Prospect's Connecticut Hospital Deal with Yale New Haven Collapses Amid Bankruptcy

Yale New Haven Calls Deal "Impossible" as Prospect Seeks New Buyers

The long-anticipated deal between Prospect Medical Holdings and Yale New Haven Health for the sale of three Connecticut hospitals has fallen through, according to recent statements from Yale New Haven. The collapse of the $435 million agreement comes in the wake of Prospect's January bankruptcy filing and months of contentious litigation between the two parties.

Yale New Haven cited Prospect's "failure to pay vendors on time, disinvestment in the facilities, and record of mismanagement" as reasons for the deal's demise. A spokesperson for Yale New Haven stated that Prospect's bankruptcy filing serves as "proof of disinvestment and mismanagement," rendering the transaction untenable under the terms set out in the October 2022 Asset Purchase Agreement.

Connecticut Regulators Push for Swift Resolution

As the legal dispute between Prospect and Yale New Haven continues, Connecticut state regulators are pressing for a quick resolution to ensure continued healthcare access for residents. In a February bankruptcy filing, state attorneys emphasized that the "real victims" of this situation are Connecticut residents facing uncertainty about their healthcare options.

Governor Ned Lamont announced that Prospect has identified potential buyers both within and outside of Connecticut, with names expected to be revealed in the coming weeks. The state's priority remains keeping the facilities—Manchester Memorial, Waterbury, and Rockville General hospitals—operational and transitioning them to a new, more stable operator.

Legislative Action and Industry Implications

In response to the ongoing Prospect situation, Connecticut lawmakers are advancing legislation to increase regulatory oversight of healthcare transactions involving private equity firms. This move comes after a Senate report criticized the financial strategies employed by Prospect's former owner, Leonard Green & Partners, suggesting that practices such as sale-leaseback transactions may have contributed to Prospect's financial decline.

The proposed bill has faced opposition from the state's hospital association, which argues that additional layers of review could unnecessarily delay healthcare transactions. This legislative push highlights the growing scrutiny of private equity involvement in healthcare and may signal a shift in how such deals are evaluated and approved in the future.