State senator calls for cutting Medicaid payments to Prospect Medical in an effort to recoup delinquent taxes

CT Insider – Thursday, March 20, 2025
By Eric Bedner

With Prospect Medical Holdings owing the state of Connecticut more than $100 million in delinquent taxes, a state senator is calling for Medicaid payments to the for-profit health care system to be halted until its taxes are paid.

Gov. Ned Lamont has said that Prospect owes the state more than $100 million, and payment is likely not coming any time soon as the California-based private equity firm filed for bankruptcy in January.

In order to recoup what is owed to the state, Sen. Saud Anwar, D-South Windsor, a pulmonologist and the senate chairman of the legislature’s Public Health Committee, is recommending the state cut off Medicaid payments to Prospect.

“For Prospect to listen to the state of Connecticut and behave according to the moral principles that we live by in the state of Connecticut, I would be a proponent to stop the Medicaid payments for Prospect until they pay our taxes or they change their behavior,” Anwar said.

A spokesperson for Prospect did not immediately respond to a request for comment.

Lamont spokesman Rob Blanchard said that issues such as payment of delinquent taxes, including to municipalities and other entities, are still being negotiated in bankruptcy court.

In the meantime, the state “will continue to hold Prospect accountable to ensure they provide quality care to the communities who rely on these institutions,” Blanchard said. “Our number one priority remains maintaining safety and quality of care at Prospect’s three Connecticut hospitals.”

Attorney General William Tong said that the state has been “actively engaged at every step of the bankruptcy process to protect both the state’s financial interests and patient care.”

Prospect’s bankruptcy, he said, is the result of “years of mismanagement and private equity plunder, enriching shareholders at the expense of patients, health care providers, and the state.”

As noted in court filings, Tong said that the state is committed to transitioning Prospect’s Connecticut hospitals “to a responsible operator” and that patients continue to receive the care they deserve.

“At the same time, those responsibly for the substantial harm to Connecticut must be held accountable,” he said.

While Yale New Haven Health agreed to buy Waterbury, Manchester Memorial, and Rockville General hospitals from Prospect for $435 million, Yale officials said last month that any deal with Prospect is now “impossible” following Prospect’s bankruptcy filing.

Lamont echoed Yale’s comments earlier this month saying he believes the transaction is “over.”

Anwar places the blame on Prospect for the deal falling through, particularly its for-profit business model, which led to Prospect “devaluing the asset” by bilking the hospitals for their own profit.

“This is a classic textbook case of how private equity works,” he said. “That’s their strategy — to maximize their profits at the cost of the wellbeing of the institutions.”

State legislators are considering several proposals that would address private equity in Connecticut health care systems, including potentially prohibiting new entities coming into the state.

Rep. Cristin McCarthy Vahey, D-Bridgeport, house chairwoman of the Public Health Committee, agrees that private equity firms have no place in health care.

“In my perfect world, there would be no private equity in health care. Period,” she said during a public hearing this week.

People have lost access to care “because of people’s greed,” and because “profits were very clearly put above patients,” McCarthy Vahey said.

In written testimony to the Public Health Committee, Office of Health Strategy Commissioner Deidre Gifford said that the definition of a private equity company may be too broad as currently written in proposed legislation.

This, she said, could prevent groups such as doctors organized as a partnership or limited liability companies that collect revenue from its members from operating health care systems in the state.

Written testimony from the Connecticut State Medical Society also raised some concerns about a complete prohibition on private equity in health care in the state.

While saying that Prospect’s ownership of its three hospitals in the state “has been nothing short of a disaster,” not all private equity investments follow the same path, as they are capable of providing more capital to modernize systems, recruit staff, and expand access to care.

Department of Public Health Commissioner Manisha Juthani submitted written testimony noting that one proposal seeks to prohibit direct or indirect ownership by private equity or a real estate investment trust, such as Medical Properties Trust, Prospect’s landlord.

However, as currently written, MPT or other real estate investment trusts, would be able to enter into lease-buyback transactions like the one in which Prospect mortgaged it’s Connecticut hospitals for $1.12 billion.

Despite some objections from state agencies, Anwar is standing his ground.

“Nothing good has come out in the hospital arena with private equity, so why not just ban them?” he said during this week’s public hearing. “They are profit-driven, they are only in it for money, they are not helping the community.”

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