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Why Yale New Haven Health is Suing to Get Out of Prospect Deal

Analysis  |  By Jay Asser  
   May 07, 2024

The fate of three Connecticut hospitals remains up in the air.

Yale New Haven Health is suing Prospect Medical Holdings to exit its acquisition of three Connecticut hospitals, alleging that a breach of contract has changed aspects of the deal.

If the transaction passes, trio of hospitals—Manchester Memorial, Rockville General, and Waterbury—would return to nonprofit status and gain financial stability. However, Yale is arguing that Prospect has failed to hold up its end of a purchasing agreement signed in October 2022 that was contingent on certain commitments.

Those requirements included protecting patient and employee personal data, remaining current on all payment obligations, and meeting all state and federal regulations.

Instead, Prospect allegedly hasn’t paid physicians and vendors, struggled with cybersecurity, neglected the upkeep of facilities, and more.

“Prospect and the Selling Entities have subjected the Businesses to a pattern of irresponsible financial practices, severe neglect and general mismanagement,” the complaint said.

After initially agreeing to a sale for $435 million, the two sides had been working on a revised figure following Prospect’s breaches.

“Prospect has refused to negotiate in good faith,” Dana Marnane, a Yale spokesperson, told the CT Mirror in a statement. “Yale New Haven Health has remained committed to the success of the transaction, cooperating with the Office of Health Strategy and engaging in good faith discussions to attempt to reach an agreement with Prospect. Despite numerous notifications by Yale New Haven Health that Prospect has failed to uphold the [contractual] obligations and closing conditions, Prospect has refused to acknowledge and address these breaches.”

In response, Prospect claims that it offered Yale a “good-faith price reduction” after the purchasing the party couldn’t secure a $80 million grant from the state. Prospect also stated that its hospitals’ patient volumes and finances have greatly improved.

"This lawsuit is a blatant, 11th hour attempt by Yale Health to back out of the commitment they made more than two years ago to the communities served by Prospect's Eastern Connecticut Health Network facilities and Waterbury Hospital," Prospect’s statement said. "Prospect believes Yale is in breach of the asset purchase agreement that was signed by both parties more than two years ago, and we will be seeking legal remedies, including completion of the transaction, to ensure Yale keeps its word to our communities."

Jay Asser is the contributing editor for strategy at HealthLeaders. 


The sale of three Prospect Medical Holdings hospitals to Yale New Haven Health should be voided due to a failure to meet requirements in the purchasing agreement, according to the Connecticut-based health system.

A complaint filed by Yale states that Prospect followed “irresponsible financial practices,” including failure to pay physicians and vendors.

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