.

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Hospital services to be sold

With no deal amid a cash crunch, Prospect has been threatening to close Taylor and a second Crozer hospital for more than a month. The company said Tuesday it needed $9 million in emergency funding to keep the hospitals running for two more weeks.

The for-profit hospital operator was able to round up $6 million as of Thursday by selling off services, Prospect attorney Bill Curtin said at the latest hearing. But even with the new cash, the hospitals could begin shutting down in as soon as 10 days. In the interim, Prospect will begin to “transition” or sell off units at the hospitals, starting with OB-GYN services.

“Certain of the service lines that exist at Crozer are not financially viable at Crozer, but would be financially viable with other other providers,” Curtin said. “There was always the intent for those to be divested.”

FTI Consulting, the same firm allocated up to $3 million in state funds to monitor the Connecticut hospitals and facilitate potential sale, will supervise the sale of services in Pennsylvania, said Melissa Van Eck, chief deputy attorney general. FTI is managing the Crozer hospitals in its role as court-appointed receiver.

“What's going to happen is that employees may be wearing different jerseys, but they'll still continue doing their job,” Van Eck said.

CT hospitals report strong finances

Prospect’s Connecticut hospitals are in better financial shape but still face uncertain sale prospects in a challenging hospital market, according to health-care experts.

A new document filed with the court this week highlighted the Connecticut hospitals’ relatively solid financial standing compared with Prospect’s Pennsylvania operations. The California-based company also has hospitals in its home state and some operations in Rhode Island.

The “monthly operating report” for Jan. 12-31 of this year showed an ending cash balance for Prospect’s Connecticut entities of $20.5 million, compared to a negative $3.8 million balance for Pennsylvania’s holdings. All three Connecticut hospital entities had positive cash balances for the period.

Prospect did not respond to a request for comment on the financial report and recent hearings. The company has been sending out upbeat media releases in recent weeks on new services like a clinic for hand surgery in Waterbury and a new Level II trauma center certification for Waterbury Hospital.

“This certification reaffirms our continued commitment to delivering the highest standard of care to critically injured members of our community,” Waterbury Health President and CEO Deborah Weymouth said in a statement on the trauma designation.

Union: Buyers showing interest in CT hospitals

Prospect’s Connecticut hospitals are paradoxically doing somewhat better financially since the bankruptcy filing in January, said Dave Hannon, president of Connecticut Health Care Associates District 1199 and co-chair of the court’s unsecured creditors committee.

“It's not surprising to me that when the local facilities don't have to shift a whole bunch of money to California to pay off huge returns to shareholders that they are operationally more sound,” Hannon said. The creditors have been told that several potential buyers have expressed interest in the Connecticut hospitals, he added.

Prior to the planned auction, Hannon said unions and state officials are working hard to prevent a profit-driven company like Prospect from once again acquiring Connecticut hospitals.

“With federal funding cuts coming rapidly and seemingly haphazardly, it will not take 10 years for the next private-equity-backed hospital system to declare bankruptcy,” Hannon said. “We really need to find the right owner, not just any owner.”

As they await the unwinding of Prospect’s businesses in multiple states, Hannon said the company’s approximately 4,400 Connecticut employees remain committed to providing the best care possible in trying circumstances.

“I think that they are holding on because there is a light, maybe a dim light, at the end of this tunnel,” Hannon said, speaking of new ownership for the three hospitals. “I think they're hanging on by a thread, but they are hanging on.”

All parties who spoke at Thursday’s Prospect bankruptcy court hearing ? viewed on a live stream by close to 600 people ? expressed frustration at the difficulty both in keeping Prospect’s Pennsylvania hospitals open and finding a buyer.

“I'm tired of hearing myself say that the situation needs some heroes,” Judge Jernigan said. “The doctors and nurses and hospital staff are, of course, heroes. So the heroes need some heroes, and the people of Delaware County need some heroes.”

April 12, 2025

Business Reporter

Liese Klein is a business reporter with CT Insider focusing on the Hartford area. She has covered business in Connecticut for 15 years and previously worked at New Haven Biz, Business New Haven, the New York Daily News and the Asahi Evening News in Tokyo.

Tim Tai

A recent bankruptcy court decision to greenlight the sale of Prospect Medical Holdings’ Connecticut hospitals is shifting financial priorities — while also reopening questions about Yale New Haven Health’s place in the ongoing legal saga.

On March 19, the U.S. Bankruptcy Court for the Northern District of Texas approved a revised settlement between Prospect Medical Holdings and Medical Properties Trust. The Court’s decision allowed Prospect to proceed with a court-supervised auction of its hospital assets, including three Connecticut Hospitals — Waterbury Hospital, Manchester Memorial Hospital and Rockville General Hospital.

