Prospect Medical Holdings has filed a lawsuit against Yale New Haven Health, alleging that the health system breached its contract with Prospect by “failing to pay the agreed-upon purchase price” for three Connecticut hospitals it offered to buy.
The California-based company also alleges that YNHH failed to use “reasonable best efforts” to complete its acquisition of three Prospect-owned facilities and “actively worked to prevent the closing of the transactions” in order to obtain a lower purchase price.
The suit was filed a month after Yale New Haven Health sued Prospect, alleging that Prospect breached its contract by failing to pay rent and taxes, allowing facilities to deteriorate, mismanaging assets, “pimping” physicians and vendors and engaging in irresponsible financial practices.
[RELATED: Yale New Haven Health wants out of deal to buy Prospect hospitals]
YNHH asked state Superior Court to terminate its contract with Prospect, which had offered to buy Manchester Memorial Hospital, Rockville General Hospital and Waterbury Hospital for $435 million, but after a cyberattack devastated the facilities’ operations and it was revealed that Prospect owed tens of millions of dollars in back taxes to vendors, doctors contracted with the hospitals and the state, YNHH asked Prospect to adjust the purchase price. In the lawsuit filed Thursday, Prospect’s lawyers wrote that Yale offered a lower purchase price on Jan. 31, which Prospect rejected on Feb. 15.
“Our primary goal in filing this lawsuit is to force YNHH to honor its binding commitment to acquire these vital safety-net hospitals and uphold YNHH’s stated commitment to ensure the hospitals’ ability to continue serving their communities,” Von Crockett, co-CEO of Prospect Medical Holdings, said in a statement Thursday. “This transaction is in the best interest of these communities and is supported by our doctors, nurses, caregivers and elected officials.”
The lawsuit also alleges that YNHH violated Connecticut’s Unfair Trade Practices Act and its confidentiality agreement and failed to act in good faith in its dealings with Prospect.
Prospect’s lawyers said the company’s three Connecticut hospitals “have been struggling for years since even before they were formed.” [Prospect’s] They also accused YNHH of abandoning the debate.
“Yale New Haven Health made the closure even harder by cancelling numerous meetings. [Prospect] “He declined to participate in regularly scheduled final confirmation conference calls and instructed his attorneys not to attend,” the lawyers wrote in the lawsuit.
YNHH officials said in a statement Thursday that they stand by May’s legal filing.
“Yale New Haven Health stands by its complaint, which documents Prospect’s multiple breaches of the asset purchase agreement through gross mismanagement,” said Dana Murnane, a spokeswoman for the health system. “Prospect’s lawsuit is a clear attempt by a California-based, for-profit corporation to distract from the mismanagement of its Connecticut facility and its disregard for the communities it entrusts with its care. We stand ready to defend ourselves against this lawsuit, and will pursue our own litigation to the end.”
The state approved a certificate of need authorizing the hospitals to merge in March.
The Connecticut Mirror previously reported that surgeries at Prospect Hospital in Connecticut were being postponed because providers didn’t have the necessary resources. Physicians at the hospital said contracts with traveling nurses and technicians were in jeopardy and were only being maintained on a “week-to-week” basis at one point last fall. An anesthesiologists’ association filed a lawsuit over more than $3 million in unpaid bills. A cyberattack that crippled operations also further strained the hospital’s finances, hospital executives said.
In January, the CT Mirror reported that Prospect had failed to pay $67 million in taxes, and the state of California filed three liens against the California-based company.
On May 22, Gov. Ned Lamont met with the CEOs of YNHH and Prospect in an effort to move stalled negotiations forward out of court.
Lamont spokeswoman Julia Bergmann said at the time that the governor was encouraged by the meeting, even if the two parties left without an agreement.
“This is the first time both CEOs have been in the same room, so we see this as a sign of progress,” Bergman said.
“The governor wanted to get everybody together away from the courtroom and see if there was a way to move this case forward,” Bergman said. “The governor continues to believe this is the best deal and that Yale is the best owner for the three hospitals.”
