Yale New Haven Health has sued Prospect Medical Holdings, arguing Yale should be released from a three-hospital acquisition agreement because Prospect allegedly violated the terms of the contract.
The New Haven, Connecticut-based nonprofit health system and Prospect, a for-profit health system based in Los Angeles, announced a definitive agreement in October 2022 to transfer ownership of Prospect’s Connecticut hospitals in Manchester, Rockville and Waterbury.
Related: Yale New Haven Health to acquire two Connecticut health systems
According to the complaint filed in the Superior Court for the Judicial District of Hartford Friday, Prospect allegedly hasn't paid clinicians and vendors, let the state of its facilities decline, allowed an August 2023 data breach to occur and is in danger of losing a Medicare contract of its Waterbury hospital, among other alleged issues.
The alleged developments violated the terms of the acquisition agreement, Yale claims.
"Prospect and the selling entities have subjected the businesses to a pattern of irresponsible financial practices, severe neglect and general mismanagement," the complaint said.
A Prospect spokesperson said in a statement the state already approved the proposal, so there is no reason for additional delay.
“For the record, patient volumes and finances at our Connecticut hospitals have rebounded significantly, marking their successful recovery from the August 2023 data security incident that disrupted their operations. Prospect’s Connecticut hospitals also continue to provide safe, quality care to our patients. Our facilities are monitored by the state department of health on a continuous basis and continue to meet the DOH’s requirements,” the statement said.
"In September 2023, we requested adjustments to the purchase price to reflect the current value of the hospitals in light of Prospect’s recent, serious mismanagement," a Yale spokesperson said in a statement. The proposed purchase price has not been made public.
"Prospect has proven unwilling to make a good faith effort to reach an agreement, leaving Yale New Haven Health no choice but to pursue a complaint to obtain a declaration that Prospect is in breach of the asset purchase agreement and that Yale New Haven Health does not have an obligation to close the transaction on the original terms," the spokesperson continued.
In March, the state approved — with conditions including enhancing healthcare services and investing in mental healthcare — the certificate of need for the proposed transaction.
