PROVIDENCE — Prospect Medical Holdings, the Los Angeles-based corporate owner of two Rhode Island hospitals, said it received a subpoena last year from the Department of Justice, according to new court documents.
The Justice Department issued the subpoena on Nov. 3, Prospect’s attorneys wrote in a new legal document filed on June 27, referring to it by its formal name as a civil investigative demand. Prospect did not provide details about the investigation or its scope.
Civil investigative demands grant the Justice Department wide-ranging access to documents and testimony. It’s unclear if the DOJ’s investigation into Prospect is ongoing, and a spokesperson with the department could not be immediately reached for comment.
The disclosure came in a court filing as part of a lawsuit filed against Prospect by Yale New Haven Health. In October 2022, Yale New Haven announced its plans to purchase Prospect’s three Connecticut-based hospitals: Rockville General Hospital, Manchester Memorial Hospital, and Waterbury Hospital. The deal has dragged out, while Yale New Haven has attempted to reduce the $435 million purchase price due to what it calls “deteriorating” conditions of the hospitals.
In Rhode Island, Prospect owns Our Lady of Fatima Hospital in North Providence and Roger Williams Medical Center in Providence, which are also up for sale. Their proposal to sell the two facilities to The Centurion Foundation, an Atlanta-based not-for-profit organization, was approved by state regulators earlier this month, but with 40 strict, non-negotiable conditions. It’s unclear if the transacting parties will go through with the deal.
In May, Yale New Haven asked the Connecticut Superior Court to let it out of its $435 million contract with Prospect, citing problems in their attempt to negotiate the purchase price down while Prospect owes tens of millions of dollars to physicians, vendors, and local and state taxes. Prospect countersued this month, alleging that Yale New Haven breached its contract and did not make reasonable efforts to close the deal.
In their documents filed in Connecticut Superior Court last week, Prospect did not disclose many details about the Justice Department’s probe. Prospect said the investigations were “past and isolated incidents,” and should not impact any potential deal with Yale New Haven Health.
“Moreover, these are the types of regulatory violations hospitals of this size and type receive and remedy regularly,” Prospect attorneys argued.
Prospect’s attorneys in its Connecticut lawsuit — Amy P. Blume of Bershtein, Volpe, & McKeon and Robert Friedman and Danielle Vrabie of Sheppard, Mullin, Richter & Hampton — did not immediately respond to the Globe’s request for comment.
Prospect’s hospitals in Rhode Island face many of the same problems their facilities in Connecticut do, including issues related to the hospitals’ conditions. According to Rhode Island Attorney General Peter F. Neronha, Prospect still owed $24 million to vendors for its two local hospitals as of early June. The unpaid bills have led to surgeries having to be canceled or rescheduled due to the lack of supplies, according to court records and an investigation by the state health department. Earlier this month, Rhode Island Superior Court Judge Brian Stern demanded Prospect pay $17 million in its unpaid bills.
A Globe reporter’s repeated requests for comment on Stern’s court order have gone unanswered by Prospect and its attorneys. Prospect’s attorneys filed an affidavit with the court, attesting that they complied with the court order and have paid the $17 million, according to Neronha spokesman Brian Hodge. Hodge said on Wednesday that Neronha’s office is reviewing the affidavit, but declined to comment further.
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Alexa Gagosz can be reached at alexa.gagosz@globe.com. Follow her @alexagagosz and on Instagram @AlexaGagosz.