YNHHS settles hospital acquisition dispute with $45-million deal

After nearly three years, Yale New Haven Health system has gotten out of its deal to acquire three Connecticut hospitals owned by Prospect Medical Holdings, a private equity company that manages various medical organizations around the country. 

According to the settlement, which was filed Friday, the health system will pay Prospect $45 million to “to settle the disputes between them,” the agreement states. 

“Following years of negotiation and litigation, Yale New Haven Health signed a settlement agreement with Prospect. This settlement will officially end all pending litigation between our health system and Prospect allowing both parties to move forward and focus on the future,”  YNHHS spokesperson Carmen Chau wrote in a statement. 

According to the settlement, YNHHS’s counsel said that “everybody’s pretty satisfied” with the outcome, although “I don’t think anybody’s happy with it,” and Prospect Medical Holdings agreed with the court that the sentiment was indicative of a good compromise.

Prospect did not respond to the News’ request for comment.

History of the suit

In October 2022, YNHHS signed a $435 million agreement with Prospect Medical Holdings to acquire three Prospect-owned Connecticut hospitals: Waterbury Hospital, Manchester Memorial Hospital and Rockville General Hospital.

The deal proved difficult to close. In May 2024, YNHHS sued Prospect, claiming that the company failed to uphold its end of the agreement. YNHHS claimed that Prospect was “driving away” physicians and vendors, engaging in “a pattern of irresponsible financial practices” and neglecting to follow cybersecurity practices, resulting in a ransomware attack. As a result of Prospect’s mismanagement, YNHHS claimed the acquisition deal was overpriced, CT Insider reported.

In response, Prospect counter-sued, accusing YNHHS of trying to renege on its agreement. 

At the time, Gov. Ned Lamont encouraged the two parties to complete the deal, arguing that a collapse would hurt local communities.

In January, Prospect filed for bankruptcy, which YNHHS took as further “proof of disinvestment and mismanagement.” Since Prospect filed for bankruptcy, the three Connecticut hospitals now owe over $200 million in unpaid property taxes and other overdue invoices.

In addition to the debt, a report released by Sen. Christopher Murphy in August 2025 claims that Prospect’s Connecticut hospitals are in acute disarray: they face crumbling infrastructure, staff report to paying for supplies out of pocket, patients face long wait times due to a lack of supplies and staff shortages are reportedly affecting patient health. The report claims that Prospect, as a private equity firm, “decimated” Connecticut hospitals.

Now, with the recent settlement, YNHHS has officially abandoned its deal to acquire the hospitals.

What now? 

According to the settlement, the agreement “preserves estate resources that may otherwise be spent on litigation.” Friday’s deal also “provides clarity to the Debtors and potential bidders in connection with the Debtors’ ongoing sale process for the Debtors’ CT Assets,’” the settlement reads. 

After Prospect filed for bankruptcy in January, Hartford HealthCare bid to buy Manchester Memorial and Rockville General for $86.1 million in a bankruptcy auction two weeks ago. UConn Health has also said it would bid for Waterbury Hospital.

Connecticut Sen. Jeff Gordon views the saga as a lesson to keep private equity out of healthcare.

“This is why I want to ban private equity from being involved in hospitals,” Gordon said. “Because they make a mess of things, and they even make a mess of trying to sell their hospitals to a big entity like Yale, when Yale was very interested.”

While Gordon said he is hopeful that the settlement will close the chapter of Prospect Medical Holdings being involved with Connecticut healthcare systems, he believes that damage has already been done in the hospitals, and that it is necessary for the state to step in and fix it.

Gordon said he hopes to enact state laws that will protect patients and healthcare employees from a similar story of litigation and hospital mismanagement, which he believes “decimated the hospitals,” from happening again.

Yale New Haven Health first announced an acquisition agreement with Prospect on Oct. 6, 2024.

Correction, Oct. 3: A previous version of this article incorrectly implied that Prospect Medical Holdings counter-sued Yale University. The article has been updated to reflect that Prospect sued the Yale New Haven Health system, not the university, which is a different legal entity.