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California system has trouble selling hospitals

Yale New Haven (Conn.) Health's attempt to get out of a deal to acquire three Connecticut hospitals from Los Angeles-based Prospect Medical Holdings has Pennsylvania legislators concerned about Prospect's ability to close a deal in their state, WHYY reported May 15. 

Prospect Medical Holdings, a for-profit hospital network, owns hospitals in Connecticut, Pennsylvania and Rhode Island, according to the report. It is currently seeking buyers for Upland, Pa.-based Crozer Health under a court order. Additionally, Prospect is attempting to sell two Rhode Island hospitals to Atlanta-based Centurion Foundation. 

Yale New Haven alleged in a lawsuit that Prospect Medical breached its contract because it did not pay rent and taxes on time, letting the three hospitals deteriorate. Yale New Haven also accused Prospect of  engaging in "irresponsible financial practices" and of driving away physicians and vendors. Yale New Haven signed a deal in November 2022 to acquire the hospitals for $435 million. But after a cyberattack in August and discovering that Prospect owes $67 million in taxes and has failed to pay physicians working at the hospitals and vendors, Yale wanted to alter the purchase price. 

Prospect's deal in Rhode Island is awaiting approval from the state's health department and attorney general's office, according to the report. Chris Callaci, general counsel for United Nurses and Allied Professionals, told WHYY the union is concerned about the deal because The Centurion Foundation doesn't own any hospitals and they won't invest in Rhode Island's hospitals if they gain ownership interest in them. 

Pennsylvania Sen. Tim Keaney's policy director Sam Arnold told WHYY the delay in Prospect's other deals negatively affects the residents in Crozer's four-hospital market. He said those delays put "a greater cash crunch on Prospect, which we are concerned will result in delays in payment to vendors, staff and needed maintenance in the Crozer properties here — because it's all the same entity getting cash-squeezed." 

Prospect did not respond to a request for comment from WHYY. A spokesperson from the Pennsylvania attorney general's office told the news outlet the "confidential sale process is progressing, and our office remains actively engaged."

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