State officials and hospital leaders are in high-level discussions concerning the purchase of Bristol, Day Kimball and Waterbury Hospitals by the state-owned University of Connecticut Health Center, according to multiple sources with knowledge of the conversations.

Officials are considering a total for the deal that could reach nearly $400 million, sources said.

On Monday, members of Gov. Ned Lamont’s administration and leadership from the University of Connecticut met with lawmakers to discuss the deal, according to several people. State Comptroller Sean Scanlon and Lamont’s chief of staff Matthew Brokman were among those in attendance, as well as UConn Health CEO Andrew Agwunobi and UConn Health Board Chair John Driscoll. 

Rob Blanchard, Lamont’s spokesperson, said in a statement, “Although discussions are ongoing, it’s premature to discuss final bids or plans around those partnerships.” He added that the governor wants to support UConn Health’s academic and research programs, while ensuring its sustainability.

Representatives for UConn Health could not be immediately reached for comment. Leadership with Bristol and Day Kimball Hospitals deferred to UConn Health for comment. A representative for Waterbury Hospital didn’t provide comment in time for publication Monday.

UConn Health Center, which houses UConn’s medical and dental schools as well as John Dempsey Hospital, has been struggling financially for years, though much of that problem involves fringe benefit and wage costs — driven largely by state government and not by the university itself.

The health center receives about 13% of its funding from the state budget. The bulk of the rest comes from revenue generated by John Dempsey Hospital.

A report released last year, commissioned by the governor and completed by investment banking firm Cain Brothers, found that the health center had too small of a footprint to compete with other academic medical centers in the current market. The health center generated cash flow losses averaging $140 million per year between 2020 and 2023, the consultants wrote.

The report proposed two solutions: either sell John Dempsey Hospital or engage in a partnership with another health system. 

Scanlon said Monday that the potential deal now being considered could bring financial stability to the state health center and benefit the communities surrounding Waterbury, Bristol and Day Kimball Hospitals.

“The potential partnerships that are being explored are about two things: strengthening UConn’s long-term fiscal health and making sure that different communities in Connecticut have access to public health and health care,” Scanlon said. 

Waterbury Hospital is one of three facilities in Connecticut owned by bankrupt hospital operator Prospect Medical Holdings. The formerly private equity-backed Prospect, which also owned hospitals in Pennsylvania, Rhode Island and California, filed for Chapter 11 bankruptcy in January. 

Prospect’s Connecticut hospitals — Waterbury, Rockville General and Manchester Memorial — have faced longstanding financial and operational problems, including a cyberattack in August 2023.

“There needed to be a public health solution,” Scanlon said in reference to Waterbury Hospital. “And that is what this is.” (Rockville General and Manchester Memorial aren’t part of the proposed acquisition by UConn Health.)

As part of the proposed deal, the state would not only have to purchase Waterbury Hospital but also the land, buildings and equipment from a real estate investment trust, sources said. Prospect acquired Waterbury Hospital in 2016 and then sold those assets to the REIT in 2018.

Connecticut claims Prospect owes it more than $67 million in health provider taxes, also known as hospital user fees, which hospitals, nursing homes and other health care providers must pay to the state every year based on their revenues. It has filed a claim in Prospect’s bankruptcy proceeding to recoup the money. Sources said the tax issue is not part of the proposed hospital deal.

On Monday, House Speaker Matt Ritter, D-Hartford, confirmed the nature of the discussions and said the state is considering borrowing money — bonding — to pay for the hospitals. The state’s goal, Ritter said, is to prevent the hospitals from being acquired by private equity interests. 

Ritter added that he had “specific concerns” about how the state would pay for the hospitals. “UConn Health is not in a position to be taking on more debt so my question is, ‘Who is going to pay for it?’” Ritter said. 

But he indicated he wasn’t opposed to using bonded funds to make the acquisition. “I think if we feel that it’s important to have strong hospitals and to keep these hospitals from being purchased by another private equity company then it’s fine for the state to bond it,” Ritter said.

Ritter said the other issue is whether the state would have to exceed its constitutional spending cap to make the purchases. He also said that question may need to be put to lawmakers in a special session.

The deal would need to be approved by the University of Connecticut’s Board of Trustees, which holds its next regular meeting on Wednesday. A source said the possible deal will be discussed at that meeting.

Bristol Hospital and Day Kimball, located in Putnam, are two independently owned community hospitals that have also historically struggled financially. In recent years, both have received state funding to help shore up their operations.