A key lawmaker has introduced a bill that would allow the attorney general to petition the court for the appointment of a receiver at financially distressed hospitals, a move prompted by the recent bankruptcy filing of Prospect Medical Holdings, which owns three community hospitals in Connecticut.

The measure would also empower the state — through eminent domain — to assume control of hospitals that are at risk of closure because of financial instability.

Sen. Saud Anwar, a South Windsor Democrat who is co-chair of the Public Health Committee, said he raised the proposal after researching what authority other states had to intervene in dire situations.

Rhode Island has a policy that permits hospital receivership, and state officials in Massachusetts can seize hospitals through eminent domain, as was recently done in the case of St. Elizabeth Medical Center, a Steward Health Care-operated facility. Steward has also filed for bankruptcy.

Earlier this month, Prospect Medical sought Chapter 11 protection in U.S. Bankruptcy Court in Northern Texas. The chief executive officer of Prospect’s three Connecticut hospitals — Manchester, Rockville and Waterbury — said payroll continues to be met and Gov. Ned Lamont vowed that the hospitals would remain open.

But it’s unclear what the filing will mean for the pending agreement Prospect signed in 2022 to sell its three Connecticut hospitals to Yale New Haven Health. 

Attorney General William Tong recently commented on the need for stronger state authority to intervene when hospitals confront financial hardship.

“We need stronger power and authority to step in when situations like this happen,” Tong said at a press conference last week. “The Rhode Island Attorney General, for example, has receivership power that I don’t have, and he exercised that power in Rhode Island. … As I look at the legislators over here, we’re going to have the conversation about what we need to do in Connecticut.”

The language of Anwar’s bill says lawmakers are trying to “prevent abrupt service interruptions and ensure the continuity of health care services at hospitals,” as well as “allow the state to coordinate long-term solutions when a hospital is in financial distress or experiencing an operational crisis.”

Tong said Monday he supports the measure.

“We are aware of the proposal and would support an expansion of the state’s authority to intervene in these types of situations, including receivership which is not currently an option in Connecticut,” he said in a statement. “More broadly, we remain concerned by the growing influence of private equity over health care, and the challenges posed by consolidation of health care delivery in Connecticut. There needs to be greater oversight and transparency regarding these transactions and acquisitions.”  

Nicole Rall, a spokeswoman for the Connecticut Hospital Association, said receivership and eminent domain don’t solve issues of financial distress.

“CHA looks forward to continuing conversations with lawmakers related to what would be helpful in preserving patient care and protecting jobs during a time of crisis, but we also must recognize that receivership and eminent domain do not solve the problems that cause financial hardship in the first place,” Rall said. “Important questions need to be answered about defining financial hardship, how receivership would be used, and why eminent domain for this use should even be considered. We look forward to continuing to work collaboratively on solutions.”

A spokesperson for Prospect Medical did not immediately respond to requests for comment Monday.

The Connecticut Mirror wrote about the lack of a receivership law in Connecticut last year as Prospect was dealing with financial difficulties and hospital officials were sounding the alarm about deteriorating conditions at the facilities.

The CT Mirror obtained emails that showed a top Lamont adviser raised concerns about the absence of a receivership policy.

“Other states [like Rhode Island] have clear authority to put a hospital into receivership, we do not,” Matthew Brokman, then a senior aide and now chief of staff, wrote in an email.

A spokeswoman for Lamont said Monday the governor plans to also put forward measures that would bolster state oversight of health care.

“We’ve yet to review [Anwar’s] proposal but the governor plans to re-introduce legislation this session that would strengthen the state’s oversight of financial transactions involving hospitals and other health care institutions,” spokeswoman Julia Bergman said.

Although bills that would regulate private equity investment in health care failed to win passage last year, Anwar said he’s optimistic the receivership bill will have good support this legislative session, especially in light of the bankruptcy filing.

“Unfortunately, because of some of the bad actors in private equity, we are seeing hospitals go through significant financial trouble,” Anwar said. “As a last resort, if things do not work out, the state has to [be able to] intervene. I feel like this is life insurance for health care system.”