By Russell R. Barksdale, Jr.
Once the wealthiest state in the country, Connecticut’s healthcare system remains in a state of crisis, grappling with significant financial challenges that have led to hospital bankruptcies and skilled nursing facility closures. Among the most recent examples is Prospect Medical Holdings, which owns Waterbury Hospital, Manchester Memorial Hospital, and Rockville General Hospital. In January 2025, Prospect Medical filed for Chapter 11 bankruptcy protection, citing liabilities ranging in the billions of dollars.
These financial challenges are not isolated incidents but rather indicative of systemic issues that permeate local, regional, state, and national healthcare systems. Since 2021, Connecticut has witnessed the closure of 15 skilled nursing facilities statewide, eliminating essential resident beds and raising alarm about the state’s ability to care for its aging population.
Complex Financial Practices and Corporate Structures
While the exact number of healthcare providers and organizations that have closed or declared bankruptcy in Connecticut has not been disclosed, cases of corporate ownership, private equity, and sale-lease-back investor contracts highlight the complex interplay of financial practices, ownership structures, and external economic factors contributing to the financial instability of healthcare institutions. Some corporate parent companies extract substantial dividends while leveraging debt on their healthcare providers, exacerbating financial fragility. These unsustainable practices result in either corporate restructuring or, worse, facility closures that force taxpayers to shoulder the burden of maintaining access to care. For private pay services like assisted living facilities, these practices leverage double digit private pay rate increases and accelerate depletion of retirees’ retirement savings and equity.
Critics argue that the focus on corporate returns undermines the mission of healthcare institutions. The pressures to meet investor expectations can divert resources away from critical services, staffing, and facility upgrades. The sale-leaseback arrangements, while providing immediate capital, saddle organizations with long-term financial obligations that can erode their stability.
As more than a few healthcare organizations sought access to capital for much needed facility renovations or costly medical technologies that could not be supported through traditional lending off of their existing balance sheets, private equity firms found their niche.
Mounting Operational Pressures
Beyond corporate structures, healthcare providers face systemic financial and operational challenges. Low reimbursement rates fail to cover the actual costs of care, leaving facilities in a precarious financial position. Adding to these pressures are time-intensive precertification processes and a generational shortage of nurses and physicians, which has driven up salaries and wages for these institutions.
Inflationary pressures have only worsened the situation, increasing the costs of medical supplies, facility maintenance, and health insurance premiums for employees. When combined with corporate return expectations, these factors create an unsustainable financial model.
A Call to Action
Governor Ned Lamont and Attorney General William Tong have assured residents that access to care will be protected. While their reassurances are necessary, it is clear that a broader structural reform is essential to address the root causes of this crisis. Just as communities in California and North Carolina have faced recent natural disasters, critics argue their severity could have been minimized or even avoided. Similarly, Connecticut must now address its healthcare system’s structural vulnerabilities with the same urgency.
The COVID-19 pandemic exposed and exacerbated existing weaknesses, including operational costs, inflation, and staffing shortages. However, these issues did not arise overnight. Pre-pandemic warnings about financial instability in healthcare went largely unheeded, and the crisis has only deepened.
Path Forward
As policymakers and healthcare leaders, we must adopt a proactive and sustainable approach. This involves:
1. Reforming Reimbursement Models: Advocate for fair and adequate reimbursement rates from Medicare, Medicare Advantage, Medicaid, and private insurers to ensure that providers can cover their costs.
2. Strengthening Workforce Support: Invest in nursing student recruitment and training programs and their access to affordable workplace housing to address the critical shortage of healthcare professionals.
3. Regulating Corporate Practices: Enact legislation to limit predatory financial practices, such as excessive dividend extractions and unsustainable leaseback agreements, that jeopardize provider stability.
4. Promoting Integrated Care Models: Shift payments toward value-based care delivery systems prioritizing quality care metrics and staffing levels supporting patient outcomes over corporate profits. Profitability can and should follow quality of care.
5. Establishing Financial Safeguards: Create mechanisms to provide temporary financial support to facilities at risk of closure while ensuring accountability and reform.
Closing Reflection
The current state of Connecticut’s healthcare system requires bold action. Yes, the pandemic exacerbated financial pressures on healthcare providers due to increased operational costs, rising interest rates and inflation, but as healthcare providers and policymakers we must embrace the serenity to accept what cannot be changed—the global pandemic, the courage to change what can be changed—healthcare policy, and the wisdom to know the difference. The time to address these long-standing issues is now—before more facilities close, more beds are lost, and more patients are left without the local access to care they need.
With collaborative efforts and a commitment to structural reform, we can build a resilient healthcare system that serves the best interests of all residents.
Russell R. Barksdale, Jr., Ph.D, MPA/MHA, FACHE is President & CEO of Waveny LifeCare Network
