YuLin Zhen, Photography Editor

The legal dispute between Yale New Haven Health System and Prospect Medical Holdings over the acquisition of three Connecticut hospitals has intensified, with both parties exchanging new allegations.

The two systems agreed on a $435 million deal in 2022, which would transfer ownership of three Connecticut hospitals to YNHHS. Now, YNHHS argues that Prospect’s alleged financial mismanagement and operational failures make finalizing the acquisition as planned impossible.

YNHHS has updated its May lawsuit against Prospect, citing concerns over patient care, unpaid taxes and violations of the purchase agreement. In response, Prospect maintains that it has complied with all federal standards and accuses YNHHS of delaying the transaction to lower the purchase price.

“By amending its lawsuit to include issues that are over a year and a half old and already fully resolved, Yale New Haven Health and its Board of Trustees are continuing their blatant attempt to extract a lower purchase price on a legally binding deal that they previously signed off on,” a Prospect spokesperson wrote in an email to the News.

The acquisition was expected to significantly expand YNHHS’s footprint in Connecticut by adding Waterbury Hospital, Manchester Memorial and Rockville General hospitals, spanning over 700 beds and more than 4,000 employees. 

The deal, however, has faced numerous obstacles, with YNHHS alleging that Prospect’s hospitals have failed to comply with Medicare standards and have been troubled by operational challenges. 

YNHHS has alleged that the hospitals have failed to meet certain healthcare standards, including issues with patient safety, sanitation and medical services, which have been flagged by federal and state agencies. The Centers for Medicare & Medicaid Services, or CMS, had previously threatened to pull Medicare contracts from Waterbury Hospital due to concerns over patient abuse, failure to sterilize equipment and other critical violations. 

Although Prospect claimed to have addressed these concerns, YNHHS maintains that the hospital remains in “substantial noncompliance” with Medicare standards.

In addition to patient care concerns, YNHHS has pointed to Prospect’s tax liabilities as a major factor in the delays. YNHHS alleges that Prospect owes tens of millions in unpaid provider and property taxes, which further complicates the acquisition. 

“After identifying new information regarding Prospect’s breach of our Asset Purchase Agreement (APA), Yale New Haven Health amended the original lawsuit against Prospect,” Dana Marnane, spokesperson for YNHHS, wrote to the News. “This amendment outlines additional details of violations of the APA, including lack of payment of provider taxes, as well as outstanding property tax liabilities.”

Prospect has pushed back, arguing that its hospitals are fully compliant with CMS and DPH guidelines. The company believes YNHHS is using outdated issues to delay the deal’s completion. 

Adding to the controversy, YNHHS has referenced an ongoing U.S. Department of Justice investigation into Prospect for allegedly violating the False Claims Act. YNHHS claims that Prospect inflated diagnoses on claims for government reimbursements, which further jeopardizes the hospital’s participation in programs like Medicare and Medicaid.

Prospect has expressed frustration over what it views as unnecessary legal maneuvers by YNHHS that are prolonging the transaction process. Prospect has placed the blame on YNHHS for the delays in closing the deal, also claiming that the ongoing litigation has resulted in increased unpaid taxes and mounting operational costs.

“The increase in unpaid taxes has occurred because Yale and its Board of Trustees have delayed the completion of the transaction,” Prospect stated. “These constant attempts by Yale and its Board of Trustees to try this case in the media while delaying the closing of the transaction are obviously intended to divert attention from their continuing refusal to live up to their word.”

State Senator Saud Anwar, chair of the public health committee, has expressed concern over the ongoing dispute and its impact on local healthcare services. He emphasized that both parties need to focus on the well-being of patients and hospital staff.

“The conversations should be held between leaders of the organizations with the mindset of working for the benefit of all the people who work and the patients who get daily care from these systems,” Anwar wrote.

He stressed that legal proceedings could slow down critical decisions that affect healthcare access in the region, as financial instability in healthcare institutions can directly affect the quality of care.

“It is no secret that the three hospitals are going through financial challenges, some could be related to policies imposed by Prospect Medical Holdings,” Anwar wrote. “The most important priority in healthcare should be patient well-being and safety aligned with standards of care.”

While the legal battles continue, both YNHHS and Prospect have expressed their willingness to find a resolution. 

A YNHHS spokesperson emphasized that the system is committed to finding a solution that ensures the future stability of the hospitals while maintaining high standards of patient care. She added that YNHHS is engaged in discussions with Prospect to identify a path forward.

The outcome of the legal battle will determine the future of healthcare for nearly half a million people served by the three hospitals.

“Time is not on our side and this would require a much more assertive position from the Governor’s office to bring the two parties together and reach a solution,” Anwar wrote to the News.

Prospect was founded in 1996 by a group of physicians in California.