Los Angeles-based Prospect Medical Holdings has received conditional approval from Rhode Island Attorney General Peter Neronha, after a lengthy review, to sell its two safety net hospitals to The Centurion Foundation.
The sale of the two hospitals, Our Lady of Fatima Hospital in North Providence, R.I., and Roger Williams Medical Center in Providence, must also be compliant with "40 unique conditions across seven areas" imposed by Mr. Neronha to ensure success for the hospitals, according to a June 20 news release shared with Becker's.
The hospitals are owned and operated by Prospect's Providence, R.I.-based CharterCare Health Partners.
A nonprofit organization, Atlanta-based Centurion aids other nonprofits through development, arranging finances and leasing facilities. It has completed over 100 taxable and tax-exempt financial transactions that total more than $850 million, according to its website.
In 2021, Mr. Neronha required that the hospitals meet multiple conditions in a deal approved under the Hospital Conversion Act. Prospect was then required to put $80 million in escrow or letter of credit to ensure operation of its two hospitals. Conditions had to be met for five years; however, by November of 2023, Prospect owed more than $24 million to hospital vendors and specific elective surgeries were canceled due to surgical supply order delays, according to a 2023 lawsuit filed by Mr. Neronha.
On May 26, 2023, a Hospital Conversions Act application was submitted to Mr. Neronha and the Rhode Island Department of Health that would let Prospect sell CharterCare and the two hospitals to Centurion. The parties found the submission "did not constitute an initial application," the release said.
Prospect and Centurion submitted a second application in November, which Mr. Neronha and the health department found to be complete in December.
Prior to the application approval, Prospect was ordered on June 12 by Rhode Island Superior Court Judge Brian Stern to pay more than $17.3 million in unpaid bills to hospital vendors within 10 days.
Here are nine findings from some of the required conditions:
1. Prospect must address the life safety and physical plant violations that state and federal regulators have cited, including inadequate life safety equipment and roof repairs.
2. Prospect must comply with Mr. Neronha's 2021 decision and pay the outstanding balance due to vendors for the hospitals.
3. Eighty million dollars in funding from Prospect and Centurion must be dedicated to the CharterCare system, regardless of failure to secure the funding through bond transactions.
4. An additional $66.8 million must be contributed by Prospect and Centurion to a dedicated fund. Prospect can apply the $47 million in outstanding escrow funds from the 2021 decision to support the CharterCare system. Centurion will not be able to use the funding for management fee or executive compensation. "Centurion’s management fee will be paid only to the extent that the Transacting Parties remain in compliance with all conditions of the Decision," the release said.
5. CharterCare system's board must adopt best governance practices, feature community and local input, and can not "alienate, encumber, or pledge New CharterCARE System's assets" without a notice to or approval from Mr. Neronha.
6. A turnaround consultant for CharterCare must be funded by Prospect and Centurion and approved by Mr. Neronha.
7. Timing, process and effort levels must be outlined to address the application's reliance on future, contingent events like IRS approval of nonprofit status.
8. CharterCare must meet charity care industry standards and properly fund community health needs that are identified.
9. Mr. Neronha must be notified by CharterCare regarding any workforce reductions that meet a specific threshold. The existing level of employee benefits must be maintained during the initial period after the proposed transaction closes.
"Beyond the numbers, figures, and provisions that make up a transaction are the communities, patients, and providers that these hospitals serve and employ, Mr. Neronha said in the release. "Our conditions aim to ensure that these hospitals continue to deliver quality, accessible, and affordable healthcare, gainfully employ thousands of Rhode Islanders, and successfully operate long into the future."
The state's department of health is expected to issue a separate decision on the transaction, the release said.
Becker's has reached out to Prospect Medical Holdings for comment and will update this story should more information become available.