This story is part of CT Mirror Explains, an ongoing effort to distill our wide-ranging reporting into a "what you need to know" format and provide practical information to our readers.
After a six-week-long cyberattack, a proposed Yale acquisition of three financially troubled Prospect Medical Holdings hospitals is at risk, as Yale New Haven Health seeks a lower purchase price and support from the state.
Prior to the cyberattacks that crippled the hospitals in Waterbury, Rockville and Manchester — forcing them to close their ERs, cancel many elective procedures and accept a $7 million bailout from the state — Yale had agreed to purchase them for $435 million.
After the cyberattack, Yale has proposed a recovery plan, where Yale New Haven would provide immediate support to all three hospitals, and Prospect would lower the price for them. Yale also expects the state to contribute funds, but it is not clear what the amount would be.
Gov. Ned Lamont believes that all sides will be able to reach a deal that will ensure the acquisition is completed in the next 60 days.
Prospect Medical Holdings is one of the largest hospital landlords in the nation, but the company has been plagued with reports of financial mismanagement and exploitation for years. When the Yale deal was announced in 2022, community and state leaders said it was the last best chance for the hospitals to remain open.
Here’s what you should know.
What is Prospect Medical Holdings?
Prospect Medical owns 20 hospitals across the nation, including some in Pennsylvania, Colorado and Connecticut. All three Connecticut hospitals were purchased by Prospect Medical in 2015.
In the years since, CBS and ProPublica have reported troubling stories on Prospect Medical’s financial practices. In 2018, Prospect Medical took a $1.12 billion loan and then used the funds to pay its executives and shareholders $457 million, according to CBS News.
Then, to pay back the loan, Prospect Medical sold the land from the hospitals they own, including the ones in Connecticut, to a real investment trust and leased the hospitals back from the trust. In Pennsylvania, the lease-back agreement meant one health care system was on the hook for $35 million a year in rent, CBS reported.
Now, Prospect appears to be on a selling spree of its own. In addition to the proposed sale of its Connecticut hospitals, the system is also looking to sell four Pennsylvania hospitals.
What happened during the six-week cyberattack?
On Aug. 3, all three hospitals issued a state of emergency notice to the state’s Department of Public Health after an early morning cyberattack paralyzed them. That morning, the Manchester and Rockville hospitals also closed their ERs — for the first of more than two dozen times.
The cyberattack prevented the hospitals from accessing patient information, scheduling procedures, paying vendors or receiving Medicaid reimbursement payments.
On Sept. 12, more than a month after the first emergency alert, Prospect reported that all systems were back to normal. But officials from all three hospitals recently told a group of 30 legislators they still are recovering financially from the breach, and computer systems are not completely restored.
What were the effects of the cyberattack?
During the six-week period, the hospitals were forced to close their ER to new patients 29 times and cancel more than 50% of elective surgeries. Other hospitals in the area reported surges in the number of patients they received and warned of potentially becoming overwhelmed.
Saint Mary’s, a hospital in Waterbury, reported that its emergency department was overrun. At some points, it got so crowded in the emergency room that people were sitting on the floor.
The state was forced to provide a $7 million bailout to the hospitals to stay afloat because they were not able to receive Medicaid reimbursements.
More than 24,000 employees of Prospect Medical Holdings in Connecticut may have also had some of their personal information, including Social Security numbers, exposed during the cyberattack.
Prospect Medical is currently investigating whether the data was obtained through the six-week-long cyberattack or in a separate attack.
What does this mean for the Yale acquisition?
Yale New Haven Health officials acknowledged their growing concerns about the completion of the deal to buy the hospitals. They are now calling on the state to contribute to the purchase while also asking Prospect to lower the $435 million price tag.
Yale has added that the acquisition is “more at risk” as time passes without approval from the state.
Lamont said that all parties involved in the deal will sit down to discuss this proposal “this or next week.” He predicted that the sale should be finished and signed off by the state’s Office of Health Strategy in the next 60 days.
Earlier in the week, executives from Prospect Medical, the three hospitals and Yale New Haven Health went to the Capitol to meet with Lamont and lawmakers to deliver a unified message: The state needs to move fast to finalize the acquisition.
Recently, hospital leaders told legislators they are even having “difficulty paying for bed linens,” according to people at the meeting. The Waterbury hospital is believed to owe $40 million to vendors, according to an email Griffin Health CEO Pat Charmel sent to Lamont.
Yale officials are working on a recovery plan to “salvage the acquisition of these community hospitals,” according to Rob Hutchison, senior vice president of marketing and communications for Yale New Haven Health.