The attorney general’s office Wednesday filed a lengthy court brief in the ongoing bankruptcy proceedings involving Prospect Medical Holdings, detailing all of the ways Connecticut has been harmed by the California company’s ownership of three hospitals here.
Attorney General William Tong’s office filed the “proof of claim” in U.S. Bankruptcy Court in Northern Texas, where the bankruptcy claim is pending.
Prospect Medical Holdings filed for bankruptcy earlier this year. The company owns three hospitals in Connecticut: Manchester Hospital, Rockville General Hospital and Waterbury Hospital.
The state of Connecticut is listed as one of the top 30 creditors in the bankruptcy filing. The state 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.
The filing on Tuesday aims to buttress the state’s claims as creditors jockey for position with the court.
The attorney general’s filing includes a draft of a 41-page lawsuit, submitted as a court exhibit, that the office did not file before Prospect’s bankruptcy filing last January.
“We’re making sure that Connecticut’s claims are front and center in the bankruptcy case, by showing the court what we would have sued Prospect for if they hadn’t filed for bankruptcy,” the spokeswoman Elizabeth Benton said Wednesday.
Once Prospect filed for bankruptcy, all legal proceedings against the company were stayed, including a lawsuit by Yale New Haven Health over a failed deal for Yale to buy the three Connecticut hospitals.
With the sale in limbo, the attorney general has expressed concerns about the levels of care in the three hospitals.
“The AG has said previously that the main priority has been ensuring patient care and safety and the transfer of the hospitals to responsible new owners. If at any point we believed litigation was the best way to achieve that, we would not have hesitated to file,” Benton said.
Tong’s filing alleges that “Prospect always knew it would strip-mine Connecticut’s hospitals, selling out their past and future for short-term profits.”
Prospect Medical declined to comment on the attorney general’s filing.
The court filing claims that the hospitals were unprepared for a cyberattack in 2023 that rattled operations; that Prospect sold the land the three hospitals are located on for short-term gain that benefitted Prospect’s management and shareholders while investing none of it in the Connecticut hospitals; and that it failed to pay many of its vendors millions of dollars.
“These Defendants took Connecticut’s community hospitals private and then sold the ground out from under them to fund massive investor payouts,” the filing claims. “They got rich deceiving the State’s enforcers; throttling its healthcare infrastructure; compromising the most private information of its residents; stiffing vendors; shortchanging the State through unpaid taxes; and endangering residents through compromising on vital medical care.”
Prospect Medical Holdings, which also owns facilities in California, Pennsylvania and Rhode Island, filed for Chapter 11 in the U.S. Bankruptcy Court in Northern Texas to “proceed on a strategic pathway to realign its organizational focus outside of California,” according to a company statement.
Prospect had not paid health provider taxes to the state dating back to March 2022, according to three liens filed by the Department of Revenue Services against Prospect Medical last January. Manchester-based Legacy ECHN Inc., an organization that controls a multimillion-dollar bequest to Manchester Memorial Hospital from a local philanthropist, is the only other organization from Connecticut listed in the filing’s top 30 creditors.