The Justice Department issued a civil investigation demand to Los Angeles-based Prospect Medical Holdings on Nov. 3, according to a June 27 court document filed by Prospect.
While the document did not go into detail about the investigation, a civil investigation allows the justice department to get documented and electronically stored information from a person or entity prior to litigation starting, according to Bloomberg Law.
The document, obtained by Becker's, was in retort to a lawsuit filed in early May by Yale New Haven (Conn.) Health against Prospect to get out of a deal to acquire three Prospect Connecticut hospitals, Waterbury (Conn.) Hospital; Manchester (Conn.) Memorial Hospital, part of Prospect's Manchester-based Eastern Connecticut Health Network; and Rockville General Hospital in Vernon, Conn.
Yale New Haven signed a November 2022 deal with Prospect to acquire the hospitals for $435 million. However, following a cyberattack in August and finding out that Prospect owed $67 million in taxes and had not paid physicians or vendors at its hospitals, Yale New Haven moved to alter the purchase price.
In early June, Prospect sued Yale New Haven over not honoring its contractual obligation to take on the hospitals, seeking at least $435 million in damages.
"We are aware of the Civil Investigative Demand issued by the DOJ to Prospect Medical Holdings and are working to understand its potential impact should a transaction proceed," a spokesperson for Yale New Haven Health said in a statement shared with Becker's.
Becker's has reached out to Prospect Medical Holdings and the Justice Department and will update this story should more information become available.