Yale New Haven’s $435 Million Deal to Buy Prospect Hospitals Collapses

A long-anticipated hospital acquisition in Connecticut has hit a dead end, with Yale New Haven Health declaring its $435 million deal to purchase three struggling hospitals from bankrupt Prospect Medical Holdings “impossible.” The failed transaction leaves the future of Waterbury Hospital, Manchester Memorial Hospital, and Rockville General Hospital uncertain as stakeholders scramble for solutions.

The Deal That Never Was

In October 2022, Yale New Haven Health (YNHHS) signed an agreement to acquire the three Connecticut hospitals from Los Angeles-based Prospect Medical Holdings for $435 million. The deal aimed to rescue the financially distressed facilities, which serve nearly half a million people and employ thousands. However, after years of delays, lawsuits, and Prospect’s bankruptcy filing in January 2025, YNHHS has pulled the plug.

A Yale spokesperson cited Prospect’s “disinvestment and mismanagement” as the breaking point. “Prospect has never been in a position to close the transaction on the terms set out in the 2022 agreement,” said Dana Marnane of YNHHS, pointing to unpaid vendors, tax debts, and operational neglect.

Prospect’s Downfall

Prospect Medical Holdings, a for-profit operator with facilities across four states, acquired the Connecticut hospitals in 2016. Since then, the facilities have faced mounting challenges: a crippling 2023 cyberattack, unpaid bills totaling over $100 million (including $67 million in state taxes), and a shrinking workforce. By January 2025, Prospect filed for Chapter 11 bankruptcy in Texas, hoping to restructure and offload its East Coast portfolio.

The Yale deal, once seen as a lifeline, unraveled amid legal battles. In May 2024, Yale sued to exit the agreement, alleging Prospect let the hospitals deteriorate. Prospect countersued in June, accusing Yale of stalling to negotiate a lower price. Despite state approval in March 2024, the rift widened, and Prospect’s bankruptcy sealed the deal’s fate.

What Went Wrong?

Several factors doomed the acquisition:

• Financial Strain: Prospect’s failure to pay vendors, staff, and taxes left the hospitals in “dire” condition, Yale claimed.

• Cyberattack Fallout: The 2023 ransomware attack disrupted billing and operations, exacerbating Prospect’s woes.

• Legal Standoff: Dueling lawsuits stalled progress, with both sides blaming the other for bad faith.

• Bankruptcy: Prospect’s filing shifted focus to restructuring, not selling to Yale.

The Fallout for Connecticut

The collapse leaves the three hospitals—key “safety-net” providers for low-income and uninsured patients—in limbo. Connecticut Governor Ned Lamont, who supported the Yale deal, now says it’s “over” and is pushing for stricter oversight of hospital transactions. “We can’t let this happen again,” he told lawmakers in March 2025, backing a bill to expedite reviews of bankrupt hospital sales.

Local communities fear job losses and reduced healthcare access if no buyer emerges. Prospect insists the hospitals remain operational, but reports suggest cash reserves could dry up soon.

Looking Ahead

With Yale out, Prospect must find a new buyer for its Connecticut portfolio. YNHHS says it will monitor the bankruptcy proceedings but has no plans to revive the deal. Meanwhile, state officials are stepping up monitoring to ensure patient care continues.