Connecticut officials gathered at the state Capitol Thursday to announce a proposal backed by Gov. Ned Lamont enhancing state oversight of major mergers, acquisitions and asset transfers in the health care sector. The proposal aims to “modernize” state regulation of health care deals. It would broaden the scope of transactions that require Attorney General review, establish a review process for both the Office of Health Strategy and the Attorney General’s Office and allow the Attorney General to impose conditions to prevent harm to the state’s health care system. Health care operators would have to notify the state 60 days in advance of any “material changes” — things like changes in ownership, transfers of assets and merging of practices. Such transactions can, in some cases, erode the quality of care, state leaders said. The approval process for major hospital transactions currently led by the Office of Health Strategy, and known as “certificate of need,” would also remain in place. The announcement comes just over a week after California-based Prospect Medical Holdings, the owner of three struggling Connecticut hospitals in Waterbury, Manchester and Vernon, filed for bankruptcy protection.  “We’re not going to be taken by surprise ever again — if this bill is passed — by some of the financial shenanigans that impacted Prospect,” Lamont said. The hospitals, which Prospect acquired in 2016, have faced worsening financial and operational problems in recent years, including a debilitating cyberattack, as well as reports of rusting equipment in operating rooms and delayed payments to physicians. In 2018, Prospect took out a $1.1 billion loan, but it used those funds to pay its executives and shareholders a $457 million dividend, CBS News reported. Prospect CEO Sam Lee reportedly took home roughly $90 million from the transaction. To repay the loan, Prospect entered into what’s known as a “sale-leaseback” agreement, selling the land and buildings from the hospitals it owned in Connecticut, California and Pennsylvania to a real estate investment trust for $1.4 billion, then leasing the property back from the trust. The transactions saddled the hospitals with a new expense: rent payments. A spokesperson with Prospect Medical Holdings did not immediately respond to a request for comment. Had the oversight measures proposed Thursday been in place sooner, the state would have been able to review both the dividend payment and the sale-leaseback agreement, Attorney General William Tong said. He also noted that the proposed legislation allows for his office to bring penalties against health care owners when they fail to notify the state of material changes. “Health care is complicated, but at the end of the day, this is pretty simple. This is about patients. It’s about quality. It’s about access. It’s about affordability,” Tong said. In an emailed statement, a spokesperson with the Connecticut Hospital Association said the group had not yet reviewed the proposal in detail but intends to work “in partnership” with state leaders. “We all have a shared goal of ensuring a stable healthcare system, addressing the financial challenges that strain hospitals, and protecting access to care for every patient and community,” Nicole Rall of CHA wrote. The proposal also aims to address the increasing role of business owners in other sectors of health care beyond hospitals, such as autism services and hospice providers, Office of Health Strategy Commissioner Deidre Gifford said. “There are lots and lots of transactions that have the potential to cause harm to patients and workers and communities that the state does not have the ability to review,” Gifford said. “This bill would allow a much broader range of transactions to be noticed to the Attorney General’s office than are currently required.” The governor’s proposal is one of several this session seeking to address the stability of the state’s health care system.  Sen. Saud Anwar, D-South Windsor, co-chair of the Public Health Committee, has introduced a bill that would allow hospital receivership and empower state control of troubled hospitals through eminent domain. Several other proposals concerning private equity in health care have also been introduced. Officials are also continuing to keep close tabs on the Prospect bankruptcy filing and its impact on Prospect’s agreement to sell its three Connecticut Hospitals to Yale New Haven Health.  Lamont said the state is looking to hire a bankruptcy attorney, and he said conversations with both Yale and Prospect about the pending purchase agreement are ongoing. He reiterated that he would like to see that deal go through, but he is also open to other buyers. “Whether Yale is the ongoing operator, or there is going to be a new, accelerated process, we’re going to have a new operator,” Lamont said.