The Chapter 11 bankruptcy proceedings of private equity-funded Prospect Medical Holdings (PMH), the parent company of three Connecticut community hospitals, kicked off Tuesday in the U.S. Bankruptcy Court for the Northern District of Texas.

Deborah Weymouth, president and CEO of Manchester Memorial Hospital, Rockville General Hospital, and Waterbury Hospital, is expected to tap into the hospitals’ own funds to finance their functioning during the bankruptcy process.

Until now, local management did not have direct access to those funds.

“We do generate a significant amount of cash that historically we have not had direct access to utilize in our local market,” Weymouth said. “First and foremost, I believe we’ll be dedicating that cash and that revenue to our operating expenses.”

A different picture was painted at the national level.

During the bankruptcy hearing in Texas Tuesday, a lawyer for Prospect said the California-headquartered company got “dangerously close” to running out of money last week.

The lawyer also said Prospect is in ongoing talks with Yale New Haven Health over the stalled $435 million sale of its Connecticut hospitals to Yale, and the talks now were at a different price point.

Prospect’s lawyers plan to transfer the lawsuit Yale filed to back out of the deal, from state court to the bankruptcy court.

In legal speak, the Texas court is what’s known as a court of equity, where the presiding judge Stacey Jernigan — who incidentally writes mystery novels involving bankruptcy judges — has the leeway when it comes to the order of distribution.

Connecticut Attorney General William Tong said his office would fight for equitable distribution.

“Our hope is that the court will focus not on creditors and all the stuff, right, but focus on the patients and focus on what’s best for the patients and these institutions to keep them open, and the employees,” Tong said.

In its declaration filed Monday, Prospect said the pandemic drove the California company into bankruptcy. But a recent U.S. Senate committee report blasted Prospect for draining local hospitals of money and saddling them with debt.

Meanwhile, Waterbury Hospital, Manchester Memorial, and Rockville General continue to see patients.

“We are open, and as always, our top priority remains to provide safe, high quality care to every patient who comes in,” Weymouth said.

The Connecticut Department of Public Health will continue to inspect the hospitals, and “those relationships continue,” Weymouth said. “Waterbury [Hospital] actually is working with an independent expert who is there on a regular basis.”

Weymouth said she expected the hospitals to remain open in the long term, in part because they would be hard to replace.

“These hospitals have significant value for far more than just their bed count,” Weymouth said. “We have a team of dedicated nurses, hospitalists, other physicians and staff who are ready and able to provide care. That adds value to our organization.”

The cost of closing or replacing the hospitals would amount to $1 million per bed, according to Weymouth.

Prospect currently owns and operates 16 hospitals in California, Connecticut, Rhode Island and Pennsylvania, and plans to shift its focus entirely to its 7 hospitals in California post bankruptcy.

This story was first published Jan. 14, 2025 by Connecticut Public.