Yale New Haven Health will pay Prospect Medical Holdings $45 million to settle dueling lawsuits in state court, ending a contentious saga over the proposed sale of Prospect’s three Connecticut hospitals — with Yale acquiring none of them.
The 50-page settlement agreement, filed in the bankruptcy court Friday, asks the judge to approve the settlement between Prospect and Yale by Oct. 10.
In the filing, Thomas Califano, an attorney for Prospect, wrote “everybody’s pretty satisfied” with the outcome, although “I don’t think anybody’s happy with it.”
Prospect signed a deal in 2022 to sell Waterbury Hospital, Manchester Hospital and Rockville General Hospital to Yale for $435 million. But that agreement hit snags and both parties sued each other.
This January, Prospect Medical filed for bankruptcy. Less than a month after the bankruptcy filing, Yale announced it was pulling out of the deal completely stating the bankruptcy filing was “proof of their disinvestment and mismanagement.”
At an August hearing in the bankruptcy case, in U.S. District Court in the Northern District of Texas, the judge encouraged Prospect and Yale to settle their dispute through mediation.
The two sides, along with Prospect’s landlord Medical Properties Trust, met for an in-person mediation session in mid-September with Judge Harlin D. Hale to work out the settlement.
“The settlement agreement is the result of good-faith negotiations among the debtors, MPT, and YNHH, during which the Committee was present and informed,” Califano wrote.
Yale New Haven Health spokeswoman Dana Marnane said Monday the “settlement will officially end all pending litigation between our Health System and Prospect allowing both parties to move forward and focus on the future.”
The two parties had been at odds since Yale sued to have the $435 million purchase price lowered after a cyberattack struck the three Prospect Hospitals two years ago, crippling some of their operations for months.
Yale officials said it would cost as much as $80 million for Yale to repair the damages to the hospital’s computer security systems because of the cyberattack. It also claimed Prospect had failed to pay some of its vendors for years and also owed the state of Connecticut at least $67 million in taxes.
Prospect then countersued, arguing Yale was trying to renege on the agreement and cited the stalled sale as part of the reason it needed to file for bankruptcy. Both lawsuits will be dismissed as part of the settlement agreement.
Meanwhile the fate of Prospect’s three Connecticut hospitals remains in bankruptcy court. Yale is no longer a player, but its main competitor Hartford HealthCare has stepped into the fray.
Hartford HealthCare has offered $86.1 million to purchase two of the three hospitals — Manchester Memorial and Rockville General.
ECHN Holdings Inc., a wholly owned subsidiary of Hartford HealthCare, will serve as the “stalking horse bidder” for the two hospitals in the court-supervised sale auction, according to court documents. The “stalking horse” serves as the first bidder in a bankruptcy auction whose offer serves as the minimum bid.
Meanwhile, state officials are in high-level discussions regarding a deal in which the University of Connecticut Health Center would purchase the third Prospect facility, Waterbury Hospital, along with the independently owned Bristol and Day Kimball Hospitals. Officials are considering a total for the deal that could reach nearly $400 million, sources said.