The updated settlement allocates a greater share of sale proceeds to creditors such as the city of Waterbury and the state of Connecticut, which are owed more than $100 million combined. While the auction process is now underway, Yale New Haven Health Services Corporation filed a motion reserving its right under a 2022 asset purchase agreement with Prospect, expressing concern that the bankruptcy sale may impact its legal claims.

“Each one of these steps is a step in the right direction toward finding a better outcome for the hospitals currently under Prospect Medical,” said Howard Forman, a professor of public health and economics.

Yale New Haven Health, which signed a $435 million agreement to acquire the three Connecticut hospitals in 2022, filed suit in 2024 to terminate the deal, citing Prospect’s alleged failure to meet financial, regulatory and operational obligations. Prospect filed a counterclaim, asserting that Yale had breached the agreement. That litigation, which has been transferred to federal court in Connecticut, remains unresolved.

In its reservation of rights filed on March 14, Yale raised concerns that Prospect’s plan to sell the hospitals through bankruptcy could interfere with the unresolved dispute.

“Notwithstanding the bidding procedures motion, Prospect has continued to take the position that the [Asset Purchase Agreement] remains effective and enforceable,” Yale’s attorneys wrote.

In its filing, Yale also alleged that Prospect failed to meet a wide range of financial, operational and legal obligations outlined in the original agreement — failures that, according to Yale, have severely damaged the hospitals’ ability to provide safe and consistent care. These included missed payments to physicians and vendors, neglect for routine maintenance and safety protocols and a ransomware attack that compromised the personal and medical information of more than 100,000 patients and employees, blaming it on Prospect’s lack of investment in adequate cybersecurity systems.

Beyond operational concerns, Yale pointed to more than $100 million in unpaid provider taxes owed to the state and at least $12 million in overdue property taxes to the city of Waterbury, which have resulted in state and local agencies placing liens on the hospitals.

“Since signing the APA, the CT Businesses’ financial performance has collapsed,” Yale wrote. “It is therefore unclear whether the Debtors seek to impact YNHH’s rights in the Connecticut Action through the Bidding Procedures Motion.”

Yale argued that Prospect is trying to move forward with a bankruptcy sale while still claiming that the original $435 million APA between the two parties remains valid. This, according to Yale, creates legal confusion — particularly because Prospect has continued to send notices suggesting the Asset Purchase Agreement, or APA, is still in effect, despite now seeking to sell the same hospitals to new buyers through a separate court-supervised process.

Additionally, Yale emphasized that any dispute over the APA should be decided in Connecticut State Court, as originally agreed by both parties. Yale is concerned that the Texas bankruptcy court process could undermine its ongoing lawsuit, where it claims that Prospect breached the agreement and that Yale is no longer obligated to complete the purchase. With a trial date originally scheduled for April, Yale is urging the court not to let the bankruptcy proceedings interfere with what it views as a nearly resolved case.

While Yale raised alarms about Prospect’s mismanagement of the hospitals and the potential legal implications of their sale, the bankruptcy process is moving ahead. Prospect, now operating under Chapter 11 protections, is pursuing a structured sale process designed to resolve its financial crisis and transfer hospital ownership.

In its Feb. 18 motion to the U.S. Bankruptcy Court for the Northern District of Texas, Prospect asked the court to approve a timeline and structure for auctioning its Connecticut hospitals. According to the filing, the sale process will unfold over several weeks. In mid-May, Prospect may select what’s known as a “stalking horse” bidder — a term for the first buyer who sets a minimum price in an auction. Other interested buyers would then have until late May to submit their offers.

The auction itself is expected in early June, followed by a court hearing to approve the final sale. Medical Properties Trust will have a say in who the buyer is, especially if the hospital properties are still involved in the deal.

In its motion to the court, Prospect described the auction as “a fulsome sale and marketing process … all while minimizing administrative costs associated with the chapter 11 process.”

The company argued that a well-organized, court-supervised auction would help draw in serious buyers, set fair prices and avoid dragging out the bankruptcy process. The goal, according to Prospect, is to make sure the hospitals are sold quickly and efficiently — protecting their value and reducing the risk of further disruption to patient care or hospital operations.

Forman noted that even though Yale walked away from its earlier deal with Prospect, the bankruptcy sale represents a new opportunity.

“The door was closed to acquiring [the hospitals] from Prospect, but acquiring them from bankruptcy is a different situation,” Forman said. “It’s almost like Prospect is out of the picture.”

The uncertainty surrounding who will ultimately acquire and operate the hospitals has drawn concern from local officials and public health experts. While several healthcare systems are believed to be monitoring the sale process, the outcome could significantly influence healthcare access for New Haven communities.

Prospect Medical Holdings is headquartered in Culver City, Calif.

JANICE HUR

Janice Hur covers the Yale New Haven Hospital for the SciTech desk. From Seoul, Korea, she is a sophomore in Morse majoring in Biomedical Engineering.