Waterbury and Prospect Medical Holdings spar over hospital assessment

CT Insider – Thursday, May 1, 2025
By Paul Hughes

WATERBURY — The legal wrangling over the city’s demands for details of Waterbury Hospital’s estimated worth in a state tax appeal is coming to a culmination while a bankruptcy proceeding in a federal court in North Texas bearing directly on the hospital’s future continues to play out.

A state judge is set to hear arguments May 7 in state Superior Court in Waterbury on certain city discovery requests for deposition testimony and records that owner Prospect Medical Holdings has contested in court filings.

The city is asserting in court filings that its appraiser needs the eight sets subpoenaed records in dispute to complete his appraisal of Waterbury Hospital. The city is also contending the contested topics of examination for deposition witnesses are relevant to the tax appeal.

Judge John L. Cordani recently granted the city’s motion to conduct the pretrial hearing after attorneys for the city and the California-based hospital chain were unable to reach accommodations on a number of the city’s discovery demands. He is scheduled to hear the tax assessment appeal on June 23.

Meanwhile, Prospect Medical Holdings is seeking a federal bankruptcy court’s approval of a plan to sell Waterbury Hospital and two other Prospect-owned hospitals in Connecticut. The company filed for Chapter 11 protection on Jan. 11 amid ongoing financial difficulty, including a costly lawsuit by Yale New Haven Health seeking to back out of a $435 million deal to buy Prospect’s Connecticut portfolio.

Prospect Medical Holdings purchased Waterbury Hospital and corporate parent Waterbury Health for $100 million in 2016. The company also bought Manchester Memorial Hospital and Rockville General Hospital in Vernon and their parent company Eastern Connecticut Health Network for $105 million that year.

Subsidiary Prospect Waterbury Inc. sued Waterbury in March 2023 contesting the city’s updated $171,714,900 assessment of the hospital’s buildings and grounds at 64 Robbins St. following a citywide revaluation in 2022. Property taxes are based on 70% of assessed market value.

The lawsuit is claiming the 2022 tax assessment was excessive, and it is seeking an unspecified court-ordered reduction.

The updated assessment was slightly more than $29.6 million higher than the previous 2021 assessment, according to city records. It represented an increase of nearly 21%.

Prospect Waterbury did not immediately respond to messages seeking comment for this report.

The bankruptcy filing put an automatic hold on litigation seeking to recover claims against Prospect Medical Holdings and any of its affiliates and subsidiaries, but the Waterbury tax appeal is proceeding because Prospect Waterbury initiated the state court action.

Prospect Waterbury has been resisting some of Waterbury’s discovery efforts to obtain information regarding the value of Waterbury Hospital’s buildings and grounds to defend the city’s tax assessment.

One of the points of contention in the pretrial discovery dispute is the city’s demand to depose a corporate representative of Prospect concerning the marketing and possible sale of Waterbury Hospital to Yale New Haven Health in 2022. It is one of 15 topics of discussion that are subjects of Prospect objections.

Yale and Prospect signed a purchase agreement in October 2022 for Yale to buy the three Prospect-owned hospitals for $435 million. Yale sued to get out of the day last May shortly after state hospital regulators approved the sale late last March, and Prospect counter sued to compel Yale to complete the purchase.

The Yale lawsuit charges Prospect violated the terms of the sale 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. While awaiting state approval of the transaction, Yale had asked Prospect lower the purchase price to $150 million in a Jan. 31 proposal. But Prospect only offered a $20 million reduction.

Prospect has objected to providing the city any valuations of Waterbury Hospital that supported a so-called sale-lease back agreement Prospect and Medical Properties Trust signed in 2019. The Alabama-based real estate investment trust purchased the land of the three Prospect-owned hospitals in Connecticut for $457 million and leased the real estate back to Prospect. It was part of a larger $1.6 billion financing deal that also included hospital properties in California and Pennsylvania.

MPT continues to be contractually owed $355 million from the proceeds of the planned sale of the three Prospect hospitals to Yale. But the publicly traded company stated in its annual 2024 report released Feb. 27 that the Prospect bankruptcy proceeding may negatively affect the sale and its ability to receive the full amount due from Prospect.

Prospect has additionally objected to making a witness available to discuss the use of the proceeds from loans or other vehicles designed to loan money secured by the hospital property.

Prospect has also objected to a request for testimony on the cost of fire and liability insurance on the hospital property. Its objection stated the company previously reported there is a blanket insurance policy.

Prospect has agreed to city requests to make witnesses available for depositions concerning condition of buildings on the hospital property in 2022, the costs of managing and maintaining the property, capital improvements made to the property since 2016, and operating expenses and gross revenue from 2020 through 2023.

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