Prospect Medical Holdings, the California-based owner of two cash-strapped Rhode Island hospitals, called in a court motion filed Friday for them to close unless the state takes them over.
Prospect reached an agreement three years ago to sell Roger Williams Medical Center in Providence and Our Lady of Fatima Hospital in North Providence. The buyer would be an Atlanta-based nonprofit, the Centurion Foundation.
But the Centurion Foundation continues to struggle to close its financing for the deal.
Now, Prospect Medical argued in U.S. Bankruptcy Court in Texas that the two money-losing hospitals should either close or be taken over by the state of Rhode Island.
Lawyers for Prospect write that six months after the promised closing date for Centurion’s financing, “the Debtors can no longer afford to fund the RI Hospitals on the hope that Centurion may finally obtain adequate financing to close the Centurion Sale.”
The lawyers argue that Prospect cannot afford more delay.
“Centurion still does not have the necessary financing, although Centurion hopes to have such financing by December 1 at the earliest,” they wrote. “As has become obvious from this process, a closing is not guaranteed at any point, much less at any time in the near future.”
In a statement, Rhode Island Attorney General Peter Neronha says his office was not surprised by Prospect’s court filing.
“We will oppose this motion in court in the coming days and will continue to do everything we can to keep these hospitals open and operating for the foreseeable future,” Neronha said.
Neronha has long described Centurion as the best hope for the two hospitals, while also indicating that there was no guarantee it could keep them open. If worst came to worst, he has previously said, a receiver might be appointed to seek another owner for the hospitals.
In a statement, Centurion spokesman Otis Brown said the hospitals remain operating as normal.
“This filing has no immediate impact on CharterCARE hospitals, they are fully operational, census is remains high, and employees are reporting for work just like any normal day,” Brown said. “Centurion and all parties, including state leaders, continue to work diligently on a financing plan that will result in a sale close before the proposed notice date.”
Roger Williams and Fatima are among the largest employers and biggest taxpayers in their respective communities.
If they were to close, other hospitals would be overwhelmed by the outflow of patients and the demand for more services.
The financing of Centurion’s purchase relied heavily on debt and the company has been unable to complete its financing. Things got more precarious when Prospect filed for bankruptcy in January.
In March, Chris Callaci, general counsel for United Nursing and Allied Professionals, the top union at Roger Williams and Fatima, expressed doubt that the financing plan would work out if completed.
In early October, after Neronha relaxed some conditions for Centurion’s purchase, Brown expressed confidence at the time.
In an Oct. 3 email, he wrote, “[W]e have taken a major step forward in the financing process. This decision, coupled with assistance we are discussing with State leaders and stakeholders, will allow us to move to complete the financing and sale by the end of October. We greatly appreciate the ongoing work and support of the attorney general and other state leaders throughout this sales process.”
But a sticking point arose after a charitable foundation, the CharterCARE Foundation, declined to return $6 million to a new entity created to manage the two Rhode Island hospitals. The money was separated when Prospect Medical acquired the hospitals’ parent, ChaterCARE Health Partners, in 2014.
In an Oct. 10 email, Brown wrote, “As the original donors intended, these funds would be dedicated to supporting the mission and work of the hospitals, to support access to programs and services for our most vulnerable patients, many of whom are Medicaid and Medicare. The hospitals continue to provide a significant amount of uncompensated care, which these funds would also support. Consistent with our new 501c3 status, we would also be concentrating resources on our community health needs assessment and priority areas, consistent with state health equity initiatives.”
In a statement, Callaci called on the CharterCARE Foundation to relinquish the $6 million.
“It will be an all out catastrophe for Rhode Island’s health care system if these important community hospitals and health care facilities close down. Our system doesn’t have the capacity to treat the patients who will be displaced in the event of closure, and Rhode Island’s other hospitals will be completely overwhelmed with a flood of new patients.
Callaci called on state top leaders “to take urgent and immediate action to keep Our Lady of Fatima Hospital, Roger Williams Medical Center, and Prospect Home Health and Hospice open and operational. There is no better use of state funds than using them to ensure these hospitals stay open and our health care system doesn’t collapse.”
In related news, U.S. Rep. Seth Magaziner said in a statement Friday that he is concerned by Prospect’s request to close Roger Williams and Fatima.
“Prospect’s former owner, private equity firm Leonard Green & Partners, is a uniquely bad actor that made millions off of these hospitals while undermining their financial stability,” Magaziner said. “I spoke out forcefully against Leonard Green & Partners when I was state treasurer. Private equity ownership of hospitals deserves tough scrutiny in Congress.”
He added: “At the same time, I fear that other hospitals in Rhode Island could face bankruptcy if Republican cuts to Medicaid and the Affordable Care Act go into effect. That is the fight we are currently in regarding the federal budget: a fight not only for the millions of Americans whose health insurance is at stake, but a fight for the viability of our state’s health care system.”
