Prospect Medical Holdings, a financially troubled 16-hospital system, is facing a federal investigation by the Department of Justice (DOJ), according to court documents revealed in a lawsuit against the company.
This news comes as Yale New Haven Health sues Prospect to escape a 2022 agreement to purchase three Connecticut hospitals. Yale New Haven alleges Prospect violated the deal terms through mismanagement of facilities, non-payment of staff and vendors, and neglecting basic cybersecurity measures.
While details of the investigation remain undisclosed, civil investigative demands, like the one Prospect received, empower the DOJ to gather documented and electronic information from an entity before initiating litigation, according to Bloomberg Law.
Yale New Haven’s complaint further accuses Prospect of breaching state and federal laws and failing to resolve “government investigations into Defendants’ operation of the Businesses.”
These civil investigative demands are significant tools for the DOJ, granting broad access to documents and testimonies in the early stages of potential fraud investigations, as Bloomberg Law reports. The department issued a record-breaking 1,500 such demands in 2023.
Prospect acknowledges the federal and state investigations but downplays their significance in its countersuit. The health system claims these are “past and isolated incidents” irrelevant to the Yale New Haven deal. Prospect further argues in its lawsuit that “Moreover, these are the types of regulatory violations hospitals of this size and type receive and remedy regularly,” similar regulatory violations regularly.
Facing financial difficulties, Prospect seeks to enforce the purchase agreement with Yale New Haven. Public records from Prospect’s landlord, Medical Properties Trust, indicate the company is months behind on rent and has transitioned to a cash-accounting basis. The sale of the three hospitals, if finalized, could provide Prospect with much-needed funds – a total of $435 million.
Neither Prospect Medical Holdings nor Yale New Haven Health responded to requests for comment.
