A $435 million hospital purchase agreement between Yale New Haven Health System and Prospect Medical Holdings hit another stumbling block this month, with Yale accusing the private-equity-backed firm of failing to pay into its employee pension obligations.
The missed payments were due on Sept. 15 and in response, the Pension Benefit Guaranty Corporation, a government agency, has stepped in to protect the workers’ pension plans. That’s according to an Oct. 9 court filing by Yale, which referred to the missed payments as a “new, very serious issue.”
The intervention has added a new layer of complexity to the troubled deal, with the pension protection agency now claiming rights to more than $4 million in Prospect assets to be sold to Yale, should the deal go through.
Yale said it notified Prospect on Oct. 4 to pay into its employee pension obligations and lift the liens on its assets within 30 days. Yale said a failure to do so would give it the right to terminate its purchase agreement of the struggling hospitals, which include Manchester Memorial and Rockville General Hospital in Vernon.
In a statement, Prospect said Yale’s court filing is “legal delay tactics” and that Prospect would deliver its Connecticut hospitals to Yale free of any outstanding financial obligations to the federal pension protection agency.
Prospect Medical’s deal with YNHH also includes Waterbury Hospital, which has struggled with staffing problems and been cited for equipment violations in operating rooms, as Connecticut Public has reported.
Meanwhile, hospital workers remain alarmed, said John Brady of AFT-Connecticut, a union that represents workers at Manchester Memorial and Rockville General hospitals.
Even though workers’ pensions are protected by the federal agency, Brady said they are concerned that the plans have been underfunded and about who, ultimately, will pick up the tab for the missed pension payments.
“Our members appear to be okay because the pensions are insured by the Pension Benefit Guaranty Corporation,” he said. “[But] somebody has to make that up … if Prospect’s going to, you know, cut and run on it.”
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