Prospect Medical Holdings-YNHH deal returns to Lamont’s office

Gov. Ned Lamont once again has placed himself between Yale New Haven Health and Prospect Medical Holdings over the stalled purchase by YNHH of Prospect’s struggling hospitals in Waterbury, Manchester and Vernon.

The governor, for the first time since an initial session in May , brought to his office the top executives of warring parties who have sued and counter-sued over the true value of the three hospitals that YNHH agreed to buy two years ago for $435 million. The meeting last week comes amid concerns over quality of care.

Lamont declined to precisely say Thursday whether his role is one of mediator or an enforcer who can use regulatory pressure to lean on Prospect to sell three hospitals that are showing signs of significant fiscal distress. How would he describe it?

“I think it’s tough love,” Lamont said. “I say that in the sense that you got to make sure the hospitals are doing all they can in a healthy way for their patients. And right now, we’re in good shape, but I worry in the future.”

Without providing details, the governor indicated some movement regarding what YNHH was willing to pay and what Prospect was willing to accept for Waterbury, Manchester Memorial and Rockville General hospitals, but he also acknowledged he had been encouraged after hosting the meeting in May.

“I thought we were there a few months ago,” Lamont said “We’ve got back some numbers. They’re taking it back to their board.”

The governor’s office said the participants in the meeting last week were the same as the one in May, including the chief executive officers of both hospital groups and a lawyer representing Medical Properties Trust, the entity that owns the hospital buildings.

Lamont remains opposed to YNHH’s request that the state contribute financially to the deal.

“I’m reluctant to do that. These are hospitals that have value. They’re quibbling about how much value they should pay. They had a purchase agreement two years ago,” Lamont said. “So before we put taxpayer dollars into this private transaction, I’m a little hesitant on that front.”

The state did not authorize the purchase until March . By then, YNHH made clear it had second thoughts about closing the deal at the original price.

The meeting Lamont hosted in May came after Yale New Haven Health filed a lawsuit accusing Prospect of breaching its sales contract by defaulting on rent and tax liabilities, allowing its facilities to deteriorate, mismanaging assets, “driving away” physicians and vendors, and engaging in “a pattern of irresponsible financial practices.”

In short, the buyer insisted the assets were devalued and that the seller was to blame.

Prospect counter-sued in June, denying YNHH’s allegations and asking a court to enforce the original contract. In one filing, Prospect said it was willing to drop the purchase price by $20 million “to get the deal done,” but Yale New Haven wanted a “whopping 66% discount.”

Dana Marnane, the director of communications for Yale New Haven Health, said the health system continues to “engage in discussions with Prospect, at the request of Governor Lamont, to identify a path forward.”

But the concerns over the value of the properties and cost of improving them remain.

“In light of uncovering Prospect’s recent, serious mismanagement of their assets and outstanding taxes owed to the state and municipalities, YNNHS’ top priority is negotiating in good faith to reach a fair purchase price that would allow us to make needed investments in these facilities, while remaining responsible stewards of the communities we serve, and maintaining the financial stability of our current hospitals,” Marnane said.. “We know expanding the benefits of academic medical care to the individuals currently served by a for-profit, out-of-state entity is in the best interest of the patients, staff and communities across the region.”

The spokesperson for Prospect could not be reached.

Community leaders and medical providers have raised alarms about the impact of the deteriorating finances on medical care. Lamont said the Department of Public Health is monitoring.

“We’re watching this like a hawk, just given this financial back and forth,” Lamont said. “And I think people can feel confident right now the care is what it should be.”

Prospect’s creditors include the state of Connecticut, which has indicated in liens it is owed at least $67 million.

“Prospect owes us a lot of money — us being the taxpayers of the state of Connecticut. I have a little bit of leverage there,” Lamont said.

For now, the posture of the Lamont administration is to see if there is substantial movement to an out-of-court settlement.

“If this thing looks like it could drag on for another two years, we’ve got to think of other things that we could do to make sure the quality of care is where it ought to be,” he said.

Such as?

“We’ll see,” he replied.