CT governor meets with Yale New Haven and Prospect Medical to try for deal on hospitals

Earlier this month, Yale filed a lawsuit against Prospect Medical, charging that Prospect breached its contract with Yale by defaulting on rent and tax liabilities, and more.

Gov. Ned Lamont met with the two chief executive officers involved in the plan for Yale New Haven Health to purchase Prospect Medical Holdings on Wednesday in an effort to move the stalled negotiations out of the courtroom.

Lamont met for more than an hour with YNNH CEO Chris O’Connor and Prospect Medical CEO Von Crockett in his office at the state Capitol Wednesday morning.

The two sides and their lawyers left without an agreement but are expected to meet again Thursday on their own. An attorney from Medical Properties Trust — an entity also involved in the proposed deal because it owns the Manchester Memorial, Rockville General and Waterbury hospital buildings that Prospect operates — also participated in the meeting.

When asked by The Connecticut Mirror if he thought that a deal could be made, Crockett responded, “Doesn’t everybody want a deal?”

Asked if residents should be concerned about the financial status of the three Prospect hospitals, Crockett said, “No one should be concerned that any of the hospitals will close.”

Lamont’s spokesperson Julia Bergman said the governor was encouraged by the meeting even if the parties left without an agreement.

“This is the first time the two CEOs have been in a room together, so we take that as a sign of progress,” Bergman said.

She said that Lamont did not offer to put any state money into the deal, as Yale had requested. Lamont has maintained that it is a private deal and the two parties need to work out.

“The governor wanted to get everyone back together, away from the courtroom, to see if there was a way to move this forward,” Bergman said. “He continues to see this as the best deal and Yale as the best owner for the three hospitals.”

Dana Marnane, a spokeswoman for YNHH, said Lamont sought the meeting with hospital executives Wednesday, but she declined to provide details about the discussion.

“At the request of Gov. Lamont, Yale New Haven Health leaders were in Hartford today meeting with the governor and representatives from Prospect and Medical Properties Trust,” she said. “We thank Gov. Lamont for facilitating this discussion and we will keep our community apprised if there are any updates to share.”

The state authorized the acquisition in March. The Office of Health Strategy had been criticized by some lawmakers for taking more than a year to issue its approval, which won’t take effect if the two sides can’t reach a sale agreement.

YNHH had announced in 2022 that it reached a deal with Prospect to buy the hospitals for $435 million.

But following a cyberattack in August and revelations that Prospect owes tens of millions of dollars to vendors, physicians under contract at the hospitals and the state in taxes, Yale asked Prospect to revise the purchase price, which Prospect has been reluctant to do so.

As part of the proposed acquisition in Connecticut, YNHH wants to purchase back the real estate of the three hospitals from MPT, which would mean they would no longer be on the hook for rent payments. Under the current sale proposal, MPT would receive $355 million, or roughly 80% of the total deal value.

Earlier this month, Yale filed a lawsuit against Prospect Medical, charging that Prospect breached its contract with Yale by defaulting on rent and tax liabilities, allowing its facilities to deteriorate, mismanaging assets, “driving away” physicians and vendors and engaging in “a pattern of irresponsible financial practices.”

The CT Mirror previously reported that surgeries at Prospect’s Connecticut hospitals were being postponed because health care providers didn’t have the needed resources. Contracts with traveling nurses and technicians were in jeopardy and had remained in place only on a “week-to-week” basis at one point last fall, physicians at the hospitals said.

The cyberattack, which crippled operations for over six weeks last August, also set the hospitals back further financially, executives have said.

In January, the CT Mirror reported that Prospect neglected to pay $67 million in taxes. The state has filed three liens against the California-based company.

“Prospect and the selling entities have not complied with their obligations to providers, failing to pay their physician groups, medical staff and vendors and, in turn, damaging irretrievably their relationships with the very individuals and entities that allow the businesses to provide medical care to their patients,” the lawsuit claims.

“Prospect and the selling entities have failed to ensure that their information technology systems have even the most basic protections against data breaches.”

In a statement when the lawsuit was filed, Prospect Medical officials called the lawsuit “a blatant, 11th hour attempt by Yale Health to back out” of the contract.

“Despite the claims made by Yale in its complaint, Yale only notified Prospect for the first time of its concern that there had been a material adverse effect on the hospitals’ finances and operations on March 27, 2024. In response, and following Yale’s failure to obtain an $80 million grant from the state, we offered Yale a good-faith price reduction in an attempt to move the negotiations forward and complete the transaction.”

Prospect officials said patient volumes and finances at their Connecticut facilities have “rebounded significantly.”

Senate Republican Leader Stephen Harding, Sen. Heather Somers, Ranking Senator on the Public Health Committee and Sen. Jeff Gordon, a doctor and a member of the Public Health Committee said in a joint statement, “We are encouraged that the governor and the CEOs met today for an extended period of time. Bringing the parties together is a positive development, and the discussions must continue. We are also encouraged to hear that there should not be a concern that any hospitals will close. We remain available to all stakeholders to assist with a swift resolution on this matter. Our collective communities’ health care accessibility –  as well as access to health care jobs – depends on it.”

Dave Altimari and Jenna Carlesso are reporters for The Connecticut Mirror (https://ctmirror.org/ ). Copyright 2024 © The Connecticut Mirror.