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Rhode Island Approves Transaction Between CharterCare, Prospect

The Rhode Island Department of Health and Attorney General Peter Kilmartin have approved the joint venture between Providence, R.I.-based CharterCare Health Partners and Santa Ana, Calif.-based Prospect Medical Holdings.

CharterCare is a nonprofit system that operates 220-bed Roger Williams Medical Center in Providence and St. Joseph Health Services in North Providence, which includes 359-bed Our Lady of Fatima Hospital. The private, for-profit PMH, supported by Los Angeles-based private equity firm Leonard Green & Partners, manages two health systems: Alta Hospitals System, a five-hospital system based in Los Angeles, and Nix Hospitals System, a one-hospital system based in San Antonio.

The two systems signed a definitive asset purchase agreement to form a joint venture in September after signing a letter of intent in March.

Under the deal, a new limited liability company will be created: Prospect CharterCare. PMH will own 85 percent of the entity, with CharterCare owning the remaining 15 percent. Kenneth Belcher will become CEO of both hospitals, which will convert into for-profits, while PMH CEO Samuel Lee will oversee the day-to-day operations of the entire joint venture.

PMH is paying $45 million for its 85 percent interest, which will go toward extinguishing the system's debt and increasing the pension funded status. Over the next four years, PMH will also invest $95 million into CharterCare's hospitals. That money will go toward "physician engagement strategies," as well as expansions and renovations of the emergency departments and converting all patient rooms to private rooms at both hospitals. PMH has committed to maintain all existing services at the hospitals for at least five years, and all employees will be offered jobs with their same salaries and wages.

In April, Standard & Poor's Ratings Services downgraded the credit rating of Roger Williams Medical Center, and it affirmed the junk status of St. Joseph Health Services. S&P analysts said financial performance at both hospitals in 2013 was poor, due primarily to sharp drops in utilization and falling patient revenue.

More Articles on Hospital Transactions:
PwC: Hospital Deal Volume Down, Value Up in Q1
CHS Calls Off Bert Fish Merger Deal
Massachusetts Approves Partners' Acquisitions, But With Conditions

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