Prospect Medical Holdings, the company that owns three struggling Connecticut hospitals, has filed for bankruptcy.
The California-based company has been trying to sell Waterbury, Rockville General and Manchester Memorial Hospitals to Yale New Haven Hospital since 2022.
That deal was thrown into turmoil after a 2023 cyber attack at Prospect severely hurt the hospital system, leaving it cash-stripped. YNH has argued that the hospitals are not worth what they were when the terms of the deal were negotiated.
They’ve asked the state for financial support, claiming they would spend more than originally planned on needed upgrades. Governor Ned Lamont (D) has been hesitant to support the deal with state funding.
“Prospect’s decision to file for bankruptcy is much larger than just the state of Connecticut – this is a national matter and of grave concern to many hospitals around the country,” Yale New Haven Health spokesperson Dana Marnane said. “Yale New Haven Health raised the alarm about this inevitability in the lawsuit we filed last year, recognizing Prospect’s lack of investment and mismanagement of the Connecticut Prospect hospitals. The situation was further exacerbated by their lack of payment to the pension plans and growing debt to the state, local governments and vendors.”
According to Attorney General William Tong, Prospect owes the state more than $100 million.
Lamont said his office had been preparing for the possibility of a bankruptcy filing.
“Our number one priority remains maintaining safety and quality of care at Prospect’s three Connecticut hospitals,” Lamont said in a statement. “We currently have an independent monitor overseeing operations at Waterbury Hospital and will increase oversight at Manchester Hospital. We will continue to work to evaluate opportunities to transfer these institutions to a new operator.”
During a Monday press conference with Connecticut officials, Tong said he would sue Prospect if necessary. The state has not filed any lawsuits yet.
In a statement, Prospect said the Chapter 11 bankruptcy declaration would help them complete hospital sales in Pennsylvania and Rhode Island.
“Divesting our operations outside of California will ensure that they receive necessary financial support so that the communities that rely on those facilities will maintain continued access to highly coordinated, personalized, and critical healthcare services long into the future,” Prospect Holdings’ Chief Executive Officer Von Crockett said.
Prospect’s hospitals will remain open amid the filing, according to the statement and Connecticut officials. Employees will continue to be paid.