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Diving brief:
- The battle over what to do with three hospitals owned by Prospect Medical Holdings in Connecticut intensified last week after Prospect pursued the potential buyer of the hospitalsYale New Haven Health, alleging the health system “actively worked to prevent” the transaction from completing in an effort to obtain a lower purchase price.
- Yale has signed a binding agreement to acquire three Prospect hospitals in 2022 for $435 million. However, the health system claims that Prospect has neglected the properties since then, putting the facilities in “disastrous” conditions. Last month, Yale filed his own complaint to exit the market.
- Prospect is now asking the Connecticut Superior Court to hold Yale to its word and force it to complete the deal. The complaint alleges Yale “knew he was buying troubled hospitals” and agreed to acquire the facilities on an “as is” basis.
Dive overview:
Yale and Prospect have been at odds since the start of the year over whether and how their 2022 deal could be completed.
Yale New Haven, which operates five hospitals, has proposed lowering the purchase price of the hospitals in January, according to Prospect's lawsuit.
When Prospect refused, Yale filed a lawsuit in May. to exit the market. Yale Claimed Closing Conditions Couldn't Be Met After Prospect Downgraded quality of facilities by failing to pay rents and suppliers, failing to implement basic cybersecurity standards – possibly contributing to the cyber attack on the health system in August 2023 – and “hunt” doctors and salespeople.
Prospect says none of these events warrant a decline the acquisition price or the cancellation of the transaction.
P.patient volumes at the hospital have recovered since the cyberattack, and its monthly EBITDAR (earnings before interest, taxes, depreciation, amortization and restructuring or rent expense) has returned to levels before February 2022, when Yale New Haven signed the purchase agreement, according to the lawsuit.
The system argued in court filings that Yale New Haven was acting in bad faith to walk away from the deal, which would require it to acquire three safety-net hospitals: Waterbury Hospital, Manchester Memorial and Rockville General Hospital.
Even though hospitals are struggling, Prospect says Yale should have known what it was buying. The problems at the facility have been going on “for years, even before (the prospect’s) ownership,” according to the lawsuit.
Since at least 2020, there have been several allegations of mismanagement.
Prospect was sued last year by the Attorney General of Rhode Island, which claims Prospect owes more than $24 million to state vendors. News site ProPublica has also published several reports on allegations poor financial management at Prospectreporting in 2020 that the healthcare system changed seller to avoid payment and “bounced checks as part of its regular cash management process.
The health system says Prospect's operating conditions have deteriorated since the parties signed their 2022 agreement.
Prospect received an “unacceptable number of regulatory citations” and notices from CMS over the past 18 months, according to the Yale New Haven lawsuit in May.
Prospect also failed to provide Yale with timely financial documents to audit its performance, in violation of the asset purchase agreement, according to Yale. As of May, more than 200 days after Prospect's 2023 fiscal year ended, Prospect had yet to provide Yale with audited statements.
Last month, Prospect's owner, Medical Properties Trust, which also leases facilities to Steward Health Care, revealed that the health system had did not pay April or May rent during its quarterly earnings call.
Yale New Haven has no plans to back down on its own lawsuit, a spokesperson told Healthcare Dive.
“Prospect's lawsuit is a clear attempt to distract from the for-profit California company's mismanagement of its Connecticut facilities and neglect of the communities that entrusted it with their care,” the spokesperson said. word. “We are prepared to defend ourselves against this lawsuit (to) ensure the sustainability of our health system.”