HARTFORD – Yale-New Haven Health is seeking details of the business dealings between Prospect Medical Holdings and the landlord of its three Connecticut hospitals to support its legal bid to get out a $435 million agreement to buy the Prospect hospitals.
Lawyers for Yale filed a motion Wednesday to compel Medical Properties Trust to provide documents and communications regarding the financial and business relationships between MPT and Prospect that Yale claims MPT is legally obligated to produce but refuses to share absent a court order citing confidentiality agreements and other grounds.
In the court filings, Yale lawyers argue the subpoenaed information is needed to further its argument that Prospect violated terms of the purchase agreement.
In 2016, Prospect purchased Waterbury, Manchester Memorial and Rockville General hospitals, and three years later the California-based private equity firm sold the hospital properties to MPT, a publicly traded Alabama-based real estate investment trust, and leased them back.
The sale-leaseback was part of a larger $1.6 billion financing deal that also included Prospect’s real estate assets in California and Pennsylvania.
Yale and Prospect signed a purchase agreement for the three Prospect-owned hospitals in October 2022, and Prospect and MPT announced a separate agreement then for MPT to sell back the hospital properties to Prospect so Yale and Prospect could conclude their sale.
If Prospect and Yale complete the sale, MPT is expecting to receive $355 million in cash from the Prospect proceeds – the equivalent of more than 80% of the negotiated purchase price of $435 million. Originally, Prospect was due $457 million, but Prospect and MPT negotiated another deal in May 2023 after Prospect missed $56 million in rent payments and owed MPT $314 million in loans. Prospect gave MPT a $103 million equity tax and MPT reduced its payment from $457 million to $355 million.
Earlier this year, Yale sued to get out the purchase agreement after trying to get Prospect to lower the purchase price due to the deteriorating conditions of the three hospitals. Yale asked Prospect to lower the price to $150 million in a Jan. 31 proposal and Prospect declined in a Feb. 15 response. Prospect had proposed a $20 million reduction that Yale did not accept.
In early May, Yale filed for a declaratory judgment that it is not obligated to complete the sale because Prospect violated the purchase agreement due to its irresponsible financial practices, severe neglect and general mismanagement that has left the three hospitals a shell of what they were when Yale agreed to acquire them. Prospect disputes violating the terms of the agreement, arguing in a countersuit that Yale is attempting to back out of the sale. The two cases have been consolidated in Hartford Superior Court.
In the latest court filing, Yale is seeking to compel MPT to comply with subpoenas for documents and communications that Prospect does not possess that Yale contends will support its case for a declaratory judgment.
The requested records concern the lease agreements for the three hospitals; the original master agreement between MPT and Prospect, and a later revision; financial relationships between MPT and Prospect; internal financial analyses of its Prospect deals; and rent payments and any reduction, forbearance, forgiveness or deferral of rent payments.
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