CT could bond $390 million for UConn Health, Waterbury Hospital

Connecticut plans to borrow $390 million to expand the footprint of its own struggling flagship medical institution, the University of Connecticut Health Center, while simultaneously ridding the state of hospitals under private equity ownership.

According to communications obtained this week by The Connecticut Mirror, the debt would be added to the “UConn 2000” bonding package, the state’s financing program for capital projects at its flagship university. 

The $390 million in borrowed funds would cover the $13 million acquisition of Waterbury Hospital from Prospect Medical Holdings, a now-bankrupt hospital operator that was formerly backed by private equity investment. The funding would also pay for “other future clinical partnerships,” according to the communication.

Last month, CT Mirror confirmed that UConn Health is also in talks to purchase Bristol Hospital and Day Kimball Hospital in Putnam. It is not clear from the communications whether any of the additional funding would be used to pay for the acquisition of those two hospitals.

A significant portion of the funding would go toward investments in “IT, equipment, deferred maintenance and working capital,” the communication said. Waterbury Hospital, in particular, would need a major influx of capital funding to upgrade its systems, which are still recovering from a crippling cyberattack in 2023.

Gov. Ned Lamont’s office did not respond to a request for comment, nor did Prospect Medical Holdings.

UConn Health spokesperson Jennifer Walker deferred comment to the governor’s office.

The nearly $400 million proposal does not address the hospital provider taxes Prospect owes the state, or its unpaid municipal taxes in Manchester and Waterbury.

As of last month, the Lamont administration was considering forgiving Prospect’s tax liabilities to the state as part of the deal for UConn Health to acquire Waterbury Hospital, according to several legislators who were briefed on the potential deal.

Prospect and its subsidiaries owe the Connecticut Department of Revenue Services as much as $100 million in “taxes or penalties,” according to court filings. However, state officials declined multiple requests to confirm Prospect’s total tax liability to the state.

The legislature would have to approve both the bonding and the tax forgiveness, House Speaker Matt Ritter, D-Hartford, confirmed. Ritter said the legislature would likely approve waiving Prospect’s tax bill.

“If we want to support UConn Health’s taking over the hospital then we will have to if it’s part of the deal,” Ritter said. “Otherwise you have to consider the alternatives — that the hospital could potentially close or some other private equity firm could come in and buy it.”

State Sen. Saud Anwar, D-South Windsor, a physician at one of Prospect’s Connecticut hospitals and a fervent critic of private equity in health care, said he agreed it would be the right move for the state, even though he doesn’t want to see Prospect “make money off the taxpayers.”

“I do think providing high-quality care to the people of Waterbury and beyond is absolutely essential,” said Anwar, who serves as co-chair of the legislature’s Public Health Committee.

During a meeting in September, members of Gov. Lamont’s administration and leadership from the University of Connecticut presented a plan to legislators regarding UConn Health’s acquisition of Waterbury, Day Kimball and Bristol hospitals. Part of that plan included forgiving Prospect’s outstanding taxes to the state. However, several legislators in attendance said they have not heard an update regarding tax forgiveness since then.

The UConn expansion is part of a broader strategy to make the institution more competitive with other academic medical centers in the market. State officials also hope it will improve the financial stability of the institution, which has generated cash flow losses averaging $140 million per year between 2020 and 2023, according to a report released last year.

Prospect isn’t the only health system with unpaid taxes. Day Kimball owes the state roughly $41 million, according to a Sept. 4 DRS report, which means the state may have to grapple with that debt as well. Bristol Health owes less than $14,000 in taxes, according to the same report.

In reference to the outstanding taxes, Day Kimball CEO Kyle Kramer said the hospital is “working together” with state officials toward “a long-term solution” and has been making payments.

Prospect Medical Holdings filed for bankruptcy protection in January, and the sale of its hospitals around the country is being overseen by the U.S. Bankruptcy Court in Northern Texas.

In September, Hartford HealthCare bid $86.1 million to purchase the other two Prospect-owned hospitals in Connecticut — Manchester Memorial and Rockville General. Additional bidders may submit offers through Oct. 16. A sale hearing, where the bankruptcy court judge will approve the preferred offer, is scheduled for Oct. 24. 

Yale New Haven Health was originally slated to purchase all three facilities in a $435 million deal reached in 2022. But the transaction became mired in legal disputes, with both health systems suing each other over the true value of the hospitals. The parties recently settled, with Yale New Haven agreeing to pay Prospect $45 million to exit the deal and end all pending litigation.

On Oct. 3, the University of Connecticut’s Board of Trustees and the UConn Health Board of Directors voted to approve a $13 million bid to acquire Waterbury Hospital. In a statement the same day, UConn Health CEO Andrew Agwunobi said UConn Health would submit the bid “in the coming week.” However, the health system had not submitted an offer as of Oct. 14.