Yale Daily News

The state signaled its support for Yale New Haven Health Systems’ acquisition of three Connecticut-based hospitals owned by Prospect Medical Holdings on Wednesday, offering a first step toward a long-awaited deal to bail out the hospitals. 

The Connecticut Office of Health Strategy signed off on YNHHS’s certificate of need, or CON, application to buy Waterbury Hospital, Rockville General Hospital and Manchester Memorial Hospital from Prospect Medical Holdings. Negotiations for YNHHS to acquire the financially troubled hospitals have been ongoing since October 2022. 

The state’s approval of the CON greenlights the way for YNHHS to finalize the terms of the acquisition deal with Prospect Medical Holdings, keeping the hospitals from shuttering their doors. The acquisition would see YNHHS expand its total bed count by 700 and add about 4,400 additional employees, for a total of approximately 33,400. The for-profit Prospect hospitals would also be reverted to non-profit status.

“I am glad that all the parties have been able to reach an agreement on this transaction in a way that ensures that the residents who live in each of the hospitals’ host communities will continue to have local access to essential medical care, and the jobs of the employees who provide this care will be preserved under this new ownership,” Connecticut Governor Ned Lamont wrote in a statement. 

For over a year, Yale New Haven Health has been in negotiations with Prospect Medical Holdings and the state to iron out an agreement to acquire the three, Prospect-owned hospitals.

Following a six-week-long cyberattack on the three hospitals last August, Yale New Haven Health proposed a “Recovery Plan” that lowered its originally proposed purchase price of $435 million and asked the state to provide financial assistance for the deal. In return, the system would provide the three hospitals with support in their efforts to recover from the cyberattack.

Shortly after, negotiations between Yale New Haven Health, Prospect and Connecticut’s Office of Health Strategy for the acquisition deal went confidential to ensure that they continued as efficiently as possible.

“We continue to meet with all parties, including the Connecticut Office of Health Strategy and Prospect, CT to bring the transaction to a successful conclusion,” said Dana Marnane, director for public relations at Yale New Haven Health, in an email to the News in October.

State conditions on YNHHS

The new CON contains 46 conditions that the state’s Office of Health Strategy, or OHS, will require Yale to adhere to, including the hiring of an independent monitor for five years that reports to the OHS at the sole expense of YNHHS. 

“The [Independent Monitor] shall be responsible for monitoring NewCo’s compliance with all of the conditions set forth in this Agreed Settlement and shall produce a schedule of required reports and data to be shared with the [OHS],” the CON stated. 

Many conditions work to ensure current employees at the three hospitals can maintain their jobs. Notably, the agreement requires YNHHS to rehire all non-management employees and use their “best efforts … to minimize the elimination of individuals’ jobs.” YNHHS must also recognize all established bargaining agreements between hospital employees and the previous management. 

Other conditions focus on community-building efforts. YNHHS and the Prospect hospitals must have community representatives on its board of directors. In addition, the hospitals must hold community meetings to engage the public with hospital activities that allow community members to ask questions. 

The hospitals will also work with local health organizations and stakeholders to conduct a Community Health Needs Assessment to systematically identify community needs. To increase accessibility, YNHHS will also make culturally and linguistically appropriate services available and integrated into the hospitals’ operations. 

All three hospitals will adopt the YNHHS financial assistance policies, and all hospitals will continue to offer Medicaid services. Further, YNHHS must increase its aggregate community benefit expenditures across each hospital. 

“For-profit ownership of community hospitals — especially when tied to hedge funds — should never again be tolerated in our state,” John Brady, vice president of the statewide labor federation AFT Connecticut, wrote in an email to the News. “We have been consistent on our priorities – the health and well-being of our communities and caregivers.”

For five years, Northeast Medical Group — the medical foundation associated with YNHHS — will offer semi-annual reports on Medicaid patients’ access to specialty treatments, including medication-assisted treatment for substance misuse, dermatology, ENT services, neurology, orthopedics, and pain management. 

YNHHS will also invest $6 million in behavioral health services that target increasing access to mental health and substance use disorder treatment. 

“With today’s approval by the Office of Health Strategy, I encourage Prospect to work with Yale to reach a deal that will allow them to finalize this purchase and bring a much-needed resolution to this transaction,” Lamont wrote.

Healthcare providers, legislators push to finalize deal

Throughout the negotiation process, many healthcare professionals, legislators and health policy experts around the state have urged the deal should move forward, and should do so as quickly as possible.

Of concern to these individuals is the volatile financial status of Prospect Medical, and the effects that its for-profit business model has had on its hospitals’ ability to provide care.

Following the cyberattacks, State Senator Saud Anwar, co-chair of the Connecticut General Assembly Public Health Committee, told the News in October that the hospitals could not bill their patients or pay medical supply vendors.

As a result, the CT Mirror also reported that the state was also forced to provide a $7 million bailout to the hospitals, which were struggling to stay afloat after being unable to receive Medicaid reimbursements during the attacks. 

“This was a perfect storm from the hospitals’ perspective,” Anwar wrote in an email to the News. “They were already struggling financially, and the fact that their medical records and ability to see as many patients as they usually see, as well as their ability to bill patients as normal, resulted in a financial issue that harmed cash flow, making their ability to manage their finances significantly more difficult.”

Prospect owes the state at least $67.39 million in health provider taxes that date back to March 2022, according to three state tax liens filed against the California-based company. 

The company’s financial struggles and alleged mismanagement have generated widespread frustration among several Connecticut healthcare providers, who told the News that they continue to support the YNHHS purchase of the Prospect hospitals.

Those financial difficulties “call attention to the dire need for responsible, committed new ownership of ECHN’s hospitals,” said Diane Carlson, president of the Manchester Federation of LPNs and Techs United, AFT Local 5144, who works as a licensed practical nurse at Manchester Memorial Hospital. 

The state’s approval of the CON greenlights the way for Yale to finalize the terms of the acquisition. 

“Our patients and our caregivers deserve better than a hedge fund that fails to pay its fair share to the communities from which it profits,” she added.

According to Rep. Jason Doucette, D-Manchester, the state representative for one of the towns containing a Prospect hospital, Prospect’s management style has “negatively affected” the availability of vendors and supplies. 

He believes that Prospect’s financial woes also harm the morale of doctors, nurses and other hospital employees.

“The private equity model of doing business in health care, together with [Prospect’s] inability to refinance certain company debts, then compounded by the cyber attack in mid-2023, created a dire situation where the bills simply weren’t getting paid,” he wrote in an email to the News. “Most of the people I speak to in the community are hopeful that the acquisition by Yale will bring a significant overall improvement to the ECHN system generally, and that frankly anything is likely to be better than the current situation.”

As the deal moves forward after the state’s approval, however, healthcare professionals continue to provide care to Connecticut residents, even as they face uncertainty over future management and job prospects.

Annie-Marie Cerra, president of AFT Local 5055 for Manchester Memorial Hospital Nurses and an emergency department nurse at Manchester Memorial, highlighted healthcare workers’ continued commitment in an email to the News.

“This acquisition process has created a lot of anxiety for all of us. Despite that, our member nurses and health professionals – as well as our physician colleagues – have shown up every day in our hospitals to provide the excellent care our patients and their families deserve.”

Yale New Haven Hospital was founded as the General Hospital Society of Connecticut in 1826.