Original reporting by Dave Altimari, Jenna Carlesso and Katy Golvala. Compiled by Gabby DeBenedictis. Prospect Medical Holdings, the owner of three Connecticut hospitals, filed for bankruptcy on Jan. 11 amid ongoing complications related to the sale of the hospitals to Yale New Haven Health. Prospect owns Manchester Memorial, Waterbury and Rockville General hospitals — all of which suffered a debilitating cyberattack in August 2023 — as well as facilities in Rhode Island, Pennsylvania and California. Bankruptcy could complicate efforts to resolve longstanding financial and operations problems at the hospitals, though Connecticut officials have vowed they won’t close. Here’s what to know. Why did Prospect Medical Holdings file for bankruptcy? In a statement, representatives for the company said the bankruptcy filing would allow it to “proceed on a strategic pathway to realign its organizational focus outside of California.” The state of Connecticut is listed as one of the top 30 creditors in the bankruptcy filing. Prospect owes the state more than $100 million in health provider taxes, according to records from the Department of Revenue Services. Every hospital, as well as nursing homes and other health care providers, must pay health provider taxes, also known as a hospital user fee, to the state every year based on their revenues. Prospect had not paid health provider taxes to the state dating back to March 2022, according to three liens filed by the Department of Revenue Services against Prospect Medical last January.  In September 2023, the presidents of Waterbury Hospital and Eastern Connecticut Health Network, the health system that includes Manchester Memorial and Rockville General hospitals, warned Gov. Ned Lamont that their financial situations were dire and that they were struggling to pay bills. What’s going on with the sale of the hospitals to Yale New Haven Health? In 2022, Prospect signed an agreement to sell its three Connecticut hospitals to Yale New Haven Health for $435 million. The state’s Office of Health Strategy approved the sale after 16 months of consideration, but the deal still hasn’t been finalized and is currently mired in legal disputes. YNHH sued Prospect in May 2024, seeking to be let out of its contract to buy the hospitals. It charged that Prospect breached its contract with Yale by defaulting on rent and tax liabilities, allowing its facilities to deteriorate, mismanaging assets, “driving away” physicians and vendors and engaging in “a pattern of irresponsible financial practices.” Prospect then countersued, claiming YNHH breached its contract with the company by “failing to deliver the agreed-upon purchase price” for the three hospitals and failing to make “reasonable best efforts” to complete the acquisition. What does the Prospect bankruptcy mean for the Yale deal? It’s unclear. Lamont said in a press conference on Monday that the hospitals would stay open, and officials would hold Prospect accountable to providing high-quality care. “Some people think bankruptcy means the lights go out and the party’s over. That’s not true at all. These hospitals are very successful,” Lamont said, reiterating that the hospitals will “stay open, stay managed.”  Early on at Monday’s press conference, Lamont made comments suggesting the sale process had failed but walked them back when asked for clarification. “We’ve worked our hearts out over the last two years trying to get this arrangement done between Prospect and Yale New Haven, just couldn’t get there,” Lamont said during opening comments. He added that his administration would be focused on quality of care while “trying to figure out who the next owner and operator of these [three] amazing hospitals is going to be.” Later, when asked whether the deal had fallen through, he said there was still a possibility it could happen. “I’d like to see the deal get done,” Lamont said. “Yale New Haven has an agreement to purchase these hospitals. We’ll see whether that goes forward.” Will state government step in? In October 2023, YNHH health executives asked the state to provide $80 million — $16 million annually across five years — to help it acquire the three hospitals. Lamont was — and remains — opposed to that request. On Monday, he said he still doesn’t see a need for the state to provide funds to help the hospitals remain open. “Closures aren’t imminent,” Lamont said, adding that the hospitals are “doing very well” under the leadership of Deborah Weymouth, the CEO of Prospect’s Connecticut hospitals. “I don’t see the need for taxpayer subsidies here,” he said.