Yale New Haven Health seeks withdrawal from Prospect hospital purchase

Yale New Haven (Conn.) Health is suing Los Angeles-based Prospect Medical Holdings, from whom it is attempting to acquire three Connecticut hospitals, as it seeks to get out of the deal, CT Mirror reported May 3.

Yale New Haven is seeking approval from the state Superior Court to terminate its agreement with Prospect Medical Holdings for the acquisition of Waterbury (Conn.) Hospital; Manchester (Conn.) Memorial Hospital, part of Prospect's Manchester-based Eastern Connecticut Health Network; and Rockville General Hospital in Vernon, Conn.

In the lawsuit, Yale New Haven says Prospect Medical breached its contract because it did not pay rent and taxes on time, letting the three hospitals deteriorate.

Additionally, Yale New Haven accuses 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. 

Yale and Prospect have not agreed on a new price, a Yale New Haven spokesperson told the publication. 

"Yale New Haven Health has remained committed to the success of the transaction, cooperating with the [Connecticut] Office of Health Strategy and engaging in good faith discussions to attempt to reach an agreement with Prospect," Dana Marnane, a spokesperson for Yale New Haven Health, told the publication. "Despite numerous notifications by Yale New Haven Health that Prospect has failed to uphold the [contractual] obligations and closing conditions, Prospect has refused to acknowledge and address these breaches."

Prospect Medical Holdings told Becker's in an emailed statement that the state has already given its approval to the sale of the Prospect hospitals to Yale and that it sees "no reason for any further delay."

"This lawsuit is a blatant, eleventh hour attempt by Yale Health to back out of the commitment they made more than two years ago to the communities served by Prospect's Eastern Connecticut Health Network facilities and Waterbury Hospital," the statement said. "Prospect believes Yale is in breach of the asset purchase agreement that was signed by both parties more than two years ago, and we will be seeking legal remedies, including completion of the transaction, to ensure Yale keeps its word to our communities."

Additionally, Prospect said it offered Yale a price reduction in "good faith" after Yale could not secure an $80 million grant from the state. 

Prospect also emphasizes that the three hospitals' patient volumes and finances have significantly improved since the cyberattack in August. 

"Our hospitals' performance has returned to levels comparable to those reported in the months leading up to February 2022 (the Material Adverse Change measurement date in the APA), the month of February 2022, and the subsequent financial periods through signing on October 5, 2022, at which point Yale committed to the deal," Prospect wrote. "It is important to note that this data security incident was not unique to Prospect. Many other hospitals, healthcare systems and healthcare-related companies across the country have faced similar devastating cyberattacks in recent months, including large organizations like UnitedHealth, Tenet Healthcare and Kaiser Permanente. Yale's attempt to use the temporary impact of the cyberattack on our Connecticut facilities as an excuse to renege on its obligations is contemptible."

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Whitepapers

Featured Webinars