Prospect listed over $400 million in debts but promised to keep its hospitals open.

Janice Hur

12:15 am, Jan 13, 2025

Staff Reporter

Tim Tai, Senior Photographer

On Jan. 11, Prospect Medical Holdings, the owner of three hospitals in Connecticut, filed for Chapter 11 bankruptcy.

Prospect’s filing listed debts of more than $400 million. The company hopes the bankruptcy process will allow it to expedite the sale of hospitals outside its home state, California, while stabilizing its financial footing. 

In a press release, Prospect promised that all of its hospitals, medical centers and physician offices would remain open and provide uninterrupted patient care and services during the bankruptcy process.

“Prospect’s decision to file for bankruptcy is much larger than just the state of Connecticut – this is a national matter and of grave concern to many hospitals around the country,” a Yale New Haven Health spokesperson wrote to the News.

YNHH is in a legal battle over the $435 million hospital deal to acquire Prospect’s three Connecticut hospitals. In a lawsuit filed last year, YNHH alleged Prospect’s financial instability and mismanagement, citing inadequate investments, unpaid pension plans and growing debt.

Prospect’s bankruptcy filing also comes after months of legal battles with state governments, including Connecticut, Pennsylvania and Rhode Island, over allegations of financial mismanagement and underinvestment in their hospital systems. CBS News previously reported that in 2018, Prospect’s private equity owners took out a $1.12 billion loan which they used to issue its leadership a $457 million dividend.

Prospect cited the lingering effects of the COVID-19 pandemic, inflation and increased health plan denials as reasons for its financial woes. 

Last week, a bipartisan Senate committee released a report with what it described as “overwhelming evidence of financial mismanagement” at Prospect, as the company’s “pursuit of financial results overshadowed priorities like patient safety and sustainable business operations.”

A Prospect spokesperson denied the allegations and claimed that the Senate report “drew false conclusions and omitted key facts.”

The bankruptcy filing needs to be approved by the U.S. Bankruptcy Court for the Northern District of Texas.

Bankruptcy’s fallout in Connecticut

As Prospect’s bankruptcy proceedings unfold, state officials, hospital leaders and legislators are working to ensure continuity of patient care and stability within Connecticut’s healthcare system. 

Prospect’s three Connecticut hospitals — Waterbury Hospital, Manchester Memorial Hospital and Rockville General Hospital — provide critical services to their local communities, including emergency care, inpatient treatments and outpatient clinics.

Gov. Ned Lamont’s administration has emphasized the importance of maintaining operations at these facilities and has announced steps to oversee the process.

“We have a cross-agency team in place to ensure hospital operations continue uninterrupted and that employees and vendors continue to be compensated, as required by court orders,” Lamont said in a press release. “Our number one priority remains maintaining safety and quality of care at Prospect’s three Connecticut hospitals.”

State Attorney General William Tong emphasized that Prospect Medical Holdings remains accountable for its obligations to patients, employees and creditors. 

Some legislators, including state Sen. Jeffrey Gordon, have called for swift and decisive action to address the potential fallout from the bankruptcy. 

In an email to the News, Gordon described the bankruptcy filing as serious but expressed confidence in the state’s ability to manage the crisis. He highlighted the importance of prioritizing patient care and employee protection during this period of uncertainty.

“We cannot have Prospect Medical Holdings’ hospitals and ECHN close. They remain open, even through bankruptcy proceedings. I encourage people who need medical care to still seek it, especially during an emergency,” Gordon wrote to the News. 

Gordon also renewed calls for the legislature to address issues tied to private equity in healthcare. 

He has introduced the Putting Patients Over Profits Act, which would ban private equity from purchasing hospitals in Connecticut, prevent the sale of hospital land and assets to third parties for profit and strengthen protections for healthcare professionals against undue corporate influence. 

Gordon described the bill as essential for maintaining the integrity of Connecticut’s healthcare system and ensuring that patient care remains the top priority.

“If this situation is not dealt with fully and soon, then it could have major, adverse impacts upon healthcare,” Gordon wrote to the News. 

Less than a year ago, another major hospital system, Steward Health Care, filed for bankruptcy, sparking a backlash against private equity’s involvement in healthcare.

Prospect Medical Holdings was established in 1996.