Tim Tai

For years, Yale New Haven Health System, or YNHHS, and Prospect Medical Holdings have been in a dispute over the acquisition of three Connecticut hospitals. This Tuesday, YNHHS said that the deal appears “impossible.”

Previously, Prospect had accused YNHHS of exacerbating its financial collapse by delaying proceedings with their ongoing lawsuit.

YNHHS has been involved in a lawsuit against Prospect in an effort to back out of a $435 million deal to acquire three Connecticut hospitals — Waterbury, Manchester Memorial and Rockville General — currently under Prospect’s ownership. YNHHS alleges that Prospect misrepresented its financial situation and failed to meet necessary regulatory and operational requirements, violating their initial terms of agreement. This Tuesday, a statement from YNHHS declared that the acquisition is no longer possible due to Prospect’s financial mismanagement.

“While YNHHS had hoped to acquire these assets and enhance the clinical care for the impacted communities, Prospect’s failure over several years to pay vendors and State and local taxes and to fund their pension obligations have made this transaction impossible,” Dana Marnane, a YNHHS spokesperson, wrote to the News.

Prospect filed for Chapter 11 bankruptcy in January, and the case is currently unfolding in a North Texas bankruptcy court. 

In court, Prospect claimed that YNHHS’s lawsuit, filed May 2, 2024, delayed other potential buyers and worsened the company’s already precarious financial position. 

In response to Prospect’s suit, YNHHS maintained that its decision to contest the acquisition was based on serious financial and operational concerns. 

YNHHS’s statement claims that Prospect’s lawsuit aligns with their claims regarding their financial mismanagement.

“The bankruptcy filing is proof of their disinvestment and mismanagement. As we have been saying for almost 18 months, and detailed in our lawsuit, Prospect has never been in a position to close the transaction,” Marnane wrote.

Prospect had outlined an auction process for its Connecticut assets, beginning with a March 18 deadline for “indications of interest” from buyers and ending with a sale on June 5. 

According to reports from the Connecticut Office of Health Strategy, the three hospitals faced tens of millions in losses in fiscal year 2023, consistent with YNHHS’s claims of financial mismanagement Waterbury Hospital alone declared a $27.9 million deficit, while Manchester Memorial and Rockville General lost $22.4 million and $10.6 million respectively.

Prospect did not respond to comment.