The Connecticut Hospital Association is suing Prospect Medical Holdings and its three financially troubled hospitals, alleging they have failed to pay $1.75 million in dues and other fees over the past two years.
The lawsuit, filed Tuesday in Hartford Superior Court, is just the latest legal issue for the California-based company that operates the three Connecticut facilities — Manchester Memorial, Rockville General, and Waterbury hospitals.
Prospect agreed more than two years ago to sell the three hospitals to Yale New Haven Health, but that deal has stalled because of a disagreement over the purchase price that has now landed in court.
The latest legal issues are with CHA, a nonprofit trade organization which has 90 members, including the state’s 27 acute care hospitals. The association lobbies for the hospitals with the legislature and provides research and educational services to its members.
The lawsuit accuses Prospect of one count of breach of contract, one count of breach of duty of good faith and fair dealing, four counts of violating the Connecticut Unfair Trade Practices Act, and one count of unjust enrichment.
The lawsuit includes copies of invoices which show that Prospect has paid only $35,000 out of the $1.41 million in dues it owes since October of 2022.
Prospect has missed four payments in that time frame for the six-month periods of October 1, 2022 to March 31, 2023; April 1, 2023 to September 30, 2023; October 1, 2023 to March 31, 2024; and April 1, 2024 to September 30, 2024, according to the lawsuit.
“Defendants have repeatedly represented that they would pay the outstanding membership dues amounts owed to CHA, but have not done so,” the lawsuit said.
Officials with Prospect declined to comment Wednesday, citing the pending litigation.
CHA issued the following statement: “This is a matter between CHA and the owner of certain member hospitals related to payment of dues and payment for other services. For additional information, please refer to the complaint filed.”
In addition to the annual dues, CHA also alleges that Prospect has reneged on paying for specialized services it offers only to members, such as ChimeData, which collects and analyzes data from member hospitals.
The data can be used for “evaluating quality and safety of patient care, assessing financial health, tracking use of key hospital services, and complying with regulatory reporting requirements,” the lawsuit said.
CHA members pay a fee for the specialized services that is separate from membership dues, the association states in the lawsuit.
The lawsuit alleges that Prospect has failed to pay $376,923 in fees for using Chime Data at the three Connecticut hospitals, as well as St. Joseph’s Medical Center in Rhode Island, since July 2021.
The lawsuit by CHA is just the latest attempt to get Prospect to honor its financial commitments.
Yale New Haven Health sued Prospect earlier this month charging that the company breached its contract to sell the three Connecticut hospitals to Yale by defaulting on rent and tax liabilities, allowing its facilities to deteriorate, mismanaging assets, “driving away” physicians and vendors and engaging in “a pattern of irresponsible financial practices.”
Prospect agreed in 2022 to sell its Connecticut hospitals to YNHH for $435 million. But following a crippling cyberattack in August at the hospitals and revelations that Prospect owes tens of millions of dollars to vendors and physicians under contract at the hospitals, Yale asked Prospect to revise the purchase price.
When the negotiations bogged down, YNHH filed a lawsuit asking the state Superior Court to release it from its contract with Prospect.
Prospect also owes the state more than $67 million in hospital provider taxes, prompting the state to file three liens against the company.
Records show Prospect Waterbury Inc. owes the state $36.39 million, Prospect Manchester Hospital Inc. owes the state $22.9 million, and Prospect Rockville Hospital owes $8.1 million for a total of $67.39 million.
However, when the Office of Health Strategies recently issued a certificate of need allowing the purchase of the three hospitals by Yale, the state offered to reduce Prospect’s tax bill by $12 million. The tax reduction is based on the Yale deal being finalized.
