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Diving brief:
- Yale New Haven Health is suing Prospect Medical Holdings to withdraw from its deal to purchase three Prospect hospitals in Connecticut, arguing that the company violated the terms of their contract and left the facility in a “dire” financial situation.
- In 2022, Yale signed an agreement to acquire Waterbury Hospital, Manchester Memorial Hospital, Rockville General Hospital and their related operations for $435 million, according to the lawsuit filed last week in Superior District Court Hartford Judicial Court.
- But since the deal was signed, Yale has claimed that Prospect subjected hospitals to “irresponsible financial practices, gross negligence and general mismanagement.” The nonprofit said Prospect failed to pay staff and vendors, racked up regulatory violations, failed to properly maintain facilities and neglected to implement basic cybersecurity measures – the operator of the for-profit hospital was hit by ransomware attack last summer.
Dive overview:
Los Angeles-based Prospect has decided to sell most of its Connecticut assets in 2021. Yale, a nonprofit that operates five hospitals, signed a letter of intent to purchase the three hospitals early in 2022, and entered into an asset purchase agreement a few months later to acquire the facilities, according to the lawsuit.
The final agreement required Prospect to continue normal hospital operations, protect patient and employee data and stay current on payments, among other requirements, according to the complaint.
But Yale says the for-profit operator failed to hold up its end of the bargain, allowing government citations for patient safety violations to pile up, letting facilities deteriorate and failing to adequately prepare for cyberattacks. In August, a ransomware attack at Prospect exposed data from more than 1.3 million people Across the country.
Yale said it warned Prospect several times about these issues, but the company only delayed the acquisition's closing date.
The health system now says the closing conditions of the transaction cannot be met and that it is not obligated to complete the transaction.
In a statement to Healthcare Dive, Prospect said the lawsuit was a “blatant 11th hour attempt” to get out of the deal, adding that the nonprofit only informed the company of its concerns. 'at the end of March. Financial conditions and patient numbers have improved at hospitals since the cyberattack, and hospitals are meeting the state Department of Health's safety and quality standards, the system says.
“The state has already given approval for the sale of Prospect Hospitals to Yale, so we see no reason to delay further,” a spokesperson said in a statement. “Prospect remains committed to completing the transaction on time. It is time for Yale to fulfill its commitment.