🔒Yale to pay $45M to settle dispute with Prospect over failed hospital acquisitions deal

Yale New Haven Health System has agreed to pay $45 million to settle litigation related to its attempt to withdraw its offer to acquire Prospect Medical Holdings’ three Connecticut hospitals. In a motion filed Friday in federal bankruptcy court in Dallas, Prospect seeks approval of the settlement, which it states will “fully and finally resolve, compromise, and settle the disputes between them ….” HBJ first reported on the settlement last week. YNHH agreed in April 2022 to pay $435 million to acquire Waterbury, Manchester Memorial and Rockville General hospitals, all owned and operated by Prospect Medical. YNHH later filed a lawsuit seeking to back out of the deal, citing the three hospital’s increasing financial woes, in part related to a data breach that occurred in August 2023. Prospect filed a countersuit seeking to force YNHH to complete the deal. That was followed by Prospect filing a Chapter 11 bankruptcy petition in Texas in January. Yale confirmed on Sept. 19 that it had reached a settlement in principle with Prospect, but did not release details at that time. The $45 million settlement represents just over 10% of its offer for the three hospitals. A hearing to approve the settlement is scheduled for Oct. 10 at 9:30 a.m. Central Time in bankruptcy court in Dallas According to the motion, the settlement was reached in principle during mediation with Judge Harlin D. Hale and representatives of Prospect, Medical Properties Trust (which owns the land on which the three hospitals are located), Yale New Haven Health and the city of Waterbury, with Connecticut state officials participating only as observers. On Sept. 16, the parties informed the court they had reached a “resolution in principle, with the definitive documentation to come at a later date.” On Sept. 26, the parties said Yale New Haven Health will pay $45 million in cash to the debtors to resolve their disputes. The motion also states that the agreement provides other benefits to Prospect and stakeholders in the bankruptcy proceedings by resolving “time-consuming and expensive litigation” with YNHH, allowing Prospect to “better focus on other pressing issues” in its Chapter 11 bankruptcy cases, “including confirmation of a Chapter 11 plan.” The settlement also provides clarity for Prospect and potential bidders in the ongoing auction process to sell the three Connecticut hospitals. Earlier this month, Prospect named “ECHN Holdings Inc.” as a stalking-horse bidder, with a bid of $86 million for Manchester Memorial and Rockville General hospitals. Hartford HealthCare has been identified as the organization behind that bid. Both Manchester Memorial and Rockville General hospitals are part of Eastern Connecticut Health Network (ECHN). In addition, state officials and hospital leaders said earlier this month they are in high-level discussions concerning the purchase of Waterbury Hospital, as well as Bristol and Day Kimball hospitals, by the state-owned University of Connecticut Health Center. Resolving its lawsuits with Prospect also benefits YNHH, which has been dealing with financial issues of its own. It reported an operating loss of $162.4 million for fiscal year 2023, but experienced a better year in fiscal 2024, reporting a $46.2 million surplus, according to audited financial statements. Yale New Haven Health System includes Bridgeport Hospital, Greenwich Hospital, Lawrence + Memorial Hospital, Yale-New Haven Hospital and related entities. The health system announced in March it was restructuring its operations, including eliminating an unspecified number of positions. That same month, it offered voluntary retirement packages to certain senior employees, stating the effort was necessary to navigate “a rapidly changing healthcare landscape.”