Sale of Roger Williams, Fatima hospitals can proceed if conditions are met

Roger Williams Medical Center in Providence. (Michael Salerno/Rhode Island Current)

An Atlanta-based nonprofit can take over Our Lady of Fatima Hospital in North Providence and Roger Williams Medical Center in Providence if it agrees to a long list of conditions, state regulators announced Thursday afternoon.

The application of Centurion Foundation to buy the two safety-net hospitals from Prospect Medical Holdings received approval from the Rhode Island Office of Attorney General and the Rhode Island Department of Health after the completion of a regulatory review to ensure the sale complies with the state’s Hospital Conversion Act .

The net purchase price is $80 million, although the fair market value of the assets was determined to be $160 million. Under the plan, CharterCARE Health of Rhode Island would be responsible for the operation of the health care system as a whole. The new CharterCARE system will finance the $160 million plus closing costs, with $80 million placed on the balance sheet at closing. The total net debt involved is approximately $192 million, comprised of taxable and tax-exempt bonds.

Judge demands Fatima, Roger Williams owner pay $17M in overdue bills

A decision in the proposed high stakes sale to return the two hospitals to nonprofit status had originally been expected last week but was delayed by negotiations over the terms for stabilizing the finances and facilities at each hospital and meeting the needs of all patients in the communities they serve.

Recent court filings paint a bleak picture of the hospitals with a string of canceled surgeries and a pile of unpaid bills from vendors supplying key equipment and materials. Documents include details of bed bugs, mold, brown water leaking from an eyewash device and the absence of standard safety procedures. Federal inspectors who visited Roger Williams in April found water leaking from the ceiling into a light fixture, prompting an “immediate jeopardy” warning by the The Centers for Medicare & Medicaid Services.

Attorney General Peter Neronha said Prospect Medical Holdings, a Los Angeles-based private equity firm, has deliberately placed both hospitals in a tenuous financial situation by profiting at the expense of patients.

Neronha’s decision sets 40 conditions while t he health department decision imposes 45.

Both regulators required Centurion to:

• Ensure the hospitals remain in good standing with financial obligations.
• Maintain hospital governing bodies that include a majority of independent board members and with relevant experience who represent the diverse populations the hospitals serve.
• Hire a senior leader to manage business affairs, oversee financial management, and explore strategic alternatives.
• Pay outstanding balances with vendors and fund necessary repairs to the hospitals.
• Pledge not eliminate or significantly reduce health care services without approval from RIDOH.

“Our team was guided by the baseline principle that Rhode Islanders deserve quality, accessible and affordable health care,” said Attorney General Peter F. Neronha in a statement. “We also know that the future of these hospitals is critical to the collective landscape of health care in Rhode Island. This decision and the conditions we have placed on the transfer of ownership were only arrived at after careful consideration and strong scrutiny.”

Neronha’s office is requiring Prospect and Centurion to commit to guaranteeing the addition of $80 million in cash to the books of the new CharterCARE system and contributing an additional $66.8 million to a dedicated fund toward which Prospect may apply an outstanding $47 million in funds held in escrow from in the 2021 sale of both hospitals.

“Rhode Island needs a stable network of hospitals that supports the health and wellness of every community in the state,” said Director of Health Dr. Jerry Larkin, in a statement.

“In light of the historical and ongoing financial and operational challenges at the hospitals, RIDOH issued a decision today with conditions carefully developed to restore local control, help stabilize these two facilities, and help ensure that the new operators would be positioned to provide consistent, safe, high-quality care.”

Hospital workers with United Nurses & Allied Professionals Local 5110 have warned of crushing debt that could force them to eventually closure even under new ownership.

The union represents almost 1,200 employees at Our Lady of Fatima Hospital and Roger Williams Medical Center said the conditions set forth in the joint decision by the health department and the attorney general are insufficient to ensure their long-term viability.

“Centurion does not have to put up a meaningful amount of their own capital, and the entire transaction relies on saddling these hospitals with more and more debt – to the tune of hundreds of millions of dollars,” the union said in a statement released after 9 p.m. Thursday. “When you consider the fact that CharterCare’s hospitals and healthcare facilities are losing tens of millions of dollars in operating costs every year, the decision makes even less sense.”

“The math simply does not work without them putting a meaningful amount of their own skin in the game,” the statement continued. “Our union is disappointed in this decision. Coming on the heels of Prospect’s disastrous ownership of these important community hospitals and healthcare facilities, you would think these conditions would have been much, much stronger. Clearly, that is not what has happened – and the long-term success of Our Lady of Fatima Hospital, Roger Williams Medical Center, and Prospect Home Health and Hospice remains at great risk.”

Otis Brown, spokesperson for Prospect’s Rhode Island subsidiary, CharterCARE Health Partners, did not immediately respond to a request for comment Thursday afternoon.

This story has been updated to include the reaction from United Nurses & Allied Professionals Local 5110.

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