Waterbury Hospital is one of three hospitals owned by Prospect Medical Holdings. Yale New Haven Health has moved to purchase the hospitals, but has asked for a lower purchase price and state funds to support the deal. Shahrzad Rasekh / CT Mirror

Officials from Yale New Haven Health, Prospect Medical Holdings and the state’s Office of Health Strategy have resumed negotiations in Yale’s bid to acquire three Prospect-owned hospitals in Connecticut after the health systems agreed to sign a confidentiality agreement to keep the talks private.

“OHS has provided the applicants with a draft settlement agreement and the applicants have agreed to confidential settlement negotiations,” said Tina Kumar Hyde, spokeswoman for the health strategy office. “OHS is unable to comment any further at this time.”

Last week, negotiations broke down after Yale and Prospect indicated they did not want to keep the talks private. Kumar Hyde said at the time that, in the absence of further negotiations, the state would move ahead quickly with a decision on whether to approve the deal. Yale has moved to purchase Waterbury, Manchester Memorial and Rockville General hospitals. Manchester and Rockville hospitals are part of the Eastern Connecticut Health Network.

Kumar Hyde has said OHS is not required to keep negotiations confidential, but the agency prefers to do so. “We routinely carry out our agreed settlement discussions in a confidential manner,” she said.

In a statement Wednesday, Yale spokeswoman Dana Marnane confirmed the health system had agreed to confidential talks.

“We signed the confidentiality agreement because we felt it was very important to continue productive conversations with OHS,” she said.

A spokesperson for Prospect Medical could not immediately be reached for comment.

Sources have told the Connecticut Mirror that Yale is seeking $16 million per year over five years, or $80 million total, from the state to help with recovery efforts from a recent cyberattack across the three Prospect-owned hospitals, to update computer systems and to address “deteriorating” conditions at the facilities.

Yale officials presented a two-page “recovery” plan to state leaders, including Gov. Ned Lamont, as well as representatives from Prospect and Medical Properties Trust Inc., which owns the properties and leases them back to Prospect.

In 2018, Prospect took out a $1.12 billion loan and used the funds to pay its executives and shareholders a $457 million dividend, CBS News reported. To pay back the loan, Prospect sold the land and buildings from hospitals it owns in Connecticut, California and Pennsylvania to a real estate investment trust, then leased back those hospitals from the trust.

“Yale believes the four parties should come together to carry out a recovery plan to preserve the essential community health care resources … represented by the Waterbury/ECHN organizations,” Yale officials wrote in the recovery plan. A copy of the plan was obtained by the CT Mirror.

Yale’s proposal would include state financial support with a guarantee from Yale that the money would go toward the hospitals’ recovery, not the health systems or trust.

“This financial support will not flow to or benefit Prospect Medical, [the properties trust] or Yale New Haven Health,” officials wrote. “It will directly support the Waterbury/ECHN organizations as they recover. The state will provide financial support that goes directly to narrow the financial deficit at Waterbury/ECHN.”

The plan also asks the state to approve the deal as soon as possible with no “conditions or restrictions on YNHH other than those mutually agreed [upon] between YNHH and OHS.”

In exchange, Yale is offering — before the acquisition is even completed — to provide professional management and information technology expertise to “support and stabilize” the three hospitals through a management services agreement.

Under the plan, the properties trust would have to transfer ownership of the properties to Yale and participate in negotiations. Yale also asks Prospect to adjust the previously agreed upon purchase price of $435 million for the hospitals. The document did not specify an alternative price.

In an interview with the CT Mirror last week, Lamont said he sees no reason for the state to chip in taxpayer funds, but Yale is free to renegotiate the purchase price.

“I have it on good information that there are a couple other folks who could step in if Yale doesn’t want to complete the deal,” he said. “I want Yale to complete the deal. I mean, it was just a year-plus ago that they came in, put in place a bid that Prospect accepted. I think now, maybe there are some second thoughts about that bid.”

Lamont said Yale’s ability to demand a new price or walk away would be dependent on whether it could show a “material change” in the value of the hospitals since the deal was done.

“We’ll see whether the last 100 days is really a material change,” he said. “But that doesn’t involve the taxpayers of the state. That’s Prospect-New Haven seeing if they can reach an agreement. And that’d be a good solution for all if they can.”

Officials from Yale, Waterbury Hospital and ECHN have been urging the state to speed up its approval of the acquisition, saying the financial situation at the Prospect-owned facilities is dire. Yale agreed to buy the hospitals in 2022.

In a meeting with about 30 legislators late last month, hospital executives said they are struggling to pay bills and, if the deal with Yale is not approved, the facilities may not remain financially viable or functional, according to people in attendance.

The executives have said they owe millions to vendors and physicians contracted to provide care at the hospitals.

ECHN alone owes $42 million in taxes to the state, $5.18 million to physicians, and $5.9 million to local vendors, sources have said.

Yale officials are concerned about the software at the Prospect-owned hospitals following a cyberattack, which began in early August and lasted for nearly six weeks. At the meeting with legislators, the computer system used by the hospitals was described as outdated.

More than 24,000 employees of Prospect Medical Holdings in Connecticut may have had some of their personal information, including Social Security numbers, exposed during the recent cyberattack that paralyzed many operations in the hospitals.

Prospect notified employees and the state Attorney General’s office of the breach in late September.

Prospect also told the Attorney General’s office that 63 Connecticut residents who were patients at Prospect hospitals in California may have had their information breached, including patient names, health insurance and financial information. Of those breaches, 13 had Social Security numbers involved, according to the Attorney General’s office.

CT Mirror Staff Writer Mark Pazniokas contributed to this report.

Jenna is CT Mirror’s Health Reporter, focusing on health access, affordability, quality, equity and disparities, social determinants of health, health system planning, infrastructure, processes, information systems, and other health policy. Before joining CT Mirror Jenna was a reporter at The Hartford Courant for 10 years, where she consistently won statewide and regional awards. Jenna has a Master of Science degree in Interactive Media from Quinnipiac University and a Bachelor or Arts degree in Journalism from Grand Valley State University.

Dave does in-depth investigative reporting for CT Mirror. His work focuses on government accountability including financial oversight, abuse of power, corruption, safety monitoring, and compliance with law. Before joining CT Mirror Altimari spent 23 years at the Hartford Courant breaking some of the state’s biggest, most impactful investigative stories.