Alyssa Chan, staff photographer
Yale-New Haven Health System is suing Prospect Medical Holdings to opt out of a hospital acquisition deal originally valued at $435 million.
Yale New Haven Health System claim Prospect’s negligence, mismanagement, or irresponsible financial practices in violation of prior agreements; These violations include failure to meet safety and disinfection standards, mismanagement of medical samples and medications, failure to repair infrastructure, improper implementation of treatments, and violations of abuse policies.
In addition, the health system cited cybersecurity concerns and financial shortcomings at Prospect Hospital, including millions of dollars in unpaid compensation to hospital employees and debts resulting from rent, interest and unpaid taxes.
“We cannot continue to pursue acquisitions and jeopardize the sustainability of our health care system,” Dana Murnane, director of public affairs for Yale New Haven Health, said in a press release sent to the newspaper.
network negotiation Plans to acquire Waterbury Hospital, Rockville General Hospital and Manchester Memorial Hospital began on February 4, 2022, when Yale-New Haven Health System signed a letter of intent to acquire Prospect Hospital. After months of negotiations, both parties signed an agreement. sales contract On October 5, 2022.
To close the acquisition deal, the health system outlined requirements that Prospect must meet. This includes maintaining consistent business practices, protecting patient and employee personal data, keeping all payment obligations current, and complying with all relevant state and federal regulations.
“Because Prospect was found to be unwilling to make a good faith effort to reach an agreement, YNHHS found that Prospect was in breach of the Asset Purchase Agreement (APA) and that Yale New Haven Health was in breach.” We have no choice but to file a complaint to obtain a declaration that we are not obligated to complete the transaction on its original terms,” Marnan wrote in the News.
In a written statement reported in CT mirrorProspects parties called the lawsuit a “blatant 11th-hour attempt” by Yale Health to back out of the contract, saying Yale had to use the law “including closing the transaction” to ensure completion of the deal. He said he would like to take appropriate measures.
Prospect did not immediately respond to a request for comment.
A pattern of repeated regulatory violations
According to a report on Friday complaint The report, prepared by Yale New Haven Health Services Corporation, found that state and federal regulators found that regulatory violations at Waterbury Hospital, Rockville General Hospital, and Manchester Memorial Hospital jeopardized patient health and safety and that I issued a notice for violating normal business practices.
In June 2023, the Connecticut Department of Public Health revealed that a patient died because Waterbury Hospital’s laboratory failed to process the patient’s blood test in a timely manner. complaint.
The department also identified 20 violations of Connecticut state regulations against Waterbury Hospital.
Violations include not disinfecting operating room equipment and leaving it rusty. Failure to properly label medicines made it impossible for staff to check expiration dates. And it failed to complete criminal background checks on 25 new employees who had direct access to patients and their records.
On October 11, 2023, the Centers for Medicare and Medicaid Services issued a notice to Manchester Memorial Hospital for failing to investigate allegations that a registered nurse had an intimate relationship with a patient in a patient’s room before and after discharge. I put it out.by complaintthis nurse was never removed from the patient care area or placed on administrative leave in violation of Manchester Memorial Hospital’s abuse policy.
In addition, the state Department of Public Health identified 13 regulatory violations at Manchester Memorial Hospital. These include missing samples of potentially cancerous cells taken during surgery, using the wrong implant during knee surgery, and failing to ensure antibiotics are administered to patients with infections. is included.
In November 2023, the department issued another violation notice to the hospital for failing to implement ongoing safety precautions to prevent infant abductions.
Like Manchester Memorial Hospital, Waterbury Hospital faced repercussions from both the department and the Centers for Medicare and Medicaid Services. On January 3, 2024, the state Department of Public Health issued a non-compliance citation to Waterbury Hospital for allegedly failing to replace a breaker that provided power to the system, resulting in a loss of power to the heating, ventilation, and air conditioning system. A notice has been issued. . Instead of paying to fix the system, the hospital took no action for five months.
In addition to patients and staff going without air conditioning during the summer months, malfunctions in the heating, ventilation, and air-conditioning systems were unable to maintain adequate humidity and temperature levels, sometimes resulting in the cancellation of surgeries.
On January 26, 2024, the Centers for Medicare and Medicaid Services reported that Waterbury Hospital no longer meets Medicare participation requirements due to serious violations and was placed under the control of a state review agency.
Then, on March 11, 2024, the Department of Health identified 18 violations at Waterbury Hospital for patient abuse and inadequate anesthesia care.
Cyber security concerns
On the morning of August 1, 2023, Prospect’s three hospitals fell victim to ransomware The complaint alleges that unauthorized persons infiltrated Prospect Hospital’s electronic environment and accessed protected health information and de-identified information of approximately 110,000 patients and employees.
“Defendants’ inadequate cybersecurity measures and investments further exacerbate the hospital’s poor financial performance,” Friday’s complaint said.
The complaint notes that Prospect’s chief information security officer resigned before the breach, but Prospect has not yet filled the position.
Weeks after the cyberattack, Manchester Memorial Hospital is unable to accept new patients until August 28, 2023, losing more than 30 percent of its patient population. Patients arriving at hospitals had to be transferred to facilities in Connecticut or nearby states. According to the report.
“Waterbury Hospital’s emergency department transferred so many patients to St. Mary’s Hospital that St. ”, the report states.
After the breach, the three hospitals were unable to bill Medicaid and other insurance companies, resulting in the state Department of Human Services having to trespass on the hospitals. $7.5 million.
Yale University New Haven Health suffers from cyber attack It has been submitted A Certificate of Need application to the state with a plan for rebuilding the hospital, including a request for financial assistance from the state. The Connecticut Department of Health Strategy signed the certification.
financial deficiency
Yale New Haven Health System’s decision to sue was also fueled by Prospect Hospital’s failure to pay vendors and doctors.Mentioned by the company’s attorney A report that reveals As of November 2023, the hospital owed $5.9 million to local contractors and $5.18 million in unpaid compensation to doctors.
These financial setbacks led nurses and doctors from Prospect’s three hospitals to gather at the state Capitol in Hartford to protest the lack of payments, according to the complaint.
“The value of the assets is due in part to Prospect’s failure to pay its doctors and vendors, including Yale Medicine, its failure to pay state health care provider and city taxes, and the massive cyber crisis caused in part by a lack of investment. “This technology exposed patient, employee, and dependent data and prevented Prospect CT from billing for services,” Murnan wrote in the News. .
The complaint also states that both Waterbury and Manchester Memorial hospitals are unable to pay for elevators, resulting in staff holding patients up and down stairs.
The prospect also owes millions of dollars in rent, interest and unpaid taxes. According to the report, Prospect owed $56 million in unpaid rent and interest and $400 million in loans. In December 2023, the state of Connecticut filed three tax liens against Prospect for failing to pay provider taxes since March 2020. The three hospitals owe a total of $67.39 million, according to the report.
The suit says Prospect’s mismanagement and financial irresponsibility have diminished the hospital’s value.
inside outlook statementDespite what Yale wrote in its complaint, Prospect was only informed on March 27, 2024 that there had been a “material adverse impact on the hospital’s finances and operations,” and that they “We lowered hospital prices in good faith,” they wrote. This is an attempt to move negotiations forward. ”
Prospect also wrote that Connecticut hospitals have seen a “significant rebound” in patient volume and finances.
Prospect Medical Holdings owns 16 hospitals in four states.
