Connecticut’s Tax Crisis: Prospect Medical’s Debt Surges to $127M+

UPDATE: A staggering $127 million tax bill owed by Prospect Medical Holdings is escalating as state officials consider potential debt forgiveness. This urgent financial crisis, stemming from unpaid hospital provider taxes dating back to 2022, has significant implications for Connecticut’s healthcare landscape.

Documents obtained by The Connecticut Mirror reveal that Prospect Medical Holdings, which filed for bankruptcy protection in January, has not met its tax obligations since 2022. The company owes $64.4 million for Waterbury Hospital, $47.2 million for Manchester Hospital, and $16.2 million for Rockville General Hospital. As negotiations unfold, the state is weighing how much of this debt might be forgiven to facilitate the acquisition of Waterbury Hospital by UConn Health.

State Comptroller Sean Scanlon confirmed that discussions are ongoing regarding a tax settlement that could allow UConn Health to take over Waterbury Hospital. “If we want to support UConn Health’s taking over the hospital, then we will have to forgive the tax debt if it’s part of the deal,” Scanlon stated.

Governor Ned Lamont has reassessed his stance on taxpayer subsidies, acknowledging the growing urgency of the situation. “We really want to keep these hospitals going. I know how important they are to the community,” Lamont remarked, highlighting the deteriorating conditions over the past two years.

The tax burden has significantly increased from earlier estimates, with claims filed in July indicating that the amount owed soared to $127 million—up from $67 million cited in December 2023. With no clear resolution in sight, the total could rise even further as it does not account for taxes due in 2025.

As part of a broader plan, Connecticut is set to borrow $390 million to fund capital improvements across the state’s struggling hospitals, including Waterbury, Bristol, and Day Kimball Hospitals. However, how this funding interacts with the tax forgiveness needed to secure UConn Health’s acquisition remains a critical concern.

In a related development, a subsidiary of Hartford HealthCare has won a bid of $86.1 million for Manchester Memorial and Rockville General Hospitals, reflecting the urgency among hospital chains to secure these facilities amid the rising financial pressures.

The state’s approach to the hospital provider tax is particularly crucial, as these funds help finance Connecticut’s Medicaid program. With hospitals falling behind on their tax payments, the state’s ability to match federal funds is jeopardized, which could have dire consequences for healthcare services in the region.

As negotiations continue, the stakes are higher than ever. Connecticut must navigate this complex financial landscape to ensure the viability of its hospital system. The potential for tax forgiveness is a double-edged sword, aiming to stabilize healthcare while also safeguarding taxpayer interests.

As this situation develops, all eyes will be on Connecticut’s leadership to see how they resolve the mounting challenges posed by Prospect Medical Holdings’ unpaid taxes and the future of its hospitals. Stay tuned for further updates on this critical issue affecting Connecticut’s healthcare system.