Financing hurdles and a missed deadline have the fate of two Rhode Island hospitals owned by the bankrupt Prospect Medical Holdings up in the air.
Roger Williams Medical Center and Fatima Hospital, which combine for about 500 beds and almost 2,500 employees, have long been eyed by Atlanta-based nonprofit The Centurion Foundation. The organizations had first announced a pending transaction for parent system CharterCARE in 2022. Even after Prospect declared bankruptcy just over a year ago, the pair said it would continue to pursue the sale via bankruptcy court.
Recent weeks have that outcome looking more and more strained. Centurion missed a Jan. 15 deadline outlined in a Dec. 8 agreement with Rhode Island’s attorney general and the bankruptcy judge to close the transaction.
Centurion has told the court its delays stem from difficulty securing the bond financing necessary to close the transaction. With Prospect seeking court permission to either close or transfer the hospitals to the state, the December agreement used funds from a preexisting account set up by the state to cover millions of operating expenses until Jan. 30.
With the Jan. 15 deadline now in the rear view, both the attorney general and Centurion have told press they are continuing to work on the issue.
The December agreement allows Prospect to transfer the hospitals and their assets “in a manner to be agreed between the RI Attorney General and the Debtors” on Jan. 30, with no lingering obligations or liability afterward. Such a transfer could potentially lead to state ownership of the hospitals.
Peter Neronha, the attorney general, said in a weekend statement given to multiple outlets that “Centurion is free to continue to try to close, but we now have work to do and a deadline by which to do it. My office is working hard in consultation with other state leaders and I expect you will hear more about that next week.”
Meanwhile, Centurion’s leadership told local press it has had “daily interactions with potential investors over the last several weeks with significant progress.”
Friday, the nonprofit’s president and CEO, Ben Mingle, also penned a letter telling Rhode Island leaders it has conditional support to purchase the needed bonds from “four large investors.”
However, the support would be contingent on the state’s creation of a new $18 million reserve fund, along with a Centurion-created $9 million fund, to backstop the deal. The state’s fund would only be accessed if necessary to make a debt service payment on the bonds, and after the $9 million fund runs dry, the letter reportedly reads.
Mingle’s letter reportedly asks the state to move promptly to pass legislation and create the reserve fund, which would then allow for a Feb. 28 transaction close. State legislative heads and the governor confirmed their receipt of the letter and its proposal but told press they’ll need more information on the planned financing before taking action.
Prospect ran 16 hospitals and more than 160 outpatient sites across four states when it declared bankruptcy last January. The announcement and bankruptcy proceedings in the time since have spurred renewed public criticism of private equity investment in healthcare.
The company has faced no shortage of drama trying to offload its assets. Pennsylvania-based facilities secured multiple funding extensions as potential buyers backed out but, eventually, its locations were closed down. Successful bids were received for the two shuttered hospitals in October.
In Connecticut, Prospect recently closed an $86.1 million sale of two Connecticut hospitals to Hartford HealthCare, both of which had been tied up in litigation with Yale New Haven Health over a prior failed transaction. Another Connecticut hospital that had been snarled in the Yale New Haven Health dispute is also set to be acquired by UConn Health.